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Supply Chain Management

Supplier Diversity

What are Supplier Diversity Initiatives?

Supplier diversity initiatives help companies source goods from vendors owned and operated by socially or economically disadvantaged people. Major corporations, such as Walmart, Google, and Johnson & Johnson have set supplier diversity goals for their procurement efforts. Despite the prevalence of these programs, there’s still confusion among some business owners about the details of supplier diversity initiatives.

Why is Supplier Diversity Important?

There are several reasons businesses have embraced supplier diversity. One prominent study found that a diverse supplier base can result in significant financial benefits for buyers. Working with vendors from other ethnic or demographic groups can also provide a toehold to sell products to their customers.

For the vendor, securing a new contract may fuel growth, resulting in economic gains for traditionally disadvantaged groups. In a well-run supplier diversity program, businesses profit while contributing to the greater social good.

It’s important to note that corporate supplier diversity goals are set by individual companies; they aren’t mandated by law. Certain government contracts may be earmarked for diverse suppliers, or come with requirements to subcontract with them. However, these programs are distinct from efforts run by companies themselves.

Supplier Diversity Certifications

Diverse suppliers generally include vendors owned and operated by women, members of socially and economically disadvantaged groups, and veterans.

Companies with supplier diversity programs often rely on widely accepted certifications to decide whether a vendor meets the requirements to be deemed a diverse business. Among the major diversity certifications are:

  1. Women-owned Small Business (WOSB)

    Companies that are owned and operated by a woman or women may qualify as a women-owned small business. The specific requirements to be considered a WOSB are set by the U.S. Small Business Administration. Qualifying businesses can self-certify as WOSBs with the SBA or seek third-party certification.
  2. Small Disadvantaged Business (SDB)

    Businesses owned and operated by socially and economically disadvantaged persons may be eligible for SDB self-certification. According to the U.S. government, individuals who have faced prejudice based upon their ethnic or racial identities are considered socially disadvantaged. Economically disadvantaged Americans are, “socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities.”
  3. Service-disabled Veteran-owned Small Business Concern (SDVOSBC)

    U.S. military veterans who acquired a disability as a result of their service may qualify for SDVOSBC status through the Vets First Verification Program. The Department of Veterans Affairs determines eligibility, which enables companies to participate in government contract set-asides. There is also a separate program for veteran-owned small businesses (VOSBs) overseen by the VA, where service-connected disabilities are not a prerequisite for participation.

How to Start Building a Diverse Supply Chain

Access to accurate business data is key to identifying vendors that meet the standards for a diverse supply chain. Specialized resources like Dun & Bradstreet’s Supplier Diversity Data reports can quickly uncover demographic and socio-economic information about business owners.

Remember that many companies self-certify for diversity credentials. Using third-party data to verify their claims can weed out dishonest firms.

There are multiple factors that go into creating an efficient, reliable supply chain. Many businesses have found supplier diversity programs to be a worthy investment that improves the overall success of their operations.

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