Revealing the Truth about Supplier Diversity Program Benefits
Supplier diversity programs have been a hot topic for some time now. While the need for minority-owned and diverse supplier programs at most companies has only recently begun to take shape, the growth has been astronomical. In fact, a study done by CAPS Research states that 71.79% of organizations expect their total supplier diversity program spend to increase greatly within the next two years. ('Measuring Supplier Diversity Program Performance', March 2012)
Even though support for diversity programs has been rising, there is still some hesitancy from businesses to develop them. This reluctance is often due to inaccurate perceptions regarding the value they can offer a company, but these myths are often easy to debunk.
Here are a few of the most common misconceptions:
The idea that you will pay a premium price for access to a historically underutilized business is false. These suppliers offer the same goods and services as anyone else. In fact, supporting supplier diversity programs infuses your existing supply base with more options, developing a healthy competitive landscape amongst the group.
Additionally, by developing a supplier diversity program, you help foster an environment of brand loyalty within the community. Diverse suppliers are more likely to be flexible and support your business goals because they appreciate your investment. There are also brand loyalty benefits from clients or customers who appreciate your enhanced corporate reputation.
Even when a supplier is part of a recognized minority class their business must be certified by going through a certification process with a regulatory agency. Typically the agency requires the company to be at least 51% owned and controlled by one or more individuals within a historically underutilized demographic. Also, just because you already work with diverse suppliers does not mean you are truly getting all the benefits from an actual program. Developing a program that you can market increases the chances that suppliers will find you.
When you create a supplier diversity program for your company, you define the goals, and you make the selections. If you are sourcing for a particular project and a non-certified supplier is the best fit, then hire them! Diversity programs are there to promote social responsibility, not to eradicate competition or needlessly sacrifice potential savings.
Another often unrecognized benefit of diversity programs is that they can help your existing supplier base get certified. If developed correctly, your program will not just be about contracting, but also about educating uncertified suppliers. Some may not realize they are eligible, and others may not know where to start. Your program can be the lynchpin that helps a supplier reap the benefits of certification.
If you are considering creating or enhancing your supplier diversity programs, but do not know where to start, there is help. Many sourcing consultants specialize in understanding the nuances of minority purchasing, such as geographical segmentation, market trends, and supplier minority qualifications. With an existing program, they can help refine minority spend initiatives, helping you strengthen relationships and community bonds while increasing your savings.
Supplier diversity myths are just that—myths. The truth is, using historically underutilized businesses will make a huge impact on your business, your community and your bottom line. Well-known certifying agencies include:
- Women Business Enterprise National Council (WBENC)
- National Gay and Lesbian Chamber of Commerce (NGLCC)
- National Association of Women Business Owners (NAWBO)
- Small Business Administration (SBA)
- Canadian Aboriginal and Minority Supplier Development Council (CAMSC)
- Minority Supplier Development Council–UK (MSDUK)
- Minority Supplier Development Council (MSD-China)
- South Africa Supplier Development Council (SASDC)
Unfortunately some people in corporations want diverse suppliers to fail. An approach that we used with out diverse suppliers was to actively mentor them! We looked at their systems, process and software and worked with them to improve them. We actually gave them some of our systems and software to help them better communicate with us. We learned more about their culture and they got to know us better. No sense having a supplier a metric when the supplier does not have the tools to be successful. Almost all grew to be better and stronger suppliers.
I also think that SRM programs are a key element into help manage performance post-contract. If SRM is in place, the diverse supplier can better adapt to the client's needs instead of being set up to fail.
I also think that SRM programs are a key element into managing performance post-contract. If SRM is in place, the diverse supplier can better adapt to the client's needs instead of being set up to fail.