Have you been using the same suppliers for goods and services year after year without looking into alternative suppliers? Well, the time has come to change this habit. And do you know why? Because companies with a robust diversity, equity, and inclusion (DEI) strategy are given more priority by investors.
Additionally, most millennials say they won’t work for organizations that don’t do a good job at corporate social responsibility (CSR). Hence, most businesses that care about CSR must establish and expand a company’s supplier diversity program. Not only will this help DEI efforts and raise ESG ratings, but it may also improve performance across the board, especially in terms of bottom-line revenues.
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The Business Benefits Of Supplier Diversity Programs
In a broad sense, a diverse supplier is a company owned and run by a person or group that belongs to an underrepresented or underprivileged group.
Especially in the beginning, it may take time, effort, and the company’s commitment to creating an effective and dedicated supplier diversity program. But for those businesses who have a diverse supply base, promoting inclusive supply chains has produced a convincing range of competitive advantages, such as:
- Exceeding diversity objectives
- Boost supply chain resilience
- Provide a variety of avenues for purchasing
- Obtain entry to a much larger network
- Encourage greater supplier competition to reduce costs
- Boost brand recognition through CSR involvement
- Encourage cooperation and creativity
- Showcase your leadership in the local community
- Create a positive social and economic impact
- Improve your return on investment (ROI)
- Enhances diverse spend and market share
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How Big Of An Impact Does Supplier Diversity, Have On A Company's Bottom Line?
Supplier diversity refers to philanthropic endeavors that provide diverse businesses such as minority-owned business enterprises (MBEs), woman-owned business enterprises (WBEs), and small business enterprises (SBEs) a more fair chance to compete with larger and more established firms for involvement in supply chains.
Although the philanthropic approach may appear more prominent initially, there is strong evidence to support the claim that initiatives like these increase revenue for the businesses that use them. For instance, approximately 2 million minority-owned businesses in the U.S. make over $ 400 billion in yearly sales.
However, these revenue increases brought on by supplier diversity often come in one of three ways: new contract wins and strategic collaborations, customer base growth brought on by brand choice, or customer base growth brought on by their positive influence on qualified diverse suppliers.
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Why Should Companies Invest in Supplier Diversity Programs?
1. Great for businessA supplier diversity program allows businesses to bid on and win contracts with U.S. government agencies. These contracts, which can be for everything from cars and building materials to food and clothing, are frequently profitable and in high demand. That implies if your organization does not already have supplier diversity initiatives, you are not allowed to participate in this hugely lucrative and revenue-generating business sector. So, take a step back and consider the categories often excluded from or given lower priority in supplier diversity efforts. Also, look at the larger value chain of your business partners to see where you may engage MWBEs.
2. Enhances the reputation of your business profileImplementing a diverse supply chain can result in incremental revenue gains for your business by leveraging the rising trend of consumer consciousness. For example, the Hackett Group claims that businesses that spend 20% or more with diverse suppliers attribute 10% to 15% of their yearly sales to supplier diversity initiatives. So, by portraying your brand as one that balances the company’s short-term objectives with your customers’ long-term needs, your brand’s reputation among customers can be enhanced and can impact how customers behave while making purchases. For instance, a reputed company like Johnson & Johnson not only shares their annual spending in each of their diversity categories, but they have also made supplier diversity a business strategy for their corporate goal.
3. Creates economic opportunity for small businessesAn effective supplier diversity initiative may increase revenue by strengthening the economies of underserved communities. Working with a historically underserved group puts money in the hands of small and diverse businesses, enabling them to purchase your company’s goods when they otherwise may not have been able to. According to the National Minority Supplier Development Council(NMSDC), recognized MBEs provide $400 billion in economic output annually, creating or maintaining 2.2 million employment and $49 billion in tax income for federal, state, and local governments. And those figures are rising steadily.
4. Aids in economic and business growthDiverse and inclusive procurement enhances the economy by providing historically minority-owned enterprises with opportunities. Compared to historically high-income and privileged segments of society, their spending tends to rise as they get a larger percentage of the national GDP. According to the 2019 Annual Business Survey (ABS), which covered the reference year 2018, roughly 18.3% (1.0 million) of all U.S. leading companies were diverse-owned businesses, and women ran nearly 19.9% (1.1 million) of all enterprises. These estimated 2.8 million firms employed around 51.1 million people and paid about $2.6 trillion in wages annually.
Nowadays, DEI, ESG, and other corporate inclusivity programs prioritize supplier diversity. Whether you’re starting a new supplier diversity program or growing your current procurement pool, the Supplier Diversity Reporting Software from LOCOMeX can assist you in finding the diverse suppliers your business needs. Its Supplier Diversity Program Management Software also helps link various suppliers with the appropriate market prospects. So, contact our experts now and take your business on a growth trajectory.