The need for procurement organizations to invest in supplier diversity initiatives has never been more crucial. Most organizations and procurement professionals are pressured to act because of the increasing attention paid to diversity, equity, and inclusion (DEI) due to the social upheaval in the United States.
In a 2020 Gartner study, 74% of procurement firms plan to increase their usage of diverse suppliers over the coming years. However, the dilemma for those leading companies is how to launch a supplier diversity program that can produce sustainable, long-term value.
This article demonstrates how to create a supplier diversity program for your organization and outlines what makes supplier diversity events successful.
What Is A Supplier Diversity Program?
A supplier diversity program is a proactive initiative that promotes collaborations and agreements with companies that are at least 51% owned and run by members of a historically underrepresented or underserved group.
Depending on the organization and the nation, these groups are described variously and often include women-owned, veteran-owned, handicapped, LGBTQ+, and minority-owned businesses as suppliers. It is seen that including these groups increases product quality and cost savings, thereby having a positive impact on the economy.
How Do You Grow A Supplier Diversity Program?
Every effective supplier diversity program begins with a thorough strategic plan. But how should you start? And what should be included in your strategic plan? Below, we’ve highlighted seven crucial measures to grow your firm for success.
1.Establish a business case for supplier diversity
Harvard Business Review says, “Inclusive procurement delivers broader societal benefits by generating economic opportunities for disadvantaged communities.” That implies a diverse supplier base helps your company to boost local economies, encourage innovation, enhance brand impression, increase vendor competition, boost financial performance and meet the ethical standards of your business.
Hence, building and integrating a solid business case into the sourcing process is necessary to gain the organization’s leadership support for supplier diversity efforts.
2.Create a policy statement
Establishing a supplier diversity policy clarifies your company’s goals and demonstrates your commitment to internal stakeholders. So, create a policy statement outlining the program’s definition, scope, and quantifiable objectives. Getting executive support from top leaders, usually a CEO, chief diversity officer, or chief procurement officer, is a recommended practice.
So, think about posting this policy on your company’s website and making it accessible to educate stakeholders so that they can comprehend what to look for and how to identify opportunities for new suppliers.
3. Identification and contracting with diverse suppliers
For supplier diversity programs to expand, finding qualified diverse suppliers is essential. In a 2021 State of Supplier Diversity study, respondents indicated using third-party databases and certification organizations like the National Minority Supplier Development Council and the Women’s Business Enterprise National Council to find diverse suppliers.
You may quickly gather that data by including diversity questions in your supplier onboarding process. After that, you can check the data or compare it to a third-party database.
4. Create a reporting framework
Data-driven supplier diversity programs provide benefits in the real world. After you’ve established specific objectives, it’s time to consider the metrics you’ll employ to measure success. For instance, if your objective is to grow your diversity spend by 5% at the end of the quarter, you should keep tabs on the number of diverse and non-diverse contracts in your supply chains.
Also, define the metrics you’ll be tracking, and then specify how often you’ll report on your progress and where you’ll get the data you need. For instance, how will you regularly obtain this information from your diverse suppliers if you aim to report on tier 2 diverse spending?
Check out LOCOMeX’s best supplier software for diverse organizations.
5. Integration throughout the company
Action is required to demonstrate a commitment to diverse suppliers, and here is where the integration feature comes into play. Setting participation-driven goals are the easiest way to guarantee supplier diversity is included in every element of your organization.
Hence, collaborate with procurement teams across all categories to find and integrate different suppliers. However, pay attention to the rest of the supply chain.
6. Launch a successful Tier 2 program with ongoing management
Your supplier diversity program must be developed and advanced by establishing a Tier 2 program. You must develop a strategy that addresses the onboarding and training of suppliers, the validation of diversified expenditure reporting, and effective report dissemination. Increase your diversified expenditure with Tier 2 Program Management services so you may keep concentrating on more important initiatives.
7. Monitor performance
No program is a total success when it is initially introduced. To track your performance, you must first create a set of metrics. So, how will diverse businesses be evaluated for success? Indicators of supplier diversity performance include the following:
- Percentage of suppliers from various industry groups.
- Generated income from diverse vendors.
- The economic impact of potential suppliers.
- Jobs created as a result of your program.
- Innovations or advancements brought forth by associations with several vendors.
What Makes A Successful Supplier Diversity Program
An organization-wide commitment, careful planning, and buy-in are necessary for a supplier-diversity initiative to be effective. However, to make sure your diversity program is successful, follow these steps:
1. Improve transparency: Removing barriers to your diversity goals is crucial to any supplier diversity program’s success. So, encourage minority suppliers and business partners to contact you by outlining the specific goods and services your business need.
2. Integrate into procurement function: Like any other business strategy, an organization can implement a supplier diversity program if integrated into the company’s operation. Ensure supplier diversity is included in your procurement operation while placing orders and tracking data. The better your metrics, the more complete they should be.
3. Offer training: Even if only a few people may be in charge of your program, you still need a way for everyone in the organization to communicate and work together. That implies holding frequent cross-departmental meetings and training procurement leaders about supplier diversity software platforms.
4. Growth and expansion: By communicating growth and expansion, highlight your supplier diversity progress. However, suppose you are implementing a global supplier diversity program. In that case, your marketing staff should spread the word in the areas where you operate.
How Can LOCOMeX Help?
Making a concerted effort to increase diversity in your company’s supply chain will not only result in a more diverse pool of suppliers for your business, but it will also assist in spurring growth and benefitting the economy as a whole. And this is where LOCOMeX’s best supplier platform for diverse suppliers can assist.
Its core feature of DivedIn Tier 2 can ensure the success of your supplier diversity program and help set realistic spending goals given the supply chain conditions. So, reach out to our experts and explore the services.