Establishing a supplier diversity program is exciting. Your company is committed to working with diverse suppliers, the potential for innovation and competition is exhilarating, and you’re eager to get started.
You know success hinges on following supplier diversity best practices, but what are they?
Once your supplier diversity program is established and proven effective, you can focus on expanding into Tier 2 spend, global supplier diversity, supplier development programs, and other best practices for advanced programs.
For now, let’s look at four of the supplier diversity best practices for newer programs.
1. Set benchmarks and goals.
Creating an effective supplier diversity program begins with establishing goals that align with your company’s values.
Setting meaningful goals ties supplier diversity to business strategy for the organization as a whole. Your goals should be reasonable and achievable, help to identify weak areas that need improvement, challenge the status quo and discourage complacency, confirm the need for change, and provide strong motivation for change. This last point is critical to establishing employee buy-in.
Once you have goals set, measure your performance against other companies through benchmarking.
When choosing who to benchmark against, you obviously want to look at companies leading the way in supplier diversity. The National Business Inclusion Consortium is a coalition of the nation's leading business organizations representing diverse communities. Each year, the group selects its Best-of-the-Best list, a designation given to companies achieving industry-leading results across all diverse segments. That list is an excellent place to find supplier diversity programs to benchmark against.
Another supplier diversity best practice is to look outside your industry and evaluate the processes used by leaders in other industries. Why? Because bringing in techniques from other sectors may give you a competitive edge over your peers and establish your organization as a leader in supplier diversity.
Benchmarking shouldn't just be about figuring out your diverse spend target; it should also guide you toward establishing the processes and culture that help you achieve those results throughout the organization.
2. Identify proven diverse businesses.
One of the first things you should do after setting your supplier diversity goals is to find out which of your suppliers are certified diverse businesses. You may be surprised to discover your company is already well on its way to meeting those spend goals.
Run your supplier list through a third-party data enrichment process to identify diverse suppliers you already do business with. Once you have identified these certified diverse suppliers, work on building your relationship and increasing spend with them.
When you have maximized opportunities with your current diverse supplier base, the next efficient way to find proven firms is through a master database of small and diverse suppliers containing accurate, detailed supplier information. This database should allow searching for suppliers using any parameter you choose. It should help your internal teams, or even your prime suppliers, find diverse businesses by making it easy to locate certified:
- Minority-owned businesses
- Woman-owned businesses
- LGBTQ-owned businesses
- Small disadvantaged businesses
- 8(a)-certified businesses
- Historically Underutilized Business Zone (HUBZone)-certified businesses
- Veteran-owned businesses
- Veteran-disability-owned businesses
- Small-business suppliers
3. Collaborate and communicate.
Successful supplier diversity programs share a common trait: effective collaboration and communication both internally and externally
Collaboration between your supplier diversity team and the various procurement and business units within your organization is key. Building relationships with those departments makes it easier to integrate supplier diversity into the normal flow of doing business.
Consistent, meaningful communication with the C-suite, managers, and procurement teams will also advance your supplier diversity goals. Share performance updates, stay in the loop about upcoming requests for proposals, communicate supplier diversity events, and highlight diverse supplier success stories.
Externally, collaboration could involve partnering with diverse supplier advocacy entities. Connect with your regional/local affiliate council about how your company can get involved.
Communicate with diverse suppliers about your supplier diversity program. One way to do so is to implement a supplier registration portal. A registration portal uses customized, commodity-specific surveys to prequalify suppliers, saving buyers time and effort. Obviously, the easier it is for buyers to work with diverse suppliers, the more likely they are to include them. The portal also allows you to communicate with diverse suppliers efficiently, nurturing relationships and sharing timely information.
4. Track and report performance.
Setting goals is a supplier diversity best practice, but it must be paired with a reliable system of tracking and reporting. Tracking spend with Tier 1 and Tier 2 suppliers is the most common metric, but consider going beyond these numbers to measure the program’s impact on your entire organization. Cost savings, market share, corporate image, and revenue impact are all valuable metrics to measure the long-term success of your supplier diversity program.
Economic impact is another important metric for your supplier diversity program. This measures the impact of doing business with diverse suppliers on local communities through job creation, indirect spend, and tax revenue.
Review these metrics regularly and share the results with company leaders. Regular, consistent reporting on your supplier diversity program’s performance provides you with valuable insight into what’s working and what’s not, so you can adjust and evolve the program over time.
For newer programs, focus on the supplier diversity best practices that will give your program a strong foundation. Goal setting, benchmarking, identifying diverse suppliers, effective collaboration and communication, and consistent tracking and reporting are key to a sustainable, effective supplier diversity program.
Learn more about supplier diversity by reading our 2021 State of Supplier Diversity report.