Companies with supplier diversity programs expect to realize benefits such as increased brand value and customer loyalty. However, they may be surprised with some of the other advantages that come with a more inclusive supply chain.
Here is a look at four unexpected benefits of investing in supplier diversity that bring even more value to your program:
1. Forging New Relationships
Perhaps the most unexpected benefit of working with diverse-owned businesses is that they diversify the company’s relationships as well. When procurement emphasizes savings above all else, the advantage goes to the largest suppliers in the market. They have the economies of scale required to keep costs low—but if they count on this to maintain their market share, they are unlikely to be agile or innovative.
For instance, as reported in Retail Dive, Best Buy’s “five largest suppliers account for 57% of its purchased merchandise, and its 20 largest suppliers account for 80% of Best Buy's merchandise.” It is reasonable to conclude that those same suppliers are being used by other retailers, offering little opportunity for differentiation.
Procurement teams may set out to achieve diversity in the sense of using businesses owned by minorities, women, veterans, and so on, and doing so can also deliver diversity of thought, experience, and approach to the company at the same time.
2. Discovering Existing Relationships
For new corporate supplier diversity programs, the greatest surprise may be uncovering which incumbent suppliers are also certified as diverse already. According to the 2021 State of Supplier Diversity report, 88 percent of diverse-owned businesses are certified as such. Whether their current customers know they hold these certifications is another question.
In this case, increasing progress toward diversity spend targets is as simple as updating supplier information. These suppliers are likely among the most valuable to the company because they consider their certifications a differentiator on top of—and not instead of—providing substantial value and running a competitive operation.
3. Driving Innovation
Certified diverse businesses are recognized for what makes them different in terms of their owners’ identities, but that differentiator brings other advantages as well. Leaders who have walked a unique path to reach their destination are likely to pick up out-of-the-box techniques along the way—and they are ready to put those to work for your company.
As Terrez Thompson, vice president of global supply inclusion and diversity at Coca-Cola told Harvard Business Review, “Diverse suppliers can turn on a dime and are now considered for contracts that they would not have been otherwise due to the imperative for flexibility. They have proven themselves to be agile in terms of responsiveness.”
Like a boutique hotel or a craft brewery, these unique suppliers offer even the largest corporations the opportunity to look at their challenges in a whole new light and implement new solutions.
4. Creating Supply Chain Resilience
Most, though not all, diverse-owned businesses are also small businesses. In addition to being owned by uniquely talented professionals, they have built up supply chains that vary from those of their much larger competitors. Unlike enterprises that are accustomed to transacting with their supply chain but rarely build meaningful partnerships, small businesses are likely to have relationships with their first- and second-tier suppliers. When supplies are uncertain, they are able to lean on those partnerships to keep their operation running—an advantage that also benefits your company’s operation.
Anything companies can do to diversify their suppliers—and diversify their supply chains—will give them more options. As today’s business continues to face constant disruption, which suppliers companies choose to partner with can be a make-or-break decision. Every company and industry is struggling with the effects of inflation, labor shortages, and rising fuel costs. Diversity of thought, source, and owner identity connect to offer increased resilience and creativity to the companies wise enough to seize the opportunity.
To learn more about where supplier diversity is and where it’s headed, read the full 2021 State of Supplier Diversity report.