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Supplier Diversity Blog by supplier.io

State of Supplier Diversity: Product-Focused Industries

For the third year, we at CVM, a supplier.io company, conducted our survey of supplier diversity professionals and diverse suppliers. This first-of-its-kind survey gives insight into what supplier diversity professionals experience within their own programs, as well as how diverse suppliers navigate the supplier diversity environment.

The full report offers a broad view of the overall state of supplier diversity, but just like when you drill down into your supplier diversity metrics for more granular reporting, it's worth taking a closer look at these responses and how they relate to different areas of supplier diversity.

For this report, we've separated the responses of supplier diversity professionals in product-focused industries to gain an overview of the state of supplier diversity in the following sectors:

  • Agriculture
  • Construction
  • Consumer product goods
  • Information
  • Manufacturing
  • Retail
  • Sports/entertainment
  • Telecommunications/technology
  • Utilities

We received responses from 48 supplier diversity professionals in these industries, giving us a look at the current state of their supplier diversity programs, how they manage those programs, challenges they face, and what they'd like to see change in the area of supplier diversity.

What drives supplier diversity?

The reasons for establishing and maintaining a supplier diversity program varied, and respondents were able to choose more than one response, but we did see some patterns. Most of them—71 percent—indicated that their supplier diversity programs are the direct result of customers requiring that they track diverse spend. 

Accountability from company to company appears to be a primary driver for inclusive supply chains within product-focused industries.

Alignment with corporate social responsibility and corporate culture also ranked highly at 67 percent and 64.5 percent respectively. We also learned that nearly two-thirds (63 percent) of supplier diversity professionals at these product-focused companies are reporting to executives at least quarterly. 

This is encouraging in that it shows how supplier diversity and inclusive supply chains are increasingly becoming part of our business DNA, a recognized value add throughout the enterprise. 

Obviously, there is room for improvement, and we'll get to some of the changes supplier diversity professionals suggest, but take this as good news.

Is supplier diversity going global?

Supplier diversity is 50 years old in the United States but is a more recent practice beyond our borders. We have been tracking the expansion of global supplier diversity and it is still an upward trend. 

One-third of our product-focused industries currently have a global supplier diversity program, which is an increase over 2018 but still a minority among respondents. However, 59 percent of those who don't currently have a global supplier diversity program plan to implement one within the next three years. 

Going global appears to be the next big step for supplier diversity programs.

Who is tracking Tier 2 spend?

Measuring Tier 2 spend allows us to see the bigger picture of how inclusive our supply chain actually is, but we found that in these product-focused industries, companies were pretty evenly split when it comes to tracking that metric. Of those who responded to our survey, 51 percent said they were not keeping track of Tier 2 spend, while 49 percent said that they were.

For further insight, we also asked how many customers they report Tier 2 spend to, making this the first year we've asked this question. Over 60 percent of the respondents reported Tier 2 spend to their customers; 33 percent said they report Tier 2 spend to 1-5 customers; 28 percent said they report Tier 2 spend to 31+ customers.

Data from future years should give us a clearer picture of how product-focused companies are driving each other to track Tier 2 spend and how that influences the inclusion of diverse suppliers up and down the supply chain.

How important is certification?

We've been hearing anecdotally that more and more companies require third-party certification of diverse businesses, so we asked the question for the third year, and saw another slight increase over 2018: 69 percent of respondents from product-focused industries require third-party certification with only 31 percent accepting self-certification. 

This is a continuing trend in the data collected in our surveys and one we don't anticipate reversing as companies rely on third-party certification to maintain the integrity of their diverse supplier base.

This trend is reflected in the manner in which companies find diverse suppliers. A whopping 71 percent of supplier diversity professionals in product-focused industries locate diverse suppliers through certifying agencies. Clearly, they feel confident in the idea of third-party certification entities vetting and verifying diverse suppliers. 

Third-party options (such as CVM's Explorer tool) were also deemed valuable, with 42 percent of respondents using them to find potential partners.

An interesting change this year is that the number of companies using search engines to find diverse suppliers increased to 58 percent. Suppliers should take note and be sure to include their certifications on websites and in SEO strategies.

What can be improved?

We also asked what supplier diversity professionals would like to see change in the next few years and what challenges they'd like to see addressed. Although 73 percent of respondents from product-focused industries said that they feel their programs are somewhat effective or very effective, they had plenty of suggestions for improvement.

Several said they would like to see supplier diversity become more of a priority for companies of all types and sizes. They want to see it “baked in” to a company's way of doing business so that supplier diversity is everyone's responsibility, not just the purview of one department. One way to do that, suggests a respondent, is to have “more clients requesting diverse suppliers” when partnering with a company.

Supplier development is also an area where supplier diversity professionals would like to see improvement. Some mentioned that it seems like diverse suppliers are easy to find in fields like IT or personnel staffing, but product-focused companies need more diverse options in fields like manufacturing. 

Suggested solutions include helping smaller firms scale up to meet the needs of larger companies, making the process of awarding contracts more inclusive, and educating the next generation of business owners on the value of becoming a certified diverse-owned business.

Overall, the supplier diversity professionals from product-focused industries who responded to our 2019 survey are optimistic about the state of supplier diversity. They enjoy the opportunity to work with diverse business owners as well as a diverse group of people and organizations within their own companies in pursuit of an inclusive supply chain. They see progress being made, as evidenced by the move toward global supplier diversity, and they have ideas for how to improve moving forward.

How can companies give their supplier diversity personnel optimal support? By working with a third-party provider like CVM. Our suite of products includes data enrichment and our Explorer tool, both of which are supported by a supplier database containing 1.6 million certifications, updated daily from almost 300 sources. From finding and vetting suppliers to tracking and reporting to strategic planning and management, CVM can help your company achieve inclusive sourcing that delivers bottom line results.

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The team has a long history in driving innovative solutions in supplier diversity. We believe that companies deserve solutions that are effective and provide measurable value and results. Started more than a decade ago, supplier.io has rapidly become a prominent provider of supplier diversity solutions to leading corporations. We currently support customers in automotive, healthcare, insurance, retail, manufacturing, education, and banking. One in five Fortune 50 company relies on supplier.io.