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Supplier Diversity Blog by supplier.io

State of Supplier Diversity: Service-Focused Industries

For the third consecutive year, we at CVM, a supplier.io company, conducted our survey of supplier diversity professionals and diverse suppliers. This first-of-its-kind survey offers 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 also 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 focused the responses of supplier diversity professionals in service-focused industries to gain an overview of the state of supplier diversity in the following sectors:

  • Accommodation and food services
  • Administrative and support services
  • Educational services
  • Finance/insurance
  • Government
  • Healthcare/pharma
  • Professional, scientific, and technical services
  • Real estate and rental and leasing
  • Transportation and warehousing

We received responses from 60 supplier diversity professionals in these industries, providing insight into the current state of their supplier diversity programs, how they manage their programs, the challenges they face, and what they'd like to see change in the area of supplier diversity.

Download the Report: The 2021 State of Supplier Diversity

What Drives Supplier Diversity?

We learned that supplier diversity programs are well-established within service-focused industries, with 34 percent of respondents reporting that their programs were 3-10 years old and 31 percent representing programs were more than 10 years old. 

This means that a full 65 percent of the service-focused supplier diversity programs reflected in this survey are at least three years old. This is lower than what respondents in product-focused industries reported—71 percent of their supplier diversity programs are at least three years old—but it's a healthy majority. 

It's worth noting that with 34 percent of programs clocking in at 3-10 years old and another 24 percent at two years old or less, it appears that it took service-focused industries a little longer to recognize the value of working with diverse suppliers. As soon as they did, however, those sectors embraced supplier diversity with gusto. 

Another related statistic here is for how frequently supplier diversity teams report to leadership. Among our respondents in service-focused industries, 48 percent reported quarterly or more often and only 14 percent didn't report at all. This shows a level of buy-in from leadership that, though it could be improved, is moving in the right direction.

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. 

Alignment with corporate culture and corporate social responsibility ranked at the top with 70 percent for each, indicating an overall emphasis on inclusiveness among service-focused industries.

Supplier development and government compliance earned the next highest ranking with 53 percent of respondents selecting those as significant factors. For 48 percent of respondents, driving competition within an inclusive supply chain is a primary driver for supplier diversity.

Unlike their product-focused counterparts, customer requirements are not a primary driver for supplier diversity programs in service-focused industries. Only 46 percent selected this option, compared to 71 percent of supplier diversity professionals in product-focused industries.

Rounding out the responses were gaining market share (33 percent) and mirroring the customer base (31 percent). As the consumer demographic shifts in the United States, and the huge, diverse millennial and Gen Z shopping population dominates the consumer base, we expect to see supplier diversity rise as a competitive advantage.

Is Supplier Diversity Going Global?

Supplier diversity has been a business strategy in the United States for 50 years, but not so outside our borders. Just one-quarter of our service-focused industries have a global supplier diversity program and only 38 percent of those who don't currently have a global supplier diversity program plan to implement one within the next three years. 

These numbers are far lower than those in product-focused industries wherein 33 percent of respondents reported an already established global supplier diversity program and 53 percent planned to start one within the next three years. 

The answers to these questions are a prime example of why we chose to separate survey results into two industry groups. Product-focused industries as a whole reported more mature supplier diversity programs, meaning they are more likely to be ready to expand globally. In addition, product-focused industries are more likely to do business globally than service-focused industries are—think overseas manufacturing or sourcing of raw materials. There are exceptions, of course, but in general, services are targeted locally instead of globally.

Who Is Tracking Tier 2 Spend?

Tier 2 spend is one area where service-focused industries are leaps and bounds ahead of their product-focused counterparts. A whopping 71 percent of respondents from service-focused industries said they are tracking Tier 2 spend, compared to just 49 percent in product-focused industries. The Tier 2 spend metric allows us to see the bigger picture of how inclusive our supply chain actually is and identify areas for improvement.

For the first time, we asked those who are tracking Tier 2 spend to tell us how many customers they report that spend to. More than half of respondents—52 percent—report to just 1-5 customers, while another 17 percent report to 31 or more customers. This suggests that most service-focused companies responding to the survey are tracking Tier 2 spend for their own purposes rather than as a mandate from a customer. 

A Tier 2 program may correlate with supplier development programs, too. Half of the respondents said that they have a supplier development program, either formal or informal. Another 30 percent are just starting or in discussions to launch a supplier development program. We'll keep asking this question in future surveys and track the changes.

How Important Is Certification?

We've been hearing anecdotally that more and more companies require third-party certification of diverse businesses, so we asked supplier diversity professionals how their company handles certification. More than half of our service-focused respondents—55 percent—do still accept self-certification compared to just 31 percent of product-focused respondents. 

The difference here might be found in the number of participating companies in product-focused industries that have government contracts versus those in service-focused industries. 

We do anticipate that accepting self-certification will be phased out over the next several years, in part because of this next statistic.

Despite the willingness to accept self-certification, supplier diversity professionals in service-focused industries still rely heavily on certifying agencies to help them locate diverse suppliers. More than three-quarters of respondents said that they utilize certifying agencies for that purpose. Clearly they feel confident in certification entities that vet and verify diverse suppliers, which suggests a change in thinking about certification.

Other popular methods for locating diverse suppliers is through search engines (56 percent) and via other diverse suppliers (51 percent). The takeaway for diverse suppliers is to include their certifications on websites and in SEO strategies and to build their networks with other diverse suppliers.

Supplier diversity professionals in service-focused industries were less likely (38 percent) to use third-party options such as CVM's supplier explorer tool to find potential partners than their product-focused counterparts (42 percent). This coincides with how respondents manage their supplier diversity programs. About 53 percent are using Excel or their own custom databases to manage their programs, while about 27 percent use third-party software.

What Can Be Improved?

We also asked what supplier diversity professionals in service-focused industries would like to see change in the next few years and what challenges they'd like to see addressed. Although 70 percent of respondents 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 prioritized across entire enterprises.

“I would love to see supplier diversity as an automatic frame of thinking for all employees of every organization,” one respondent said. 

Many also noted challenges within their organizations, such as inadequate resources, decentralized decision-making, and internal awareness.

Unsurprising given the statistics in the supplier locator section, several respondents said finding qualified suppliers is one of their main challenges and expressed the desire for a reliable, up-to-date supplier database. 

On a related note, supplier development is also an area where supplier diversity professionals would like to see improvement. Several respondents mentioned the lack of qualified diverse suppliers in areas they would like to award contracts and wished they had more support for—or that other entities would prioritize—helping diverse suppliers scale.

Get Support for Your Supplier Diversity Program

Overall, the supplier diversity professionals from service-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, but many are in need of additional resources and support if their supplier diversity programs are going to make a real impact.

A third-party provider like CVM meets those needs. Our suite of products includes data enrichment and our Explorer tool, both of which are supported by a supplier database containing more than 1.6 million certifications, updated daily from nearly 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.