08.03.2016 | Supply chain
Indspark: Supplier diversity - could it mean integrating more female businesses?
Have you thought about diversifying your supply chain? Did you know that companies that have implemented supplier diversity programs say that the payoff has come in many ways?
When large organisations make the conscious and active decision to diversify their supply chain there are normally many positive payoffs. Companies, that have implemented supplier diversity programs, say, the payoff has come in the form of stronger relationships with their supply base, new business opportunities and a more agile supply chain.
What is supplier diversity?
Supplier diversity is, when companies actively work to integrate under utilized businesses into their processes, strategies and decisions. You could also say that supplier diversity is a broad concept, describing the inclusion of groups that have traditionally found it difficult to break into the systems, that large organisations have set up to buy in goods and services.
Supplier diversity is also considered to be a proactive activity undertaken by large organisations to ensure, that all relevant, potential suppliers have the fair and equal opportunity to compete for business within their supply chains.
Diverse suppliers could be:
- Small businesses (0-50 people) or medium sized businesses (50-249 people) – also called SME’s
- Local businesses
- Underrepresented businesses (ethnic minorities, veterans, women, immigrants, disabled, lesbian, gay, bisexual and transgender people).
- Not for profit sector
- Organisations based in specific, economically disadvantaged communities
- Social enterprises
- Sheltered workshops employing disabled people
Supplier diversity does not guarantee work to specific business groups. Rather it provides a platform of equal opportunities on which potential suppliers compete and win or lose. Supplier diversity is also not about positive discrimination, political correctness or taking action in favour of one group rather than the other.
What could the benefit of supplier diversity be?
There are several benefits of implementing supplier diversity.
Stronger relationships with suppliers
Companies that have implemented supplier diversity programs say the payoff has come in the form of stronger relationships with their supply base, new business opportunities and a more agile supply chain.
Smaller creates a more agile supply chain
“These smaller companies are often more nimble and innovative than larger suppliers", says Nancy Deskins, Lockheed Martin’s director of corporate agreements and supplier diversity.
“When you look at the passing of Steve Jobs and how he started his business in the garage of his parents’ home, what these small businesses do is really bring innovation to our corporation in a much faster method to market than a real large corporation like Lockheed Martin might be able to do,” Deskins says.
Ability to respond to a changing external environment
As a company you need to respond to the changing external environment and to maintain the best possible strategic fit with it. You need to produce products and services that are appropriate to an increasingly diverse marketplace, and be able to find the best suppliers from an increasingly diverse candidate pool. Supplier diversity can help achieve all of this.
Market knowledge and market goodwill
Supplier Diversity offers organisations the opportunity to build stakeholder relations. Certain consumer groups may choose to buy only from companies who are prepared, in turn, to buy from suppliers owned by people like them. Making supply chain opportunities accessible to a wider range of suppliers can also generate goodwill and market knowledge.
Spread of risk
Supplier diversity can deliver improved organisational performance. Cost control and reduction of risk spreading can be achieved by widening the pool of potential suppliers. If procurers are to be sure that they are accessing the widest possible pool of potential suppliers, they need to ensure that information about their procurement opportunities is spread through more varied routes than they might have relied on previously, in order to reach the diverse applicant pool.
Supplier diversity is a commonly used strategic approach in the US. Perhaps you are now inspired to take on a supplier diversity approach?
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