Supplier diversity initiatives can achieve notable business benefits, including greater supply chain resiliency, wider supplier pools that drive down costs, and a boost to your brand reputation. These efforts also make a lasting impact on global communities, helping uplift diverse and small businesses that are more likely to hire talent from underrepresented groups.
Despite the benefits of supplier diversity, however, many companies struggle to improve their results in meaningful ways. According to Supplier.io’s 2023 Supplier Diversity Benchmarking report, companies on average spend just 3.6 percent of their budget with certified diverse suppliers—which leaves considerable room for improvement.
As companies assess ways to improve their programs, it helps to emulate industry leaders that exceed their peers by two-to-three times, achieving a 9.1 percent average spend. Let’s understand what these best-in-class companies have in common: their supplier diversity programs haven’t necessarily been around longer or have greater staff or budgets, but they excel in five specific areas that any organization can address.
Five ways to improve your supplier diversity program results
It can be a daunting task to decide where to start with supplier diversity and how to achieve meaningful progress. You need to first assess your current spend with certified diverse suppliers and then develop goals to increase your diverse spend.
Achieving your goals may be easier than you think, especially when you follow these best practices:
Leverage supplier diversity data to keep teams accountable
Every company uses data to assess its progress toward ongoing business goals. However, leading organizations set themselves apart by tracking supplier diversity metrics with the same detail and focus as other business metrics including tracking results at the business unit level, forecasting, regular reviews, and implementing dashboards.
Once you’re confident in the accuracy of your supplier diversity data, start by creating dashboards that make your data and goals visible to each business leader. Ideally, you should display these stats in the same dashboard your leaders use to assess your overall business performance. Establish a goal for each department based on your historical data, current supplier diversity results, and future business plans.
We’ve noticed that some leading organizations include supplier diversity goals as part of each executive’s performance metrics, which can be highly effective for holding executives accountable.
UPS, for example, incorporated supplier diversity into its procurement department scorecard several years ago and increased its weight to 20 percent in 2022 – making it equal to its savings goal. Now, UPS’ category and sourcing teams also include supplier diversity within individual performance goals.
Be proactive in identifying opportunities for diverse suppliers
Don’t wait for a request for proposal process to start thinking about how you can engage more diverse suppliers. Encourage proactive category planning that spotlights opportunities to source from diverse suppliers in the future. Regularly connect with business unit leaders and buyers to discuss impending projects and envision potential ways that diverse suppliers can help support the business.
In addition, evaluate forthcoming supplier contract renewals over the next two years. It helps to always be on the lookout for diverse suppliers and create a list of suppliers that you can engage when the right opportunities arise.
Engage all business unit leaders
Establish deep connections between your supply chain and procurement leaders with all other business unit leaders. Seek to understand each business unit’s objectives and plan out how supplier diversity supports the department. Through regular collaboration, supplier diversity leaders can find clear ways to help the business win more sales while engaging diverse suppliers.
A key part of this process is sharing success stories and showcasing how supplier diversity has driven measurable results, such as how engaging diverse suppliers has helped your business secure more diverse customers. These anecdotes will bring the value of your efforts to life and help encourage more progress.
Make it easy to support supplier diversity
Empowering everyone in your organization to support your supplier diversity goals will greatly improve your program success. Provide tools and processes that make it easy for everyone to work with diverse suppliers, including a central way for teams to find and source diverse suppliers.
Host tailored conversations with cross-departmental teams to explain how that team is performing against its supplier diversity goals and provide feedback on their progress compared to other departments. This is a key opportunity to answer questions and inspire innovation.
Develop true relationships with diverse suppliers
Use your supplier diversity data to prioritize relationships that you need to develop for specific business units. Proactively network with suppliers and attend industry events with cross-departmental leaders so you can create business relationships directly.
Meanwhile, you should also deepen your relationships with your existing diverse suppliers and ensure you can continue to partner with them for future projects. Develop a clear understanding of how these suppliers have directly helped you win more business and ways that supplier diversity can benefit the whole organization and be ready to share these stories with your internal teams.
Small steps to major advancements in supplier diversity
Most companies understand that supporting diverse suppliers is the right thing to do from a business perspective. The key is to empower everyone across your organization to actively support your supplier diversity goals and identify new ways to bring in diverse suppliers.
Significant change cannot happen overnight, but calculated efforts can scale over time as you begin to engage more diverse suppliers and nurture your existing suppliers to retain their partnership. Your best asset is the data you share and the stories you can tell about how diverse suppliers have helped your business succeed. Remember: an increase in spend with diverse suppliers is more than a number on a spreadsheet, it’s a family supported and community uplifted.
For a list of the sources used in this article, please contact the editor.
Aylin Basom is CEO of Supplier.io, the market-leading SaaS provider of supplier diversity data and management solutions. The platform enables organizations to track and manage supplier diversity, providing valuable data and insights that drive business growth and social impact. Equipped with unparalleled data intelligence, superior technology, and expert guidance, Supplier.io’s customers can establish and advance their supplier diversity initiatives effectively and strategically.