The world of buying and selling has a constantly evolving landscape that forces businesses to adapt to remain competitive. In addition, organizations that identify with their customers are more effective at connecting and staying relevant. With a growing diverse population, having a diverse workforce and supplier base is more important now than ever before. There are advantages to both, so let's focus on 5 Benefits of a strong Supplier Diversity program.
First, what is a Supplier Diversity program? The U.S. Department of Commerce defines a Supplier Diversity program as, "a proactive business program which encourages the use of minority-owned, women owned, veteran owned, LGBT-owned, service disabled veteran owned, historically underutilized business, and Small Business Administration-defined small business concerns as suppliers."
See the many ways this program can benefit your organization:
1. Companies need to connect with customers
Customers are becoming increasingly aware of the social responsibilities that companies have to the people they serve and the neighborhoods they operate in. For many, it's not just about buying a service or product, it's about aligning their spending habits with their values. Frequently, consumers are willing to spend more money on a particular brand because of what that brand means. Take Girl Scout Cookies as an example. To some, they're just plain cookies (yes, even the delicious ones). But others will drive across town and shell out extra dough (pun intended) to make the purchase because the proceeds support the troop and program costs. Knowing that supporting one business means you're supporting other businesses/causes you care about could be the deciding factor between buying from Company A vs Company B. A 2017 Cone Communications CSR study stated that 87% of consumers would purchase a product that aligned to their own values, and 76% would boycott a brand if it supported an issue that went against their beliefs.
2. Diversity breeds innovation
It's no secret that we all tackle problems differently. Bring 5 people to the table to solve an issue and you could walk away with 10 different opinions. The approach that individuals take when developing solutions is often determined by their background, experience, and identity. Studies show that there is a positive relationship between increased levels of diversity in management and effective innovation at complex companies. The same can be said about suppliers. Bringing diverse suppliers to the table improves the possibility of a company developing new and creative solutions for their supply chain needs.
3. Greater brand awareness
Suppliers are driven to help their customers succeed. The greater a company performs, the more they may need to rely on their suppliers for expansion, process improvement, and cost savings. While suppliers focus on these objectives, they inadvertently advertise their customers. Suppliers are proud of who they work with. This is proven by many companies listing their most prominent customers on their website or using them as a reference. This is free marketing. With a diverse supplier base, organizations diversify which companies and consumers they reach through secondary marketing. Whether it's formal, or word of mouth, diversifying the audience through secondary marketing strategies is a great way to build brand awareness.
4. Improves competition
When suppliers compete, buyers win. Competition drives higher quality at comparable costs. To compete, companies need to have the ability to invest, grow, and improve. That wouldn't be possible without consistent clientele that brings changing and developing needs to the market. Diverse Suppliers that solve these needs benefit in several ways. 1. They receive income to grow and thrive. 2. They improve their working knowledge and expertise through real experience and 3. They build their portfolio to improve their chances of more business in the future. With more solutions entering the market, other companies are forced to compete with these new and daring answers to modern problems.
5. Cultivates future customers
Lastly, investing in a Diverse Supplier program has the potential for cultivating future customers. By reaching the businesses that wouldn't normally get attention, you are subsequently giving opportunities to individuals who may otherwise have lacked them. This could lead to new innovators entering the field, sparks of interest by young professionals in your industry, or even contributing to the creation of businesses, entities, or individuals that need your service.
This is all great, but how do you create a strong supplier diversity program? Well, that's a longer topic, but here are a few ways your organization can get started:
1. Define your targets: decide on an acceptable percentage for your supplier base to be defined as Diverse Suppliers. Defining targets by tier could be helpful as well:
- Tier 1 - Suppliers that you directly do business with
- Tier 2 - Suppliers that your suppliers do business with
- Some entities, such as the government, may want to audit your diverse supplier base when doing business together
To learn more or get help with developing your supplier diversity program visit: Source One.
Thanks for reading!