When it comes to supplier management and your overall supplier strategy a key component is often overlooked: supplier diversity. This probably wasn’t left off intentionally, the topic just simply hasn’t been top of mind for many organizations. As issues such as supply chain risk, supplier relationship management, and ultimately the bottom line have dominated the conversation in years past, supplier diversity hasn’t been a focus.
However, now supplier diversity has been given the spotlight and many organizations are finding that a strong supplier diversity program can go a long way towards those critical points listed above. To help you navigate this we hosted a webinar along with industry experts to bring their perspective to both why and how to develop a supplier diversity strategy.
We received several audience questions, so we wanted to answer some of our favorites.
1. How would you define the scope of various spend? Is there a standard definition of scope?
The short answer is no, there isn’t a standardized view of supplier diversity or its scope. However, it is accepted that supplier diversity is a proactive business program that encourages sourcing from minority-owned, women-owned, veteran-owned, LGBT-owned, and SBA-defined small business vendors, all of which are historically underutilized. However, in our VP of Corporate and Product Marketing’s article detailing supplier diversity he goes on to say “while this is a very important piece of supplier diversity, it is not the full picture. It really encompasses corporate social responsibility (CSR), ethical sourcing, friendly and sustainable sourcing, and creating a diverse supplier portfolio (think diverse stock portfolio).”
At JAGGAER we believe that looking at supplier diversity in this full scope truly allows organizations to see the importance of supplier diversity and lays the foundation for you to approach diversity in a comprehensive and strategic way.
2. For those who are just starting out with supplier diversity efforts, would you recommend dedicating a person whose sole job is supplier diversity, or to add it on to an existing job responsibility?
This is a really interesting question. On one hand, having someone whose only responsibility is supplier diversity would go a long way in getting the most out of your supplier diversity efforts. Of course, the same could be said about any strategic program and it’s why many companies have someone who owns a specific vertical, category, or product.
On the other hand, some organizations aren’t built that way, and may have one person that owns many different strategic initiatives, so it can make sense to add supplier diversity to their responsibility starting out.
This is something that has to be handled on a case-by-case basis. There are obvious benefits to having one person focus only on supplier diversity, and it is considered best practice, but that may not work for everyone. Your organization may not be structured that way, or there may not be enough budget to hire someone initially and that’s okay. Rome wasn’t built in a day and the perfect supplier diversity strategy won’t be either. Doing it slowly, and bit by bit is better than doing nothing at all.
3. Has the conversation on the importance of supplier diversity changed from just financial ROI to corporate social responsibility, ie from financial benefits vs intangible benefits?
The answer to this question is constantly evolving due to the trending nature of supplier diversity of late. For many this may be the first they are hearing about supplier diversity in a formalized sense, which is highlighted by this poll that we ran during our webinar.
With around 75% of participants (nearly 1200 procurement professionals attended) answering that they only do basic reporting or less when it comes to supplier diversity, it’s clear that this is still a very fresh topic. So naturally, the conversation first revolves around the bottom line and ROI, as it does with almost any business proposition.
However, what we’re trying to do at JAGGAER, and in large part what this webinar was for, is to spark conversation around supplier diversity. In a separate blog we highlighted several of the benefits associated with having a diverse supply base, which includes CSR, ethical sourcing, economic impact, innovation and much more.
4. The COVID-19 pandemic has magnified the issue of supplier risk management. Do you see this as an opportunity to promote supplier diversity as part of overall risk management?
Absolutely, and this lends itself to our original definition of supplier diversity extending to a variety of diverse initiatives. One of the main benefits of supplier diversity is the agile and innovative nature that various suppliers bring to the table. Pairing this with the ability to source from multiple demographics and geographic locations allows organizations themselves to be flexible and agile in the face of disruptions.
When the pandemic hit, many supply chain breakdowns were due in large part to many organizations’ reliance on a select few geographic locations and large suppliers. When they started experiencing disruptions it caused a ripple effect. Having a diverse supplier portfolio to lean on will alleviate risks from macroeconomic disruptions and ethical violations by offering alternatives to singular, static suppliers.
5. How much is too much supplier diversity?
This is another thing that needs to be taken case by case. Every organization’s needs are different, and diversity must be scaled accordingly. It’s important not to force diversity for diversity’s sake, but there are clear advantages to supplier diversity if done correctly. Like anything else, if it’s overdone or forced then the benefits can be minimized, and you can end up with contradicting and confusing strategies without a clear goal in sight. It may be easy to get caught up and spread yourself too thin but remember: supplier diversity should be done strategically, proactively, and purposefully.
For a more in-depth answer, check out this follow-up blog
