What is Supplier Diversity? A Complete Guide

This is something you probably already know 

Supply chains are becoming more and more complicated to manage 

Businesses have to deal with a myriad of challenges, from the unavoidable impact of climate change to volatile markets, and of course, let’s not forget about customers shifting behaviors.

But…wait, there’s no need to panic yet. 

Implementing a supplier diversity program can help your businesses be more resilient to problems. 

Never heard about that? Or maybe you have, but don’t really know where to start? 

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Keep reading on

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What’s Supplier Diversity?

You can picture it as a strategy that works to include suppliers from underrepresented groups in your supply chain. 

Usually, you’ll find that these groups consist of companies owned by minorities, women, veterans, individuals with disabilities, and LGBTQ+ individuals.

Building a diverse network of suppliers won’t only show your business’s commitment to give back to the community but it will also contribute to protecting your procurement operations from unexpected challenges. 

The Role of Diverse Suppliers in Businesses 

Here’s the thing about diversity

It’s an excellent mechanism to open the doors to different perspectives and solutions. 

The meaning of this?

Well, your company will rely on suppliers that will help you to adapt to changing markets and customers' needs. Their agility and innovation often provide a serious advantage, particularly in industries that require fresh thinking and responsiveness.

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What Constitutes a Diverse Supplier?

A diverse supplier is typically defined as a business that is at least 51% owned, operated, and controlled by individuals from underrepresented groups. This includes:

• Minority-Owned Businesses
• Women-Owned Businesses
• Veteran-Owned Businesses
• LGBTQ+ Owned Businesses
• Businesses Owned by Individuals with Disabilities

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More often than not, you’ll see that most companies that are part of this classification, undergo a certification process with organizations such as the National Minority Supplier Development Council (NMSDC) or the Women’s Business Enterprise National Council (WBENC).

Partnering with certified diverse suppliers is ideal if you are after accountability and credibility, This will improve the overall effectiveness of supplier diversity programs.

The Impact of Supplier Diversity

Innovation

Do you often feel stuck in your processes? After some time, the ideas surrounding you start becoming repetitive and you aren’t really sure if your business is going in the right direction. Working with a supplier diversity program can fix that 

Diverse suppliers bring fresh ideas and innovative solutions, helping you to remain competitive. Their perspectives often lead to discoveries that traditional suppliers might overlook. For example, a minority-owned supplier might have cultural insights that give you a better product design, while a disability-owned business could offer real approaches to accessibility.

Bigger market reach

Another lovely benefit is that the moment you begin working with a diverse supplier, you are welcome to be part of the community they represent, so you can easily reach new markets and cover different demographics. 

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And of course, with this, your company is gaining higher brand visibility and market share.  Talk about making a profit.

Customer loyalty 

People love inclusive people

Yes, and that goes for businesses as well. 

So if you learn how to prioritize diversity as a key value in your business, you can bet that your brand will automatically be seen more positively as customers are more likely to support businesses that demonstrate social responsibility.

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Supply chain resilience

If you diversify your supplier network, you have more options to work with, let’s say for example that something goes wrong with your traditional suppliers. Instead of fearing the possibility of facing disruptions, you would only need to move to your other suppliers as a solution.

Remember that a diverse supplier network promotes flexibility, enabling businesses to respond quickly to challenges.

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Sustainability

Inclusion and sustainability go hand in hand so it’s no wonder that many companies that you could partner with for your business’s supply chain, are already on the path of sustainability.  Something that will definitively give you bonus points for your company’s environmental, social, and governance (ESG) profile.

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Key Performance Indicators for Supply Diversity

You’ll want to focus on the following metrics

• Percentage of spending allocated to diverse suppliers.
• Number of contracts awarded to diverse businesses.
• Economic impact on underrepresented communities.
• Supplier satisfaction and retention rates.
• Contribution to overall business goals, such as innovation or market expansion.

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Implementation of Supplier Diversity Programs

To implement an effective supplier diversity program:

Set clear objectives

This is fundamental for any strategy, because how else could you know that you are heading in the right direction?

Define your goals and align them with your business strategy. Determine how supplier diversity fits into your overall mission and values. For example, if you want to focus on, you’ll need to stick with suppliers known for their creative approaches.

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Audit your current supply chain

Another simple but very important point is to be able to identify the gaps and opportunities in your processes for including diverse suppliers.  Stop for a moment and see around you, talk with your people so you can fully understand where your supply chain can be more inclusive. Conducting a thorough audit can reveal what’s the potential and areas for improvement.

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Partner with certification organizations

See? Certifications can make a big difference

Work with groups like NMSDC or WBENC to find certified diverse suppliers. These organizations provide you with resources and networking opportunities, simplifying the process of identifying and vetting suppliers.

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Engage internal stakeholders

As we often say, procurement isn’t a one-man effort, there’s a whole team of professionals involved so bear in mind the necessity of educating your procurement teams and leadership members about the importance of supplier diversity. Highlight success stories and data-driven insights. Doing this will help you to have everyone aligned on your quest for diversity.

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Build relationships

The key to success in supply chain management? Relationships

Consider attending trade fairs and networking events to connect with diverse suppliers. Personal relationships can lead to stronger, long-term partnerships. Engage in open communication and provide feedback to achieve mutual growth.

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Monitor progress

Use KPIs like the ones we mentioned above to evaluate the effectiveness of your program. Share regular updates with your stakeholders to maintain support and momentum. Transparency and accountability are very important to sustaining success in the long term

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Challenges in Supplier Diversity and How to Overcome Them

Finding qualified suppliers

This is something that might be challenging regardless of the kind of supplier you are looking for. After all, one of the procurement’s goals is to find the best match for your business. 

Use certification organizations like the ones we’ve discussed and industry directories to locate suppliers that meet your needs. Networking and participating in industry events can also help identify potential partners. Additionally, don’t overlook that mentorship programs can help smaller suppliers build capacity and meet your procurement requirements.

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Managing costs

Yes, everything goes back to the money.

Compare pricing and value to demonstrate that diverse suppliers can offer competitive solutions. Focus on the long-term benefits of innovation and resilience that these suppliers bring, and don’t forget to educate your stakeholders about the broader value of supplier diversity, beyond immediate cost considerations.

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Securing stakeholder approval

Share relevant insights and every detail about the benefits that come with working with a more inclusive supply chain to gain support from stakeholders. Show how supplier diversity aligns with your business goals. The more convinced your team is, the simpler will be to have everyone working on the same page.  Goal setting can help you with this part. 

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Compliance requirements

Ah, regulations…sometimes they are just a pain in the back, right?

Whether you like it or not, they are necessary, especially if you are working in a high-risk industry so take your time to understand and adhere to legal and industry-specific regulations regarding supplier diversity. Seek expert guidance to ensure compliance without losing any benefits. If you can proactively address potential challenges, you’ll prevent delays and build credibility.

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What’s Next for Supplier Diversity?

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As with everything, you can expect to see a rise in the use of technology.

Technology integration is becoming quite popular, with tools and platforms like procurement software, for example, ready to streamline the identification and collaboration with the right suppliers.

Businesses are expected to use advancements in artificial intelligence and data analytics to increase their supplier diversity initiatives, making it easier to find, vet, and collaborate with a wider range of suppliers.

Another trend involves the expanded definitions of diversity, as the understanding of diversity evolves to include new categories such as neurodiverse-owned businesses and other underrepresented groups. 

And, of course, we can’t stop mentioning sustainability 

Companies are increasingly aligning their supplier diversity goals with environmental objectives, prioritizing partnerships with suppliers working with eco-friendly practices.

Best Practices for Supplier Diversity

• Collaborate across teams: If you build strong partnerships within your company to support supplier diversity, it’ll be simpler to have key departments understand its importance.
• Focus on long-term relationships: Build positive relationships with your suppliers. Collaboration over time leads to greater mutual benefits.
• Celebrate success:  Don’t be shy and get ready to share stories and achievements to inspire others and show your impact. Public recognition can encourage more businesses to prioritize supplier diversity.
• Stay informed: Follow industry trends and adjust your program as needed. Continuous learning will allow your efforts to remain effective and relevant.

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