Sourcing professionals have found their role growing in complexity over the decades. From a focus on keeping costs as low as possible while working primarily with local suppliers, sourcing and procurement have expanded tremendously in scope. A modern organization’s procurement department practices strategic sourcing, managing a tangled global supply chain.
If your company hasn’t done so already, it’s time to add another variable into the mix—and this one is rapidly becoming a high priority. Supplier diversity has become a hot-button social issue. Without an effective plan to support it and the tools needed to make that plan a success, the goal of inclusive and sustainable procurement simply can’t be achieved.
Supplier diversity is the key to inclusive and sustainable procurement. But what exactly is “supplier diversity,” why should companies care about it, and how do their sourcing teams put it into practice?
What is Supplier Diversity?
The first step to addressing inclusive and sustainable procurement is to understand what a diverse supplier is. A 2020 article published by the Harvard Business Review succinctly defines supplier diversity:
“A diverse supplier is a business that is at least 51% owned and operated by an individual or group that is part of a traditionally underrepresented or underserved group. Common classifications are small-business enterprises (SBEs), minority-owned enterprises (MBEs), and woman-owned enterprises (WBEs). Over time, the definition of diversity has expanded to businesses owned by other minority groups such as LGBQT, veterans, and proprietors with disabilities.”
This definition clarifies which businesses are considered to be diverse. It also makes the point that the meaning has changed over time. Therefore, any program focused on supplier diversity must have the flexibility to add new businesses as needed.
Why Your Company Should Care About Inclusive and Sustainable Procurement
You know what supplier diversity is, but why should your organization care about it?
There are many reasons ranging from ethics to customer demand and competitive advantages. We’ll go through some specifics, but the big takeaway is that adopting inclusive and sustainable procurement is a winning strategy for any company. Yes, there may be some effort involved in launching the program, but doing so results in nothing but positives.
In a 2020 article on supply chain management, Michigan State University researchers explain the high-level reason why companies are adopting supplier diversity:
“In an age when consumers expect their purchases to reflect their values and use social media to share their values and purchasing habits, companies are stepping up to meet those expectations of diversity, sustainability and ethical procurement practices.”
Thanks to the internet and social media, consumers (and customers) have far more access to specifics about the supply chain than ever before. They can find out when companies are failing to live up to expectations and take action. This might be simply losing them as a customer, but with social media, it can quickly turn into a boycott. Many companies have learned that it is better to adopt transparency along with supplier diversity—turning their supply chain into a positive that attracts customers and earns their loyalty.
There are additional wins for organizations that make supplier diversity a core component of their procurement process.
According to Kris Oswald of UPS, “To truly drive toward economic equality, supplier diversity can’t feel like a secret tucked away in the procurement function. It has to hit the main stage.”
Working with diverse suppliers usually means working with more suppliers, with many smaller and medium-sized businesses taking the place of larger ones. This works against the trend of consolidation of supply chains that comes with globalization.
We saw the danger inherent in this consolidation last year during the early stages of the pandemic. Companies that had moved their supply chain to low-cost factories in China were hit hard when many of those factories were forced to temporarily close. This caused component shortages that rippled through the supply chain, taking months to recover from.
Working with diverse suppliers minimizes the risk. It increases your company’s resilience during difficult times, and access to diverse suppliers reduces the risk caused by the digital divide. Often, smaller and diverse suppliers are more agile in nature than larger conglomerates.
A 2020 article on supplier diversity published by Reuters outlined additional advantages to the approach. Diverse suppliers are often more innovative, more flexible, and more adaptable—traits that can pay off handsomely for their customers. In addition, working with a diverse supplier can open up new markets.
It’s also worth noting that companies with a formal supplier diversity program tend to attract more diverse job applicants. This lets them draw from a much wider talent pool, which is an obvious advantage.
Arkestro can help you gain visibility into these suppliers, and unifies the data on compliance and performance all in one place. Most current solutions fall short. That’s why procurement professionals are turning to Predictive Procurement Orchestration Platforms like Arkestro.
Arkestro is the Predictive Software That Enables Your Buyer Diversity Program
Arkestro is built around transparency and being a single source of truth that drives amazing business outcomes, like getting better quotes faster to reduce the quote time cycle by 10-15 times.
The Arkestro Public Supplier Directory is the meeting place where suppliers can join (for free), interact with your company, and get discovered by customers around the world. With a complete profile, you will be able to easily find these suppliers and identify them as being diverse and/or sustainable. Arkestro provides the functionality needed to secure RFI, RFQ, and RFP participation from a diverse supplier base.
Arkestro employs the power of artificial intelligence as part of the bidding process. With AI crunching the numbers and weighing outcomes, all factors and variables—including supplier diversity—are accounted for. This ensures you get better quotes, faster, that account for all your requirements providing a full audit trail for every sourcing project to show good faith efforts, and free and fair competition. Arkestro can help your business stay ahead of the market. To learn more about Arkestro and how it will make your inclusive and sustainable procurement policy a reality, visit arkestro.com to learn more.