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Why Supplier Diversity Is Good Business

January 28, 2018

Two and half years ago, my VP came to me with a need.  One of our largest customers was requiring that we get on board to meet our contractual obligations to increase the diversity of our supply chain.  My response was “I Got this.”  That is always my response when presented with a new challenge.  Did I have it, not even close, but I jumped in and started to figure this thing out.

Our first order of business was to understand our baseline.  It was not good.  Not only that, we had no idea how to classify vendors as diverse and what that meant.  Our customer was willing to mentor us and I took every advantage to soak up the knowledge and dove in head first.  As we navigated the space we learned about the certifications the national organizations and committed to a development plan to increase our spend with Women, Diverse and disadvantaged suppliers. 

We started with a mission statement and the idea that we had to do this to be in compliance with our contractual obligations.  We started with the idea that supplier diversity was “the RIGHT thing to do.”  We continued down our path of connecting with qualified diverse suppliers that could meet needs for the business.  What we found in those vendors were cost savings, innovation and high levels of customer service.  One of the internal questions was one of economies.  The legacy thoughts were that larger suppliers would have cost advantages over smaller suppliers.  What we found was the opposite, especially in the services industry.  Smaller suppliers had lower overhead and could deliver on our needs faster than the larger suppliers they were replacing.  Contracting was easier, they were nimbler on delivery and were able to provide local and specialized resources that lowered our costs from several angles.  Our first substantial engagement with a diverse supplier saved us hundreds of thousands of dollars over our prior supplier, the business was happier with the resources, and we delivered projects on time and on budget.

So wait, you mean that we get better service, better results and we are saving money.  Well that is a win, win, win.  As we dug a little deeper we continued to see savings while increasing stakeholder satisfaction and faster delivery—this was not a one off.  This piqued my curiosity and I started talking to more and more diverse suppliers.  This is not an anomaly.  Smaller vendors may have fewer tools in the tool box, but they are resourceful in using those tools to solve customer challenges.  They are not tied to big bureaucracies, so they have freedom to be agile and creative.  Leveraging this advantage makes good business sense for organizations that need to reach compliance goals as there are additional benefits.

As we grew the supplier diversity practice more of the business started asking for help.  We researched new customer segments and a common theory emerged.  Customers are loyal to companies and brands that support their communities. We pitched marketing the concept and started to build a story for those segments.  We received requests from the sales team to review proposals to see how we could meet the supplier diversity requirements of large public companies and government entities.  Two previously unreachable markets. 

We still have some room to grow our program through our mentoring programs and our outreach to diverse suppliers.  But one thing is clear--compliance and doing the “RIGHT thing” are great, but when you can make a case to do the “right thing” and drive revenue for the organization it is a story that connects corporate citizenship with returning shareholder value.

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