4 Factors Driving Supplier Diversity

Supplier Diversity is important in nearly every industry, but I always find it interesting to understand the various drivers that determine the level of importance within select industries.  Here are a few key takeaways I’ve found based on my conversations with clients and prospects:

#1: Government mandates directly influence supplier diversity requirements.

Supplier diversity in the Telecom industry is stemmed from government mandates to comply with minimum diversity requirements. As a result, several organizations have come to realize the value of working with diverse suppliers with lower costs and higher quality. What better reasons to work with a supplier? Today, the amount of diverse spend within a Telecom organization is often 40% or higher.

#2: Working with diverse suppliers can improve customer satisfaction.  

Many organizations realized that a large portion of their customer base comes directly from diverse backgrounds. In some situations, companies feel obligated to increase the amount of spend with similar diverse suppliers to satisfy consumer demands and preferences. In some cases, consumers will report spending more money with corporations that have a focus on supplier diversity.

#3: Companies benefit from having more options and flexibility within the supply chain by working with diverse suppliers.

Companies within the Financial sector are not required to report to the Government on the level of diversity spend, so there is no political pressure, but drivers to work with diverse suppliers are still present.  For example, many Financial organizations recognize a strong presence of diverse suppliers in Professional Services, which provide many available options and flexibility in their supply chain. Working with diverse suppliers in the local communities establishes credibility for their organization. In turn, the diverse suppliers increase the number of diverse customers – everyone wins!

#4: The most successful supplier diversity programs make diversity a priority.

Based on my research and conversations, I’ve come to realize the biggest trend of all: working with diverse suppliers is most successful and beneficial to the organizations that make it a corporate priority or initiative.  At the end of the day, due diligence must always be followed. The presence of a strong and well-managed supplier diversity program should raise the quality, delivery and contractual compliance bar for all suppliers.

Even in some industries where the majority of spend is in direct materials and the option to work with diverse suppliers is limited and unregulated, there is still a common theme of the importance to working with diverse suppliers whenever possible.  In many such instances Diversity teams are established where sourcing professionals are given the additional task of finding opportunities to include diverse supplier responses.  It seems everyone is quickly realizing the many benefits of diverse supplier inclusion.

There is something in this for everyone.

What additional factors can you think of that are driving supplier diversity? Share your thoughts by commenting below or tweeting @iasta.

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