Subscribe Here! Email Address. Subscribe to Supply Chain Game Changer. Specifically in the area of Procurement there has been a history associated with attempts to direct spending toward diversity owned businesses.
There have been successes and failures for sure but the underlying intent of providing business opportunities to those who would otherwise not have that opportunity still makes sense. For some this is second nature yet for too many others this is not understood or not even known. According to Wikipedia, Supplier Diversity is defined as follows:. It is not directly correlated with supply chain diversification , although utilizing more vendors may enhance supply chain diversification.
It is an initiative by corporations to ensure they are being inclusive in their supply chain practices to suppliers of diverse backgrounds, while at the same time capitalizing on the opportunity for competitive advantage and community engagement that comes from working more closely with a broader range of aboriginal and minority suppliers.
Many different companies and organizations have customized their definitions of Supplier Diversity but the core elements are all the same. Fundamentally it is about the inclusion of suppliers who are not otherwise necessarily given the same opportunities on an equal footing that are open to other, often larger suppliers and suppliers of demographic majority-type ownership. Kennedy amended a federal order to take affirmative action into consideration for federal contracting.
For my part I first heard of Supplier Diversity over 30 years ago as an initiative within the Procurement or Commodity Management function.
The stated objective was to look for all opportunities to include these suppliers in quotation opportunities and to award that business to them everywhere possible. When an MWVBE supplier quoted on business if they were competitive and able to meet all performance requirements then they were to be awarded that business.
The general reaction I recall getting from the Procurement community at the time was less than aggressive. First most of the suppliers we were informed of were not production material suppliers but rather non-production, or indirect procurement spend or MRO candidates only. Our spend in this area was relatively small so this reduced the opportunity significantly. Through our research, which includes interviews with companies and diversity organizations as well analyses of media coverage and company reports, we have mapped the history of diversity programs and their social and commercial impacts.
Our research affirms the commercial and social benefits of such programs and makes the case for companies to revisit their efforts and, if necessary, commit themselves to taking them seriously. Over time, the definition of diversity has expanded to businesses owned by other minority groups such as LGBQT, veterans, and proprietors with disabilities. The history of supplier diversity in the United States is firmly rooted in the civil rights movement of the s and s.
Following race riots in Detroit in , General Motors set up what is regarded as one of the first supplier diversity programs, and much of the American auto industry followed suit. Early movers in the electronics industry such as IBM established supplier diversity programs around the same time.
Later, Public Law established a program to encourage government contractors to include minority-owned businesses in their supply chains. The UPS program has evolved in the ways it identifies and helps fledgling diverse suppliers. Hispanic Chamber of Commerce to run mentoring and training programs that support the growth and success of diverse suppliers.
This work includes workshops , professional matchmaking at supplier diversity conferences, enhancing opportunities for capital investment, and management education. Inclusive procurement also delivers broader societal benefits by generating economic opportunity for disadvantaged communities. The U. Small Business Administration estimates there were 8 million minority-owned companies in the United States as of And those numbers are steadily increasing.
In an interview, Terrez Thompson, vice president of global supply inclusion and diversity at Coca-Cola, highlighted the role that diversity programs play in fostering entrepreneurship in highly impacted minority groups.
Together with Georgia State University, Coca-Cola formed a supplier-development institute four years ago to provide education on how to start businesses for small and disadvantaged groups. Coca-Cola also has the STEP initiative to support women entrepreneurs through training, education, and mentorship.
Some large companies encourage, and in some cases, require their suppliers to create their own diversity initiatives to broaden the impact. Supplier diversity programs are also a selling point when hiring. Fifty-two percent of respondents to a survey conducted for UPS by Hootology, a specialized marketing and consumer insights research firm, said they want to work for a company that has a supplier diversity and inclusion program, according to Oswold.
Aside from these moral and ethical arguments, there are sound commercial reasons for creating supplier diversity programs. An inclusive procurement strategy widens the pool of potential suppliers and promotes competition in the supply base, which can improve product quality and drive down costs. And by providing more sourcing options, inclusiveness can make supply chains more resilient and agile — an increasingly important advantage in these uncertain times.
Stacey Key, president and CEO of the Georgia Minority Supplier Development Council GMSDC , gave one example of how that flexibility has helped during the pandemic: Minority businesses drew on their expertise in formulating and manufacturing hair products to create their own line of hand sanitizers and multi-purpose disinfectant cleaners. The current furor over race relations in the United States and increasing support for movements such as Black Lives Matter will surely bolster the impact of supplier diversity programs on brands.
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