The Importance of Supplier Diversity

History of Supplier Diversity

It’s claimed by some scholars that the UK has a long history of supplier diversity, dating bas far back as the 17th century. Citing The East India Company buying tea from various Indian estates in the late 17th century, with this practice continuing for at least 200 years. It’s also cited that in 1823, Robert Owen, founder of the New Lanark Model Village, was the first British industrialist to formally encourage the employment of people with disabilities in industrial settings. However, others believe that there was exploitation and questionable practices which occurred during these examples too.

In the U.K., it wasn’t until the supplier diversity legislation was first introduced in 2000 under the Local Government Act, that things were officially acknowledged. This early directive outlined the responsibility that local authorities have to promote the social, economic, and environmental “well-being” of their communities through diverse procurement practices. Sadly, more than twenty years on, we’re still far off achieving significant supplier diversity, but there does appear to be a glimmer of hope, in the form of several non-profit bodies and organisations leading the charge.

The Importance of Supplier Diversity

When a company decides to do business with another, the selection process is carefully examined. A company wants to be sure that the supplier it is working with is trustworthy, reliable, and can deliver quality products and services. Similarly, suppliers want to be sure that the companies they do business with have the capacity and willingness to perform. For these reasons, many corporations have implemented a supplier diversity program. A supplier diversity program, (also known as supplier diversity initiative, SDI or SDG), seeks to increase the number of companies with which they do business. SDIs can be implemented company-wide, or within a department or business unit. Here are some of the main reasons these initiatives and programs are important:

1. They Support Diversity

2. Promote Innovation

3. Support Local Business

4. Local Businesses are often more agile

5. Local Businesses are often more sustainable

Benefits of a Diverse Supply Chain

Having a supply chain that is made up of diverse businesses allows you to gain different perspectives, which in turn can help improve products and services. In addition, businesses and employees gain knowledge and develop new skill sets.

Supplier diversity is an important aspect of supply chain and procurement that companies should evaluate as part of their sourcing strategy. A diverse supplier base helps ensure that supply-chain strategies, business strategies, and procurement strategies are aligned, that companies are investing resources in communities in which they do business, and that they support their supplier base.

So what do we mean by “diverse suppliers”, well HBR defines a diverse supplier as “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.”

Unlocking Value

Companies can unlock more value in their supplier diversity programs by including higher-growth sectors and promoting diversity across the business ecosystem. Diversity is becoming increasingly important in the business sector. Many companies have been learning to embrace diversity. Diversity is beneficial because it helps businesses to find cheaper suppliers and gain access to a broader variety of products. Businesses also gain a lot of experience from working with diverse suppliers. It can help a company develop a network of new contacts who may otherwise have been inaccessible. Frequently this translates to increased value, whether financially or in terms of improved services/products.

Increasing Diversity in your Supply Chain

There are a few steps companies can take to increase the diversity of their supply chains. One is to identify and target high-growth sectors for inclusion in their programs. Another is to promote supplier diversity across the business ecosystem; among vendors, partners, and customers. Thankfully, experienced help is now on hand in the form of various organisations/non-profits that provide an organised channel between corporates and diverse suppliers. By taking such steps, corporate organisations can unlock more value in their supplier diversity programs and help create a more diverse and inclusive business environment.

MSDUK, a non-profit organisation focuses on ethnic minority-owned businesses (EMBs; synonymous to MBEs in the US) and has established a vast international network of EMBs and multinational corporations. In particular, MSDUK has worked to raise awareness of the benefits of inclusive procurement among European policy-makers and opinion-leaders and has hosted many supplier diversity events, including the European Supplier Diversity Conference, aimed at connecting EMBs and big businesses. MSDUK has a wealth of resources, toolkits and events to support those in corporate procurement and EMBs

WEConnect International is a global network that connects women-owned businesses to qualified buyers. Many large corporations are members of the network and are open to purchasing goods or services from women-owned businesses. WEConnect International provides regular events and training, as well as providing resources and toolkits for those in procurement and women owned businesses

Diverse suppliers bring valuable insights into the company’s customer, market and product requirements. They also bring different points of view, experiences and perspectives that can help any enterprise be more effective and competitive. Despite the divide between diverse suppliers and corporate businesses closing, it’s still taking place at a very slow rate. There is also a significant barrier to entry, especially for small diverse businesses, who may be lacking the knowledge and support to apply for the various supplier diversity programs. 

However, the barriers identified can be overcome if companies are genuinely committed to making their procurement strategies easier for diverse suppliers to meet. While creating a supplier diversity program may be difficult in the short term, these “inclusive” programs represent an opportunity to join the fight against all forms of discrimination, enable economic opportunity, and enhance their businesses.

At BX Merchandise, we pride ourselves on being a diverse, ethnic-minority and woman-led business. We are active and engaged members of both MSDUK & WEConnect International, and feel grateful to be a part of this much needed change. Therefore, if you represent a company looking to expand your supplier diversity, especially in terms of promotional merchandise, please don’t hesitate reaching out to us at BX Merchandise, as we’d love to help!