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Supplier Diversity Best Practices

Supplier Diversity Best Practices

March 21, 2024
As companies invest more in supplier diversity strategies, accurate data is essential.

A new survey from Supplier.io, which analyzed over $2 trillion spend data, produced five industry best practices.

The report notes that supplier diversity has moved from being community focused to business critical as this strategy can improve vendor relationships, reduce supply chain risk, offer new innovations, enhance brands, and even cut costs. 

“With business decisions and investment dollars now being allocated based on supplier diversity data, supplier diversity leaders are now held to a higher standard. Data has to be accurate and reliable,” the report states.

The report offers five key areas for managing supplier diversity. 

Data – Accurate data remains key. Get your data -house in order and make it easy to get reliable metrics. 

Here are some ways to ensure accurate data:

Certifications – Leaders prioritize certified suppliers to ensure accuracy. Less than half of organizations include non-certified suppliers in reporting. However, many capture self-certification data for future opportunities.

3rd Party Data – 67% of supplier diversity leaders surveyed now use third-party diverse supplier data to accurately identify how much they spend with small and diverse suppliers. Our own data analysis identified supplier diversity data churns at about 23% annually. This means that it’s hard to keep supplier data accurate as some suppliers take on equity, change ownership, drop their certifications, or change locations. Keeping that data accurate has proven to be too much work for most under-staffed teams.

Behaviors and Results – Many top programs not only track results, but also the leading behaviors that are most likely to get the best results. For example, as accurate data is crucial, one program holds buyers accountable that the data is 100% accurate, measured, and reported on a quarterly basis. Another program regularly surveys the buyers to gauge whether buyers understand the strategy and tools for their supplier diversity program.

Context - Provide more context for your results including business unit (BU) specific tracking, benchmarks, and economic impact analysis.

Here are ways to provide better context: 

Benchmarking – Leaders are looking for more ways to define success for the company. Beyond internal targets, it’s important to get context for what’s possible based on industry specific dynamics, as well as set a competitive tone based on what industry peers are doing. However, this can be difficult. Some have turned to widely reported cross-industry metrics while others have engaged industry consultants to document accurate benchmarks. This is an area where new data sources have started to become available from data providers as well.

Economic impact – 81% of companies report they support their supplier diversity program because it’s simply how they want to do business; it is consistent with their company values. But measuring that has historically been difficult. Leaders have started to quantify their community support with economic impact analysis. They are now reporting the number of jobs, wages, and taxes they support with the suppliers they spend money with.

Business - Partner with your business unit peers to identify the benefit of supplier diversity. Demonstrating business impact is more important than ever.

Leaders are more connected in the following ways:

Win more business – Supplier diversity leaders have found clear ways to connect to how the business can grow with the increasingly diverse consumer population and win more business sales, especially with big customers and government contracts. They work with the BU to plan out the bidding process and identify specific line items that could be improved by promoting or using more diverse suppliers.

Share results – Leaders are able to directly connect supplier diversity with current and key objectives for the company. One team used the company strategy to show where supplier diversity hit for each company objective. This went well beyond the notion of “this is how we do business” and connected it to key performance objectives like cost, innovation, growth, brand, talent retention, and more. Some leaders were even able to do this at the departmental level. For example, one team showed marketing how supplier diversity was connected to their goal of growing with diverse consumers and improving the overall brand.

Planning – Short term wins like including supplier diversity initiatives in RFPs won’t help you grow fast enough. Plan further out including upcoming contacts that will expire, new business ventures, and even design and research level project.

Leaders are more proactive using these methods:

Starting at the design phase – Don’t wait for the RFPs. Knowing that diverse suppliers can bring in innovation, leaders bring diverse suppliers in at the product design phase to achieve a shared vision for the final product.

Having suppliers on deck – Leaders curate a set of potential diverse suppliers before the opportunities arise. They work with BU leaders to identify the type of services that might be needed and ensure that these specific suppliers are ready to meet the company’s requirements for price, quality, and speed.

ESG – You’re a leader in supply chain visibility. The company is going to ask you for more. Plan to add more tracking attributes including sustainability, carbon, and other social attributes like anti -slave labor.

Proactive leaders are doing the following:

Adding ESG data – Leaders are already reaching out to third party data providers to see how they can expand their supplier identification beyond just diversity categories. Some are working with individual sustainability consultants while others are partnering directly with data providers.

Assessing risks – It’s not possible to get the data you want from all suppliers. Leaders are finding ways to define a more focused sub-set of suppliers to focus on to ensure capturing more detailed data. Some are focusing on their highest spend suppliers while others focus on the biggest possible ESG risks like suppliers in high carbon categories.