Many supply chain teams have supplier diversity initiatives, targets, and goals. These are typically not even new programs, as many of them have been on the agenda for ten, thirty, or even fifty years. They have survived multiple supply chain leaders, multiple CEOs, and multiple CFOs the way few things do other than cost savings initiatives. So why aren’t they more effective? Let’s explore both the benefits of a supplier diversity program and a couple simple things any procurement professional can do to convert diverse suppliers on a bid list into diverse supplier partners bringing value. 

Benefits

An article in Harvard Business Review from 2020 cites multiple benefits of a diverse supplier base, including: 

• Improving goodwill in communities through small business investment
• Creating a wider pool of potential suppliers for better competition
• Increasing agility and resilience due to supplier size or better flexibility
• Providing a selling point to potential candidates who are seeking an organization focused on more than profit

While the benefits of having diverse-owned businesses in a supply chain persist, we have seen the pendulum swing towards and back away from these initiatives even since the HBR article in 2020. In the aftermath of the strong diversity, equity and inclusion (DEI) surge in 2020 and 2021, many companies have pulled back on their DEI programs along with a host of other post-COVID adjustments. The typical human response to change is “change back”, and we’re seeing that here. Thankfully, the pendulum swing back to pre-COVID supplier diversity initiatives continues to value diverse suppliers and see both monetary and non-monetary benefits. 

Actionable Steps

Getting diverse-owned suppliers on board with an organization starts with simply finding them. Software programs like Descartes or Scoutbee can help with this, but many metro areas in the U.S. also have chambers of commerce specifically focused on diverse-owned businesses. Consider searching your city or state and “Latinx chamber of commerce” or “woman-owned business chamber of commerce.” If you already have some diverse-owned businesses in your supply base, ask if they have partners or contacts to recommend in other categories that might serve you. Chances are they have a network of colleagues or even suppliers they use for services unrelated to those they provide you and can make a good reference. 

Now that you’ve found some diverse-owned suppliers to add to bid lists or partner with, look critically at the barriers to entry at your business to becoming a supplier. Some of them may have even been placed intentionally to ensure new suppliers are willing to work for your business. Every large company I’ve worked for has such barriers, but they are double-edged swords. Are any of them particularly tricky for diverse-owned businesses? How can you coach target diverse suppliers through the hurdles and hoops in front of them? Build enough trust that if you ask a supplier what makes you a difficult customer, they can tell you (this goes for non-diverse-owned suppliers too!). 

In building a bid or Request for Proposal (RFP), consider both your timing and your award scenario to bring more diverse-owned suppliers in. For timing, consider holidays other than the “standard” ones your business may observe. For a business where the team is Muslim, having a bid response due on Eid is difficult as it is a time of celebration and reflection similar to Christmas. Considerations like this are due for Yom Kippur or  the Chinese New Year. 

In planning your award scenario, ask if a small percentage of the business can be awarded to a secondary or even tertiary supplier. It is best to include that some percentage of the business will go to the second- or third-place supplier in the RFP so the primary supplier isn’t surprised when they win 80% of the business. Especially in a market with new suppliers or where the diverse-owned suppliers are small, awarding them a smaller portion of the business might make them more likely to bid and it allows the supplier and the supplier relationship to grow. If the company ends up with much more business in a category than originally expected, perhaps the extra volume can also be awarded this way to make the next bid opportunity more competitive. 

My last thought on action items comes from a minority chamber of commerce meeting I attended in Maryland a couple of years ago, while I was leading a large supply chain. One of the small business owners I was talking to mentioned that he often had trouble getting a line of credit from a bank, even after winning huge business opportunities with clients. The banks simply wouldn’t believe a company his size had won business with the value he had secured. A simple letter from the company awarding the business outlining the value of the business, the length of the relationship, and the importance of the work would have helped him tremendously and cost the company nothing. This was an eye-opening moment for me, and got me thinking about my own supplier base and how many of them might be in the same situation when they no-bid my RFPs. 

As this pendulum continues to swing, note that supplier diversity initiatives continue on. Consider how you approach your own diverse suppliers and what simple things you can do to help build valuable, diverse, effective supplier partners.