With 95% of businesses reporting some level of sourcing and supply chain disruption during the pandemic, many procurement leaders turned to smaller, diverse suppliers to ensure continuity for the business. Smaller, local suppliers lend procurement teams added agility when it comes to last-minute or urgent requests. Unlike their larger counterparts, smaller suppliers can often act with more flexibility in times of uncertainty.
Supplier Diversity Drives Competition and Innovation
A wider supply base made of diverse perspectives not only creates healthy competition, but it also sparks innovation. Because diverse businesses can often act with more agility, they can drive costs down, challenging even the largest suppliers to keep pace. A 2019 McKinsey study found that more diverse companies outperform other businesses by 36%. Moreover, the Hackett Group found that nearly all diverse suppliers either meet or exceed buyer expectations. With access to a broad range of experiences and perspectives, diverse suppliers can often outperform their counterparts and find creative solutions to supply chain disruption.
Businesses rely on supplier-enabled innovation (SEI) to create better quality products or services. According to Procurement Leaders, “with 25%-45% of revenues coming from product innovation and up to 65% of innovations sourced externally through external partners and suppliers, SEI represents a treasure trove of opportunity.” But innovation cannot exist in a vacuum. By partnering with diverse suppliers, enterprises are opening themselves up to new perspectives and new ways of doing business.
Supplier Diversity Builds Trust and Attracts Top Talent
Partnering with diverse suppliers doesn’t just lower costs and drive innovation, it also builds trust with consumers and attracts top talent. Harvard Business Review cites a Hootology study conducted for Coca-Cola that found that 45% of those who were aware of Coca-Cola’s supplier diversity efforts were more likely to perceive the brand as valuing diversity, and nearly half of respondents were more likely to consume Coca-Cola products.
By demonstrating a commitment to D&I, enterprises can forge better relationships with their customers and establish themselves as trusted brands. Companies like Walmart and Target are also prioritizing supplier diversity. In its 2018 Global Responsibility Summary, for example, Walmart reported that it had sourced nearly $14 billion from diverse suppliers.
If boosting the brand wasn’t enough, supplier diversity also attracts top talent throughout all lines of business. Job seekers are prioritizing company mission statements and core values more than ever. Forbes cites a Cone Communications study that found that 64% of millennial job seekers will pass on a job offer if the employer does not have a corporate social responsibility policy in place. Indeed, 52% of the Hootology survey respondents indicated they would like to work for a company with a supplier D&I program. With employees as a company’s greatest asset, supplier diversity programs can help attract incredible talent as well as retain high-performing people.
Supplier Diversity Enriches the Enterprise and Local Communities
Enterprises that prioritize supplier diversity set their business up for success while simultaneously enriching the lives of their employees, their supplier partners, their customers, and the greater communities they serve. Cecil Plummer, president and chief executive officer of the Western Regional Minority Supplier Development Council (WRMSDC), explained that the benefits of effective supplier diversity efforts are far-reaching. According to WRMSDC research: “Diverse businesses in the Western Region alone generate over $11B in value, which translates to job creation, tax revenue, and access to healthcare, housing, and higher education for underserved communities.”