How to Foster Supplier Diversity in Your Procurement Strategy
Posted 25th January 2024 • Written by Emily Newton on supplychainonline.co.uk • • • • • •
Improving supplier diversity in procurement can lead to more stable supply chains that support success for business owners, employees and consumers alike. In today’s supply chain, working with a wider array of partners can help businesses improve quality control and avoid delays and shortages. Businesses can diversify their supplier portfolio with a few basic steps.
Analyse Current Supplier Diversity
The first step to improving supplier diversity is analysing the current supplier portfolio. There are a few ways to do so depending on a business’s definition of supplier diversity.
In some cases, supplier diversity simply means having a varied pool of supply chain partners. This is a broader approach to supplier diversity and ensures a business isn’t completely reliant on a single supplier.
Supplier diversity can also mean creating a more varied pool of supply chain partners that specifically includes businesses owned by people from minority groups. Generally speaking, a diverse business is at least 51% owned and operated by women, people of colour, people with disabilities, LGBTQ people and veterans.
Businesses should carefully analyse the size, location and leadership of their existing suppliers. Take note of any trends. For example, are a large majority of the suppliers large businesses or based in the same region? Are they mostly run by people of a certain race, gender or ethnic background? Identifying these trends will highlight where supplier diversity should improve.
Create Procurement Strategy Goals
Successfully increasing supplier diversity requires having a clear understanding of what a business is trying to achieve with its procurement strategy. There are many ways to approach supplier diversity, after all. For some businesses, it can mean working with supply chain partners from minority groups. For others, it can simply mean having a wide variety of suppliers, manufacturers and distributors.
It’s important for businesses to clarify what they are hoping to achieve before reaching out to new suppliers. These goals can be purely business-focused or connected to social or environmental goals. For example, a business might want to work with more sustainable and minority-owned businesses as part of its ESG initiatives.
Likewise, a business might want to build a new portfolio of suppliers after dealing with quality control issues. Studies show that improving supplier management can lead to a 68% decrease in supplier quality control escapes. Working with a wider range of suppliers can be a great way to move on from low-quality suppliers and improve QC.
Expand Supply Chain Connections
After identifying a current lack of diversity and pinpointing supplier diversity goals, businesses can move forward to the networking stage. This stage is all about forging new supply chain connections. Depending on a business’s procurement strategy goals, there are a few resources that can be helpful.
Many nations have organisations that represent minority businesses, which can be a great source for networking. For example, Minority Supplier Development UK (MSDUK) represents and advocates for suppliers owned by people from minority groups. The U.S. has a similar organisation, the National Minority Supplier Development Council (NMSDC).
There are also some international networking organisations, such as WEConnect International, which specialises in women-owned businesses. Likewise, businesses that want to work with more small suppliers can connect with the Federation of Small Businesses in the UK or one of many similar organisations around the world.
Organisations like these often host conferences and networking events where businesses can develop new connections. It’s a great way to get started improving supplier diversity since business leaders can meet many potential suppliers at once.
Remember to focus on creating mutually beneficial partnerships. Successful supplier diversity goes beyond variety and forges supply chain connections that support growth for everyone involved.
Monitor Progress and Performance
Monitoring is vital to ensure that new procurement partnerships are successful for businesses and suppliers alike. There are a variety of KPIs businesses can track to accomplish this. For instance, a business that wants to work with more sustainable suppliers could track its carbon footprint, manufacturing waste or suppliers’ emissions.
Technology is often helpful for improving supply chain visibility at this stage. Businesses can use tools like IoT sensors to autonomously collect data for performance monitoring. Likewise, AI can analyse businesses’ supplier performance data to rapidly identify patterns and make predictions about future outcomes.
Businesses focusing on working with more minority-owned suppliers can use metrics like investment size, turnover and percentage of diverse suppliers to measure success. In this case, it is also a good idea for businesses to reach out to their diverse suppliers for feedback.
Building More Diverse Supply Chains
Improving supplier diversity in procurement benefits everyone, from business owners to employees to consumers. Businesses can foster supplier diversity by making an effort to expand their supply chain connections.
Working with the many reputable diverse supplier organisations around the world is a great way to get started. After building new connections, businesses need to carefully monitor their goals and progress to ensure they’re fostering mutually beneficial partnerships.
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