Diversity Spend

Understanding Diversity Spend

Government agencies and a myriad of corporations are required to set aside certain percentages of their purchasing budgets for “diversity-qualified” vendors, and these vendors require the diversity certification in order to qualify for purchasing bids consideration from those government and private corporations.

To qualify for Diversity Certification, a business must be at least 51-percent owned and operated by minorities or women; in the U.S., this includes American Indian or Alaskan natives, Asians, Blacks or African-Americans, native Hawaiians or other Pacific Islanders, Hispanics or Latinos, women, veterans or service-disabled veterans of the U.S. armed forces.

Here’s the thing, though: The homogeneous customer base that companies once sold to no longer exists; every market now is a diverse one with multiple segments that must be addressed. The question that must be asked to modern day companies is, what better way is there to gain customer insight than to purchase and collaborate with the markets that buy from you? From our experience, what can result in supply base diversification, growth, cost-saving opportunities and innovation all begins with establishing an open, team-esque dialogue between buyer and supplier.

Ultimately, to achieve success today, supply chain diversification must be championed by top management while communicated via an organization – and to each individual involved in the sourcing process.

How to Increase Diversity Spend Without Sacrificing Anything Else

Here’s a myth we’d like to debunk right here and now: Smaller or more diverse suppliers can’t keep up with quality, delivery and service in the same manner that larger companies can. Indeed, that’s a load of hogwash; the key when vetting a diverse supplier is to ensure that all existing standards are met and that the proposed supplier is capable of supporting a client as a customer. When choosing to partner with a diverse supplier, it’s important that organizations form a mentoring program wherein customer and supplier work closely on a multitude of business initiatives to ultimately ensure the success of both organizations.

We can cite dozens of examples in which companies, through such mentoring programs, assist their suppliers via process implementation and education – all while improving customer delivery and quality standards.

Conclusion

Supplier diversity efforts are growing amongst nearly every industry – from consumer electronics to medical devices – and though it is easy to find a page on every major company’s website concerning supplier diversity initiatives, not every company shares the same goal. Indeed, organizations that look beyond the mere “social good” of engaging diverse suppliers will reap the most formidable benefit through improved financial performance, decreased supplier risk and strong yet cohesive supply base relationships.


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