Established in 1969 by a Presidential Executive Order, a supplier diversity program encourages the use of diverse suppliers within an organization's supply chain. A diverse supplier is one that is at least 51% owned and operated by a traditionally underrepresented or underserved individual or group. These groups include minorities, LGBTQ, veterans, and persons with a disability.
Evidence has shown that when a company implements a comprehensive supplier diversity program from the top down, it saves money, drives innovation, increases competition, and drives down prices. And according to a
McKinsey report, a successful program is the key to a strong, inclusive economic recovery. The article states that spending $50 billion with minority-owned businesses could add four million jobs and $280 billion in extra income.
VIVA has found that a successful implementation should be addressed in two phases. The first phase is the creation of the program, while the second phase is its sustainability. Below are 10 best practices to implement Phase I.
Get commitment from leadership
Commitment from leadership is important for growing a supplier diversity program because it sets the tone for the rest of the organization and demonstrates that the program is a priority. When leadership is committed to the program, they are more likely to allocate resources and provide support to ensure its success. This can include things like providing staff time to work on the program, setting targets for increasing diversity among suppliers, and promoting the program to other stakeholders.
Without leadership commitment, it is difficult to effectively implement and sustain a supplier diversity program. Staff may be hesitant to allocate time to the program, and it may not receive the support it needs to succeed. Additionally, without leadership commitment, it may be harder to secure buy-in from other stakeholders, such as suppliers and customers, who may not see the program as a priority for the organization.
Appoint a senior manager to lead the program
Appointing a senior manager to lead the supplier diversity program can help to ensure that the program receives the necessary support and attention from leadership. A senior manager is more likely to have the authority and influence to allocate resources and make decisions that impact the program and can also serve as a point person for other stakeholders, such as suppliers and customers.
Additionally, having a dedicated leader for the program can help to ensure that it is effectively implemented and sustained over time. The leader can be responsible for setting goals and targets for the program, developing and implementing strategies to increase diversity among suppliers, and tracking progress and results.
Almost every impactful supplier diversity program is an extension of the corporation’s goals and values. Developing a policy helps internal stakeholders and buyers understand what to look for, how to evaluate new suppliers, and establish both short and long-term measurable goals.
Additionally, a policy helps to ensure that the program is well-defined, consistent, and transparent. A policy can help to establish the goals and objectives of the program, outline the expectations for supplier diversity, and provide guidance on how the program will be implemented and measured.
Having a clear policy in place can also help to communicate the importance of the program to stakeholders, such as employees, suppliers, and customers. It can demonstrate the organization's commitment to diversity and inclusion and provide a framework for how the program will be implemented and supported.
Establish baseline spend
According to the
Institute for Supply Management, US companies currently devote 7.2 percent to diversity spend. To set such goals for your organization, establish the company’s baseline spend, identify the number of diverse suppliers you already have, the diverse categories they fall in, and your current spend with each category. This information can be quickly gathered with the help of a
third-party data enrichment solution.
Once the baseline spend is developed, it can further help companies track their progress in increasing diversity among their suppliers and measure the impact of their supplier diversity efforts. It can also serve as a benchmark against which to set goals and targets for increasing diversity.
Having a baseline spend can also help companies identify areas where they may be able to increase their use of diverse suppliers. By analyzing their current supplier base and spend, they can identify opportunities to diversify their supplier mix and potentially drive cost savings or other benefits.
Employ technical integration
Many companies use spreadsheets and non-networked internal databases to manage their supplier diversity program. But due to government regulations and audit requirements, companies need a
full suite of technology solutions to collect accurate supplier data and avoid financial penalties. Real-time collaboration software shared among departments streamlines these functions as well as removes information silos. All this helps your company reach common goals.
Employing technical integration can help supplier diversity teams to effectively and efficiently manage the supplier diversity program. For instance, supplier diversity team can reduce the time and effort required to manage the program and free up resources to focus on other strategic initiatives. It can also help to ensure that the program is consistent and transparent, and that it is aligned with the overall goals and objectives of the organization.
Develop specialized reports
Developing specialized reports for supplier diversity can help track and measure the progress and impact of the program. These reports can include metrics such as the number and percentage of diverse suppliers in the supplier base, the spend with diverse suppliers, and the impact on the overall supplier base.
Specialized reports can also help identify areas for improvement in the program and opportunities for increasing the use of diverse suppliers. For example, a report may highlight categories where the organization has a low number of diverse suppliers, indicating an opportunity to increase diversity in that area.
Finally, specialized reports have the ability to help achieve continued C-suite buy-in. Measure the metrics most important to leadership to demonstrate the benefits of supplier diversity to the company. Examples include cost savings, revenue impact, market share, deals won and lost, and social impact.
Onboard employees and vendors
Onboarding employees and vendors for a supplier diversity program can help to ensure that all stakeholders are aware of the program and understand its goals and expectations. This can help to build support and buy-in for the program and ensure that it is effectively implemented and sustained over time.
Onboarding can also help ensure that employees and vendors have the knowledge and skills they need to effectively engage with diverse suppliers. By providing actionable steps for both employees and vendors, this ensures employees understand all facets of the program so they can train vendors to understand your company, its industry, and program expectations.
Communication is vital to a successful program.
Launch an effective Tier 2 spend program
Tier 2 suppliers are smaller companies that are accepted as part of your organization's diverse spend. To launch an effective program, identify your diverse suppliers and their certification status. From there, select your top Tier 1 suppliers and request they track their Tier 2 spend. It is recommended that you also connect your Tier 2s with your Tier 1s. This way, they can bid on contracts together.
Doing so has the potential to increase the overall diversity of the supplier base by identifying and engaging with diverse suppliers at the sub-tier level. This can help ensure that the organization is not just diversifying its direct supplier base but is also considering diversity at all levels of the supply chain.
Second, it can help to track and measure the diversity of the sub-tier supplier base, allowing the organization to identify areas where it may be able to increase diversity.
Finally, launching an effective Tier 2 spend program can help to drive overall supplier diversity efforts by providing additional opportunities for diverse suppliers to do business with the organization, and by demonstrating the organization's commitment to diversity to its suppliers and other stakeholders.
Institute best practices and goals
Instituting best practices and goals for supplier diversity can help companies increase the overall diversity of their supplier base, demonstrate their commitment to diversity and inclusion, track and measure progress, and drive cost savings and other benefits.
To institute these best practices and goals, establish a set of KPIs, making sure they are reasonable, achievable targets. Companies also provide benchmarks to measure the program’s success against others inside and outside your industry. It is important to measure not only the spend target but processes and culture too.
In conclusion, implementing a supplier diversity program can bring numerous benefits to an organization, including increased innovation, access to new markets, and cost savings. By following best practices, such as obtaining leadership buy-in, assessing the current supplier base, developing a plan, training staff, and communicating and promoting the program, companies can effectively implement and sustain a successful supplier diversity program. Additionally, by appointing a senior manager to lead the program, employing technical integration, developing specialized reports, onboarding employees and vendors, and instituting best practices and goals, companies can drive better results and achieve their diversity and inclusion objectives. To ensure the longevity of your supplier diversity program, take the next step, Phase II, which emphasizes sustainability and long-term value.