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The Importance of Supplier Diversity

Supplier Diversity
24th AUG 2023 | 3 Mins

Supplier diversity refers to a supply chain that incorporates businesses that are at least 51% owned and operated by an individual or group that is part of a traditionally underrepresented or underserved group, such as woman-owned, minority-owned and veteran-owned among others.

Many company executives are recognizing the program’s value and including it to their corporate strategy. But what exactly makes supplier diversity so important? Let’s explore the impact of supplier diversity in greater detail.

Creating Economic Opportunity for Diverse Communities

Contracting with diverse suppliers creates economic opportunities for MWBEs and fosters an economy where anyone has the chance to succeed. Economic disadvantage and income inequality have long been associated with several familial and societal challenges. Supplier diversity has the potential to improve both areas. According to a McKinsey report, $280 billion in extra income and four million jobs could be generated if corporations increased MWBE spend from $1 trillion to $2 trillion.

The benefits are not one-sided. A study by Rebirth Analytics and the Northwest Mountain Minority Supplier Development Council found that minority suppliers show higher levels of resiliency during shifting economic conditions and play a key role in preventing disruptions along the supply chain.

Additionally, implementing a supplier diversity program signals a commitment to fostering an inclusive workplace. This is especially important in today’s climate where younger generations aren’t just looking for diversity and inclusion—they require it.

Achieving Cost Savings and Quality Improvement

Supplier diversity programs have the potential to help organizations achieve cost savings and quality improvement goals. The MIT Sloan School of Management published data on the financial benefits of diverse supply chains for buyers. The authors said that “a stream of academic research has demonstrated that supplier diversity initiatives can quite substantially reduce the buyer’s purchasing costs in a wide variety of industry settings.” The crux of all of these savings, according to MIT Sloan authors, is driven purely by the increased number of players on the field.

Working with diverse suppliers also introduces new ideas into the supply chain which can lead to innovation gains and higher quality products or services at lower costs. It also allows access to untapped markets and innovative new technologies that are only available through certain sources. In some cases, working with diverse suppliers may even reduce risk by diversifying the supply chain across multiple vendors instead of relying on a single source.

Improving Employee Engagement

Supplier diversity programs also have the potential to improve employee engagement among workers from various backgrounds. If employees see that their employer cares about promoting social justice through its policies, they are more likely to feel connected with the company’s mission and passionate about their work. Overall, this can foster better relationships between colleagues who might not normally interact on a regular basis.

Moreover, supplier diversity has been shown to increase employee morale and productivity levels. Studies have found that employees who work in organizations with diverse suppliers are happier at work as they feel that their voices are being heard and valued by management. As a result of this improved morale, workers tend to be more productive which ultimately leads to better performance overall. Finally, supplier diversity helps build stronger relationships between businesses within a community or region; this boosts both social capital and economic growth for all involved parties.


In summary, supplier diversity programs offer numerous advantages for CEOs looking to increase their competitive edge while also contributing positively towards society. From creating economic opportunity for marginalized communities to achieving cost savings and employee engagement improvements, there are many reasons why supplier diversity is important. By investing in supplier diversity, companies can create a more equitable and inclusive workplace while gaining competitive advantages such as access to new markets, customer bases, and products.

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