Supplier/Vendor Diversity 

An integral part of any organization’s diversity program is to ensure that it promotes diversity outside of the company in addition to its internal efforts. One way organizations accomplish this goal is through supplier diversity programs that support minority- and women-owned businesses with which they do business.

Supplier diversity can include all underrepresented groups that can provide goods or services to the organization. They are commonly referred to as minority- and women-owned business enterprises (M/WBEs). However, it can include all types of organizations that are owned or operated by underrepresented members of the population.

There are several factors motivating companies to establish supplier diversity programs:

• Their organizations have a diverse customer base. By showing support for the demographic groups of its customers, an organization hopes to strengthen its appeal to them. Studies show female consumers are more likely to buy from a company using a woman-owned supplier. Diverse suppliers can act as powerful advocates for the company sourcing from them, especially since some diverse suppliers are politically active in their communities.
• Their organizations serve customers that support supplier diversity. Companies that are committed to supplier diversity don’t just select diverse suppliers. They require their suppliers to support supplier diversity.
• The government may require it. Federal contractors are expected to subcontract a portion of their award to diverse suppliers.
• Their organizations want to demonstrate social responsibility. Many organizations voluntarily use a diverse supplier base because the leadership feels that it is the right thing to do for society and the community.
• Diverse suppliers bring added skill sets that prove to be tactically advantageous in a global marketplace.

The following are key steps to establishing a supplier diversity program:

Define the Scope:  Like any business objective, the mission statement of the supplier diversity initiative must define what it is, why it is important and how it will impact the organization. The business case for supplier diversity needs to be clear. To make a true commitment to supplier diversity, the organization should consider all suppliers of goods and services that the organization purchases. This includes everything from raw materials and IT suppliers to legal services and janitorial supplies.  To help define the scope, the organization should decide the following as it begins its development of a supplier diversity initiative: What percent of total purchases does the organization want to make from underrepresented suppliers? How many new minority-/women-/disabled-owned suppliers does the organization want to partner with each year?

Link Program to Organizational Goals: The purpose of a supplier diversity program should be communicated to management, purchasing, other appropriate personnel and existing suppliers so all key stakeholders understand how the program is expected to contribute to the company’s success.  Specific, measurable goals need to be established, and the responsible internal personnel and suppliers held accountable for achieving them

Select Qualified Suppliers: Once the organization understands the role of supplier diversity and is committed to making it successful, the organization must find and start contracting with M/WBE suppliers. To do this, each organization must develop specific criteria for determining what constitutes a diverse supplier. The procurement department must proactively seek out companies that meet their criteria and start doing business with them. It is also important to help current suppliers understand and comply with the new supplier diversity program.

Manage the Program:  This involves the coordination of multiple parties in the organization including procurement, contracts, program managers and senior leadership. Relationships have to be continuously formed with new suppliers and reinforced with existing suppliers. In addition, there are several things an organization can do to support and foster its supplier diversity efforts, including:

• Attend business opportunity fairs in local communities.
• Participate in minority and women-focused business professional organizations.
• Create a business directory to connect M/WBEs with individual customer users.
• Outline roles of supplier diversity program management

Support and Mentor Suppliers:  By nurturing the success of suppliers, an organization can ensure the continual supply of goods and services as well as the trust and confidence of vendors, customers, employees and shareholders. The following are some development programs that an organization might consider:

• Offer business consulting services.
• Provide favorable financial terms.
• Recognize and reward participating M/WBE suppliers.
• Hosting trade fairs for M/WBEs and procurement.
• Conduct site visits for M/WBEs, including detailed interviews covering operations and management.
• Conduct seminars for M/WBEs to learn how to do business with your company.
• Provide technical and managerial assistance to M/WBEs.
• Emphasize importance of second tier M/WBEs.

Organizations are constantly looking for ways to gain a competitive advantage over their competitors. Supplier diversity can lead to reducing costs, promoting innovation and connecting with a broader customer base. The steps outlined above are the foundations for a successful supplier diversity program that will help companies remain competitive and enhance their efforts to diversify the workplace.

National Minority Supplier Development Council

National Women Business Owners Corporation