At Accelerate, our aim is always to help businesses embrace diversity of thought to help unlock their full potential. We believe that there are many benefits that come with embracing diversity: smarter ideas and solutions created by people from different backgrounds and experiences.
Nurturing a diverse supplier base should be an intrinsic part of procurement strategy. As more companies take steps to increase diversity on executive teams, it’s becoming clear that there is a relationship between diversity and improved financial performance. This applies to gender, ethnic, and cultural diversity: the most diverse companies are now more likely than ever to outperform less diverse peers on profitability.
Research by McKinsey said benchmarking data showed most organisations claim savings annually between 3-7%, however a survey of 163 procurement leaders at US corporations found those with corporate partnerships with MWBE’s increased savings to 8.5% on an annual basis.
Put simply, diversity helps to create better workplaces.
What are the key benefits of having a diverse supplier base
1. Innovation
Innovation is crucial to any brand, and companies who are successful when it comes to innovation are often those who forge relationships with suppliers who can bring extra value through technical expertise and creativity. If you continually use the same suppliers without branching out into new, diverse markets, you may miss out on these creative benefits.
Consider bringing new small and medium-sized businesses onto your supplier base: they tend to differentiate themselves from their competitors by bringing added innovation. In addition, small businesses, unlike their larger counterparts, are more agile and can create and innovate quickly.
Procurement managers should aim to tap into the depth and breadth of innovation that naturally occurs when you have a diverse supply base.
2. Multiple procurement channels for goods and services
Procurement managers can open up the opportunity to create scenarios that involve multiple suppliers for one sourcing event by building a large database of suppliers from which to source.
Of course, another benefit of using multiple channels is that it allows you to analyse the prices, location, and range of goods from several suppliers and choose the one that works best.
3. Drives up competition, and decrease prices
When sourcing products, there are many factors that you’ll take into account, such as price, deliverable date, quality etc. Suppliers are always looking to give you the best deal they can to win your business, and including more diverse suppliers on your supplier base allows you to drive up competition between suppliers. This drives competition between suppliers, which reduces your direct and indirect spend.
4. Displays your company’s ethical stance
Partnering with more diverse suppliers illustrates your commitment to supporting and championing minority-owned, women-owned, LGBTQ-owned, and historically underutilised businesses. This can bring numerous benefits, for example:
– The workforce is now more socially-aware than ever before. A recent study found that Sixty-four percent of millennials say they won’t take a job if their employee doesn’t have a strong corporate social responsibility (CSR) policy. At a time where recruiting the right candidates is notoriously difficult across all industries, ensuring that your company is an attractive option to the most eligible candidates has never been more important. With this in mind, increasing the diversity of suppliers has become more urgent in line with the spotlight on social issues and the impact this can have on business growth.
– Investors are now also prioritising companies with a strong diversity, equity, and inclusion (DEI) strategy.
– A diverse supplier base also demonstrates your interest in the economic growth of your community. Contracting with local small-medium-sized enterprises or minority business enterprises has a significant impact on your surrounding community. By partnering with these suppliers, you’re promoting job creation on the local level and bolstering the communities you live and work in.
Building a diverse supplier base: how Accelerate can help
Supplier diversity is certainly something for procurement managers to prioritise right now. Not only does it have the potential to change business for the better, it can also increase innovation and unlock additional value.
Being a majority female owned procurement organisation means that supplier diversity is something we’re particularly passionate about, and well-versed in. If you’d like to discuss how we can help you to build a diverse supplier base, get in touch today.