5 challenges for supplier diversity


5 challenges for supplier diversity

You’re charged with making money. Maybe not in those words, but it’s the mainstay of your job. Getting more for less, finding incremental sources of profit, driving costs out of the supply chain. And many think supplier diversity, however laudable, just makes everything more complex and costly.

In this article, we’ll look at the challenges of changing these perceptions. Because in actuality, procurement heads are finding supplier diversity is a source of opportunities, not costs. Let’s answer the arguments in turn.

Being aware that unintentional bias exists

“Unconscious bias” courses open people’s eyes to the ingrained prejudices that make us treat people differently—even if you fiercely oppose racism and sexism. In business, its equivalent is unintentional bias: not giving certain companies a chance of joining your supply chain, simply because they don’t fit your view of what a supplier should look like.

It can be as simple as not being on your existing supplier list. So ask: when was that list written? If it’s more than a few years old, it’s worth an update.

Instead of groaning how much work that creates, imagine the positives: finding companies with innovative, cost-effective products that could improve your market position … companies your competitors don’t know about.

Controlling the box-ticking and bureaucracy

Criteria for approval are another challenge preventing supplier diversity. Do your suppliers have to be a certain size, or have a minimum number of trading years? There may be minority-owned businesses with products that fit your reqs perfectly — but they may be smaller, or newer, or not in the usual trade associations.

So if “your way of doing things” involves a lot of box-checking, make sure those boxes aren’t excluding diverse suppliers for no strategic reason. Instead, look at changing those criteria to actively incentivize your team to broaden their outlook.

The bonus here is that you’re building self-sustaining supplier diversity processes into the way you work — not creating more administrative hassle for your people. And if you design KPIs that reward such behavior, the diversity of your supply chain will increase as a result.

Spreading the word about competitive advantage

So embracing supplier diversity—including examining your own motivations and past practices with a critical eye—leads to a wealth of positive opportunities for your organization. The next challenge is simply making your people aware of these benefits.

After all, broadening the diversity of your supply chain isn’t just about fair treatment of others. It increases robustness, by choosing suppliers who don’t all do the same thing in the same way. It opens your business up to new customers, since many global organizations include diversity requirements in their sourcing. And it exposes you to new sources of talent and ideas, since people regard you as a fair and equitable place to work.

Determining progress when processes are complex

Of course, a broader supply base can mean an uptick in complexity. You’re dealing with more businesses, with more diverse ways of working. But this doesn’t have to mean yet more hours added to your day.

Instead, take a look at your own processes. Could the source of complexity actually be closer to home? If you spend significant amounts of time forcing suppliers to adopt your practices, your procedures, your form-filling — consider whether cutting down all that paperwork might benefit both sides.

The solution: making the right use of data

Making supplier diversity part of your culture, of course, needs data. So you can check how you’re performing and whether your policies are making a genuine difference. The key thought here: that doesn’t have to create yet more work for your department.

With access to the right data sources—like Scoutbee’s—you’ll find the work is done for you. Validated datasets already enriched with diversity profiles; information you can use in your decisionmaking alongside your usual criteria of cost, reliability, product quality.

This means you’re not “tacking on” diversity as a side project: you’re treating it as a core part of your procurement process, for all the right reasons.

“When a social need can be tackled with a profitable business model, the magic of capitalism is unleashed”—Michael E. Porter with George Serafeim and Mark Kramer

From great data come great diversity and inclusion. And not just awareness of D&I, but the opportunity to leverage it as a profit-maximizing business strategy—opening your eyes to diverse suppliers, a broader set of supplier options, and the ability to source from businesses that might not have historically had a fair chance of being considered. It’s win-win, all the way.

Together with our  partner, Scoutbee enables procurement to get insights into the diversity status of its supply base. Schedule a call with our sales team to find out more.

In the meantime, check out the article by Ashlee Nelson and Roger D. Blumberg on about the top 10 strategies to increase supplier diversity.