The Benefits of Supplier Diversity

What is Supplier Diversity?
The term Supplier Diversity is becoming much more commonplace in the business community today, but what does it mean? According to the Institute for Supply Management supplier diversity is an organization's efforts to include different categories of suppliers in its sourcing process. By doing so, this gives diverse businesses equal access to purchasing opportunities and enhances supply chain diversification.

There are many categories that can be used to identify diverse businesses, such as Minority-Owned Business Enterprise (MBE) and Women’s Business Enterprise (WBE). Diverse suppliers will need to be certified through the Federal Government or a third-party certification agency so that the organizations they do business with can record and report diverse spend. Examples of these agencies include the National Minority Supplier Development Council (NMSDC) and the Women’s Business Enterprise National Council (WBENC).

Why Is Supplier Diversity Important?
Minority and women owned companies are among the fastest growing businesses in the United States. Because most diverse businesses are small businesses, they boost the economic recovery and sustainability of their communities. According to a report published by the NMSDC, the nearly 12,000 diverse businesses certified by NMSDC as of August 2014 had a total economic impact of more than $400 billion in output. These minority-owned small businesses helped create more than 2.2 million jobs held by persons who find themselves either directly or indirectly employed by NMSDC-certified MBEs.

Additionally, some government entities are required by law to purchase a minimum percentage of their supply needs from MBEs and/or WBEs. Many corporations, although not legally bound, realize the benefits in purchasing from MBEs and WBEs and have committed to buying a substantial amount of goods and services from them. In today’s competitive business landscape, MBE and WBE certifications offer one way to differentiate a company from other potential suppliers.

What makes a successful supplier diversity program?
Since supplier diversity programs have been shown to add economic value because they encourage the growth of diverse businesses, it is important for corporations to have well thought out programs. Diverse businesses typically encounter barriers such as access to capital and networking opportunities, so effective supplier diversity strategies can alleviate these potential burdens.

Additionally, a big part of a supplier diversity program should be the supplier development aspect. The concept of supplier development means that the organization offers resources and guidance to help vendors expand their operations, deliver a better product, and become more successful. This will ultimately strengthen the sponsoring organization's community outreach and increase the company’s bottom line. Typical resources that may be available to diverse suppliers in a supplier development program include matchmaking and networking opportunities, professional development for the company leaders, and mentoring programs.

How do I become a diverse supplier?
In order qualify as a diverse supplier, the business typically needs to be at least 51% owned and operated by a woman, minority, veteran, person with a disability, LGBTQ, or be considered a socio-economically disadvantaged small business. The process to become certified involves documentation, screening, and interviews. The application may take several weeks to be approved, but once it is, you are certified and are eligible to participate in supplier diversity programs and can be placed into a database of suppliers that corporations and government agencies access. The Small Business Administration website is a great resource for small diverse business owners to learn about the different types of federally sponsored programs that provide contracting support for small businesses.

More companies are beginning to realize the positive effect that comes from working with diverse suppliers because it offers a competitive advantage, greater community engagement, and helps to create wealth and employment opportunities. Ultimately it is the job of corporations and our government to expand into diverse communities because as these small businesses grow, so will our nation’s economy.