How Supplier Diversity Can Grow Value of Your Business

Posted by PS Energy Group on Feb 4, 2016 10:00:00 AM

iStock_000034398050_XXXLarge_web.jpgIf you are looking for a tip on how to grow the value of your business and gain a competitive edge, one that the executives in the C-suite at Georgia Power, Ryder, Duke Energy, Southern Company, Frito-Lay, Microsoft or Delta Air Lines might pass along is:

Take a closer look at a supplier diversity program and commit to making it a core part of your business strategy. In order to ensure your program is successful, get your executive team on board.

Supplier diversity is a proactive program that is designed to promote and increase the participation of businesses within a company’s supply chain that are classified as diverse. Diversity is including Women-owned, Minority-owned, Disability-owned, Veteran-owned, LGBT-owned, HUB-zone or Small Businesses. The executives in the C-suite would tell you, supplier diversity is not just a program for “social good”—the benefits go far beyond. Supplier diversity is serious business that boosts the bottom line of companies of all sizes, strengthens local communities, and helps diverse suppliers grow their business. It is a mutually beneficial relationship that is a “win-win-win” all around.

Take a look at these findings. In the“ROI-Related Supplier Diversity” report completed by The Hackett Group, a Miami-based business management consultant, found that companies that participate in a long-term supplier diversity program:

  • Generate a 133% greater ROI than those companies that use the suppliers they have traditionally relied upon
  • Drive an additional $3.6 million to the bottom line for every $1 million spent in procurement operating costs
  • Have lower overall operating costs and spent 20% less on their buying operations
  • Generate new revenue streams

The concept of supplier diversity is nothing new. It has been around since 1953 with the establishment of the Small Business Administration. But with the successes that companies who partner with diverse suppliers are seeing, it is no wonder that supplier diversity programs have gained more traction and attention in recent years and are top priority at many companies. In 2014 alone, Microsoft spent more than $2 billion on diversifying its global supply chain. Over the last five years, Georgia Power spent almost $1.8 billion with diverse businesses and annually purchases goods and services from 600 diverse suppliers.

With the current economy of tight budgets, layoffs and an eye always glued to the bottom line, why do companies such as Microsoft and Georgia Power allocate so much of their budget for supplier diversity? The answer is simple—because it works both socially and economically. The return on investment, as pointed out in The Hackett Group report, is very impressive. Supplier diversity is good for business and adds value.

If you are considering a supplier diversity program, you should visit the websites of the companies that you are interested in establishing a partnership with and review their requirements of becoming a supplier. Contact them, ask questions and get answers.

If the findings from The Hackett Group report are not enough to get you off the fence to take action, consider these advantages:

  • A larger, more diversified supply chain mitigates risks
  • Partnering with diverse suppliers shows that your company is socially-responsible and that your suppliers are reflective of your diverse customer base and the diverse business community
  • A diverse range of suppliers encourages innovation that can lead to ideation excellence and superior products
  • Supplier diversity gives you access to new markets and sectors for business growth
  • A larger pool of suppliers in the competitive bid process ensures best price for goods and services
  • Diverse suppliers often have less hierarchy and bureaucracy, so they are more nimble, flexible and faster to delivering goods or services
  • Partnering with diverse suppliers strengthens communities by increasing spending and consumption, which in turn, helps promote job creation on the local level

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