Supplier diversity dominates in consumer packaged goods (CPG) these days, and for good reason–as minority populations are growing quickly, the U.S. population overall is becoming more diverse. The minority population will most likely surpass the non-Hispanic, Caucasian population by 2050, raising the U.S. population to 374 million, with 90 percent of that growth stemming from the minority population.1 https://gbr.pepperdine.edu/2010/08/supplier-diversity-and-competitive-advantage-new-opportunities-in-emerging-domestic-markets /
On those numbers alone, implementing supplier diversity into a retailer’s business makes sense (a more diverse population inherently makes for more diverse business partners, after all). But a 2015 Hackett Group survey pushes the necessity for supplier diversity a step further, noting that a supplier diversity program can add $3.6 million to a retailer’s bottom line per every $1 million in procurement costs.2 https://blog.cvmsolutions.com/what-is-supplier-diversity And adding dollars is always a good thing, but the benefits of supplier diversity aren’t just monetary–it also drives job creation, promotes inclusivity and innovation, and drives competition.
For retailers (and suppliers), touting a diverse supplier program can bring in new business, open up new avenues, and so much more. Here are three ways diversity can be the best calling card for your business and buying practices:
1. Supplier diversity helps you be a problem solver, not a problem creator. A decade ago, minority-owned businesses made up just shy of half of the businesses in the US, yet only earned 10 percent of the revenue, due largely in part of buyers being more interested in cost than value. But the tides are turning, and diversity spend is on the rise.3 https://www.procurious.com/procurement-news/5-reasons-supplier-diversity-matters
So while the ghosts of buyers past had a hand in creating the lack of diverse suppliers, today’s buyers are reversing the course and are steadily increasing their diverse supplier lines, and creating a more well-rounded supplier program.
Walgreens, for example, has put an emphasis on diversity in their supplier program to better meet the needs of their diverse customer base. “Doing business with small and diverse suppliers is a key part of our corporate social responsibility strategy,” says Carlos Cubia, Vice President and Global Chief Diversity Officer for the company in a recent press release.4 https://ecrm.marketgate.com/Blog/2019/07/Walgreens-Taps-RangeMe-to-Help-Discover-Diverse-Suppliers
There are an estimated 16 diversity certifications that suppliers can achieve, like ethnic-minority, owned, small business certified, woman-owned, or MBE, for example, which helps retailers create a well-rounded program.
2. Supplier diversity shows self-awareness and leadership. If a lack of diversity in a retailer’s supply chain is identified, it’s imperative to take steps to create a robust and diverse supplier program. By starting from inside the organization to commit to the change in program, retailers are showing not only their own employees but also any new business prospects, that they are mindful of where they can improve and be receptive to change.
“Companies that focus on supplier diversity, driven by a sense of social responsibility, government mandates, or a range of other factors, are just as able to run effective procurement operations as their peers that ignore supplier diversity,” said Hackett Senior Business Advisor Kurt Albertson.(1)
Retailers need to ensure that they are aligning their efforts in creating a diverse supply program and track it across departments. Being visible and vocal about the efforts to strengthen a retailer’s supplier diversity may even inspire others inside and outside of the organization.
3. Supplier diversity demonstrates the ability to grow and build. As the number of diverse businesses continues to rise, they will undoubtedly, increasingly take on bigger and bigger pieces of the supply chain pie. That growth, notes one report, “is important because minority businesses create jobs in minority communities and help build wealth among minority families.”(4) And that’s not only a benefit to the supplier, but also to the retailer, who through the partnership can also have a hand in helping communities grow.
Retail giant Target sees its diverse supplier program as a way of staying close to the community and building better relationships with suppliers and shoppers alike. “Underrepresented businesses are critical to strengthening the great shopping experience we create for our guest,” says Target CEO Brian Cornell on the company’s website. “By investing in these suppliers, we demonstrate our commitment to building strong partnerships to ensure broader, more innovative assortments, economic development and quality of life for the communities we serve.”
Supplier diversity is no longer “the right thing to do”; as the world’s demographics shift, it’s a necessary component of a healthy, successful business. There are burgeoning opportunities for diverse suppliers, And for retailers, implementing a strong supplier diversity process is key for leveraging and driving sales.
Looking for suppliers to grow your supplier diversity program in 2020? Explore the Supplier Diversity Collection on RangeMe.