Vendor diversity, also known as supplier diversity, is a program used by various companies and governments with regard to their supply chain management.
To understand better what vendor diversity is, here’s a good description.
Vendor diversity is a program. It is a program created and operated by many entities. Often, these entities are large companies and engage in manufacturing goods and services to their consumers.
Both state governments and private companies have vendor diversity programs. This means that these entities are sourcing from different kinds of businesses, often from small businesses considered as disadvantaged. These businesses include women, veterans, and minorities as owners. The program’s aim is to encourage big businesses to source from these businesses and gain advantages for both sides.
For the larger entities (corporation and governments), the advantage lies in the diversity of materials sourced. One also has to consider prices and the type of service provided. Many small businesses have low costs with a lot of variety in terms of products or materials. Those who cannot compete with price can offer a better service compared to its competitors.
Another advantage is the goodwill that it fosters. Vendor diversity can be part of the company’s corporate social responsibility and an effort from the government to help small businesses. A company that employs this program creates a good reputation in its industry while meeting the needs of its operations.
Their clients can also help in developing products or use alternative materials, technology and methods that will improve their product.
Vendor diversity has a close concept called supply chain diversification. Supply chain diversification is a technique used to expand a company’s list of possible vendors, where they can source their products and services. Many manufacturing businesses need a lot of raw or semi- finished products to create their own product. Companies source out these needed products from different vendors. Vendors furnish these companies with different varieties of the same product, as well as different qualities. An agreed contract between the vendor and the buying company spells out the specific item/s, its quantity and sometimes, products with varying quality. If a certain vendor is unable to deliver on the supply, the company will simply have to move to another vender that will satisfy its needs on time.
In this aspect, supplier chain diversification is a method to secure the best product for the company and create contingency vendors. The company secures its operation by having many possible vendors to choose and source form to make their own product on schedule and without incurring more costs.
Incorporating vendor diversity and supplier chain diversification is a great combo for people managing the business. Both present many advantages to a company that source from other companies in the same or different industry. It also makes the sourcing /procuring efficient.
Vendor diversity as a program creates more opportunity for both the receiving company and the company that supplies the need. In addition, it is fits with the current trends of globalization, albeit in a more specific locale. With vendor diversity, companies that source their product will also have a choice and the marketplace gets more diverse with more variety.
