Supplier diversity is an effective strategy when it comes to a business’ procurement or supply chain management. The strategy involves a collection of suppliers from different backgrounds which will provide the necessary raw products that a business needs for its own production activities. Speaking of suppliers, often these are also small businesses that are owned by numerous disadvantaged people like women, veterans, minorities and other owners classified under the Small Business Administration (SBA) definition. Other potential suppliers that come from overseas or different areas can also be classified under supplier diversity.
The main advantage of supplier diversity is accessibility to raw products as well as lower costs for raw products and efficient service.
As supplier diversity is becoming one of the major program and practices in supply chain management, there are best ways to do this.
Best Applications
For many companies, including small businesses and corporations, supplier diversity is a growing trend that will help in their business operations. With any new trend or practice, it is best to execute it perfectly to maximize the results.
One best practice in supplier diversity is commitment from the company’s CEO. This commitment will strengthen the company’s willingness to do supplier diversity.
Another example of best practices in supplier diversity development is incorporating the minority small businesses in the company’s supply chain management. This consideration can go for a larger and wider extent like making small minority business as a functioning part of the procurement process and delegating an officer for the supplier and diversity program. In addition to adding small minority business to the supplier list, sub-contracting to other minority and small businesses is also possible. A list of primary secondary and subcontracted suppliers can be an advantage for a large cooperation. It would also help if the reach to small business is not confined to pure business functions like product or service sourcing. Large or multinational companies can also lend a hand to small and minority business by helping them as part of their corporate social responsibility.
The Minority/Ethnic View
There is also the NMSDC or the National Minority Supplier Development Council. This agency helps minority owned businesses connect with larger companies in a business-to-business transaction. Often, the agency helps in procurement activities. As a national entity, it has its own national headquarters in New York with 33 regional offices. The work is straightforward – match certified disadvantaged small business minority owners to corporations and multinational companies (who are also members of the council). Minority business owner members hail from different ethnic groups like Black, Asian-Pacific, Asian–Indian, Native Americans and Hispanic.
By matching two businesses together, both parties benefit from mutual and profitable activities.
The agency published the NMSDC supplier diversity best practices that minorities and other business owners can adopt for a seamless, manageable and effective supplier diversity program or approach. The NMSDC best practices constitute of 7 goals. They are the following: establishing corporate policy and top corporate management support, developing a corporate minority development plan, establishing comprehensive external and internal communications, identify opportunities for minority business enterprises (MBEs) in strategic sourcing and supply chain management, establish comprehensive minority supplier development process, establishing the tracking, reporting and goal-setting mechanisms, establishing a continuous improvement plan and establish a second-tier program. Each goal has its own measures for success.
These goals are used by companies attempting or employing supplier diversity program in their operations. It is an assessment document with a set of criteria and a score system. The score is from 0 to 5, with a conditional criterion for each score. The score 0 is reserved for unfamiliarity with no knowledge and implementation of the program. Scoring the 1st point would mean adequate knowledge of the goal with actual output (planning, implementation and documentation). Scores 2 to 5 implies that there is also knowledge with varying levels of output (less than 50%, more than 50%, 100% and beyond 100%). Each goal is scored and the average is taken from all eight goals.
Importance of Goals, Criteria and Scores
The best practice in supplier diversity development assessment form has many advantages. As an assessment, it brings a clear picture of progress or development of the supplier diversity program within the company. It might be easier to adopt a supplier diversity program but a harder task to maintain it and make it efficient as part of an operational process of a business.
The assessment can also bring out the aspects or areas of the programs that needed work or help. The assessment can also display information that could affect the whole procurement or supply chain process.
The assessment is not only good for the company doing the supplier diversity program but for the small business participating or selling to that company. It is a good tool to measure accountability and performance between partner business and for individual business participating in the program.
The form and its accomplishment can also ensure that the quality of supplier diversity best practices is maintained.
A Trend for the Future
Supplier Diversity is a trend that is going to stay and will have a huge impact on many companies and their own operations and performance. As with many trends, it will need time to actually measure the success of a supplier diversity program. The trend’s intention (getting more available suppliers and supplies) is definitely a practical solution to the company’s problems in terms of sourcing. It is also a great program as a strategy for a company’s corporate social responsibility (CSR) and encouraging other large/multinational companies to follow suit. In addition, it allows a big opportunity for small business owners to expand their clientele and earn more possible profits.
Supplier Diversity brings a lot of positive possibilities to a company. The concept might be simple and practical but setting it in one’s organization can be complicated. Just line in any methods, a lot of baby steps and a bit of patience with this approach can go a long way. In the long run, supplier diversity might just evolve into a major operational function.
