Why supplier diversity is a necessity, not an option for business

Those of you who regularly read the news items in IDC Blog will have seen this headline:

"Olympic Delivery Authority sets out equality and diversity demands for contractors"

It made me think that supplier diversity is too a hot topic not to have had a viewpoint about it yet and so here it is!

For the last 20 years, companies have rationalised their supply chains to reduce the number of suppliers they have. This has been seen as more cost-effective, by simplifying supply chain management and offering more opportunity to maintain common standards.

However, competition in the marketplace is always nibbling away at sacred cows and that is happening to the rationalisation approach to supply chain management. Some companies are now opening up their supply chains to smaller suppliers. Why? Because these suppliers can sometimes offer greater efficiency, quality, specialisation, innovation and a reduction in cost as they are often more tightly run than the conventional large-scale suppliers. This is known as supplier diversity and it matters because it can:

• add value to your supply chain - see above.
• offer the opportunity to win new customers. Minority-owned suppliers, in particular, can help you better understand the needs of minority customers and advise on how to grow your business in those markets.
• help private sector companies win public sector contracts. Witness the Olympic Delivery Authority! Public sector organisations increasingly require bidders to demonstrate good equality and diversity practices and show supplier diversity is embedded in their supply chain.
• help you achieve corporate social responsibility (CSR) objectives. Supplier diversity enhances your reputation in the communities where you operate by contributing to the economic success of minority-owned firms and increasing employment of people from minority backgrounds.

Another reason it's happening in the UK is that demographic changes are resulting in a growing and influential minority-owned business community. Ownership of small firms by people from minority backgrounds is significant and increasing. Ethnic minority-owned businesses represent around 10% of the business population and 19% of the small firm stock. Almost 99% of all UK businesses are SMEs - the majority of them employing less than 50 people - and having the highest concentration of minority-owned businesses, (CRÈME Supplier Diversity Guide, 2006).

These demographic changes mean that firms will increasingly need to engage more actively with the minority owned business community - increasing the importance of supplier diversity.

Related articles:

·      Profiting from diversity

·      Cross-cultural competence raises productivity and adds commercial value

·      Take an honest look at your business culture from a diversity perspective