Supplier Diversity: From Checking the Box to Driving Business Strategy

by Jarrod McAdoo

Part I: Building Business Cases and Driving Momentum

Supplier diversity programs are something many procurement professionals in the United States (U.S.) have accepted as a key element of procurement. These programs are as familiar to procurement professionals as concepts like spend analysis or category management. This mainstream awareness is directly attributable to the U.S. Government, which has been sponsoring diversity programs since 1969 on government contracts.  But since its inception more than 50 years ago, supplier diversity programs have spread beyond public procurements and now many privately held U.S. businesses proudly maintain robust supplier diversity programs.  They have now moved from largely being a reporting exercise, to being a business strategy.

If you doubt this assertion, I encourage you to look at the success of organizations like the National Minority Supplier Development Council (NMSDC). NMSDC’s economic output and job figures are astounding and their corporate members, sponsors, event attendees, and award recipients show a broad and rich representation across a wide swath of commercial industries. Organizations like NMSDC have shown how far the U.S. has come regarding supplier diversity while also shining a light on how far the U.S. needs to go as the expectations of real equity and inclusion have been elevated.  

While it is encouraging to see a shift in the way supplier diversity is viewed in the U.S., it is even more encouraging to see how supplier diversity has grown and how it has expanded beyond the United States. Global governments and businesses are now recognizing diversity programs as an effective “ethical” mechanism to increase community engagement and correct systemic issues or historic inequality. However, the ethical justification is no longer the totality of the value proposition.  Supplier diversity (along with equality and inclusion) is spreading globally and leaders in both the public and private sectors are starting to see these programs for their business value, as well as for the ethical and economic benefits to the global community.  

Building Business Cases and Momentum

Amid the pandemic in 2020, I was spending a great deal of time comparing notes with colleagues (past and present) about how their supply chains were faring, as well as canvassing thought leadership and talking to current and potential customers about how our solutions could help with their supplier risk and management challenges. With all these discussions, research, and brainstorming, many things were a blur and much of the research and thought leadership has melded together in my mind. But, there was one article that I clearly recall reading and it stuck with me.  

This piece  was a Harvard Business Review article in August 2020 that resonated with me and helped to reframe supplier diversity in terms of supply chain resilience. The article was about why organizations needed supplier diversity programs and it lamented how some organizations treat these programs as “token gestures”. The authors began to carefully lay out all the reasons why marginalizing these programs was a mistake. Armed with their research, they laid out the case for recommitting to these programs starting with a clear retelling of the societal benefits and then pivoting to the commercial advantages.  

These advantages include the increased competition that diverse suppliers bring to an organization, which can directly improve quality and drive down costs. As a supply chain professional who had performance tied to savings many times in my career, this resonated with me. However, what really stuck with me from that article was input from a Vice President of a globally recognized brand who was quoted in the article.  Paraphrasing this individual’s thoughts, she noted that the true value of diverse suppliers comes from the fact that they can “turn on a dime” and their flexibility and agility have proven to be a large advantage, especially in these times of disruption.

Diverse suppliers seem to punch above their weight when it comes to contributing to the resiliency of a supply chain. This sentiment has been echoed so many times since by experts and practitioners and I have come to accept it as a key factor of resiliency.  The pandemic had caused the status quo to be thrown out the window.  The reshaping of supply chains in the shadow of the pandemic provided a huge win-win opportunity for supplier resilience and supplier diversity. Now that we are truly starting to see the light at the end of the pandemic tunnel and we now see the value of supplier diversity across the ethical and business case fronts, I have started to eagerly and optimistically look forward to what will be done with this hard-won momentum.

Continue on my journey with me through this blog series on supplier diversity with Part II: Supplier Diversity on the World Stage to learn how nations outside of the United States developed their supplier diversity programs and what we can learn from those frameworks.