Aug 2, 2020
Supplier Diversity: Corporate Social Responsibility’s Next Challenge
Diversity and inclusion must go beyond employment and include the corporate supply chain
As our nation continues on the quest to steer “Ship America” to peaceful shores the winds of change remind us that they are ever-shifting and our country must adjust its sails to keep moving forward to avoid the problems and perils of disease, societal divides, and economic calamities.
The economy is down, politics are in turmoil, racial strife is rampant and death looms from a deadly virus. This is a bleak picture. However, I continue to see glimmers of hope amid hopelessness.
One of the consistent visions I see is the fact that corporate America, the giant of our economy has finally awakened and is slowly taking steps to make positive changes like:
- It has spoken with a loud voice and forced changes in the thought process of institutions like sports to change names and get rid of the excess baggage of racism associated with racial slurs and flying confederate flags that bring back flashes of servitude, violence, and inequality.
- It has demonstrated that it has a heart that inclines it to do the right thing in the return of millions of dollars received through our nation’s stimulus package to allow the funds to be provided to small and disadvantaged businesses that desperately need it more.
- It has made commitments and demonstrated a mindset to be more diverse, inclusive, and provide more equality within its employee workforces.
All of the above are laudable but quite frankly that’s what corporate America should have done in the first place. Also, now that it’s taking steps in the right direction, there is another mountain that it must climb to help America get to the top and be able to declare a victory over the enemy of racism that has a stranglehold around its neck.
That mountain is the lack of meaningful and game-changing use of the nation’s minority and women suppliers that are hanging on for dear life to keep their doors open and become stitched into the fabric of the supply chain as regular contributors.
This can happen only with a concerted and sustained effort by “Corporate America” to create real supply chain investment into women and minority entrepreneurs that provide goods and services to help corporations fuel and drive the engines of commerce around the world.
It’s all wrapped up in one word: Supplier diversity.
What Is Supplier Diversity?
According to Wikipedia, a supplier diversity program is a proactive business program that encourages the use of minority-owned, women-owned, veteran-owned, LGBT-owed, service-disabled, and historically underutilized businesses as suppliers.
Supplier diversity programs recognize that sourcing products and services from previously under-used suppliers helps to sustain and progressively transform a company’s supply chain, and should reflect the demographics of the percentage makeup of the community in which it operates.
Why it’s important
Minority and women-owned business enterprises are among the fastest-growing segments of the U.S. economy.
Over the past 10 years, minority-owned businesses have grown at approximately double the rate of all firms in the U.S. economy. There are over 2 million minority firms in the United States, generating an excess of $700 billion in sales annually.
With these statistics, it can quickly be seen that including minorities and women in Corporate America’s supply chain is not only expedient but prudent. It employs and feeds millions of Americans and can foster goodwill and equality throughout the country, something that is desperately needed right now.
I’ve discovered that when people are engaged in meaningful and fairly compensated work that allows them to have a decent standard of living and that gives them a feeling of appreciation and respect, and ability to rise according to their intellect and sweat effort, there exists a large degree of calm within that group of people.
They become more caring for each other and they, in large part, adopt a “my brother’s keeper mentality” This is what is lacking in America now. This is what we must seek to recapture.
Through concentrated corporate social responsibility policies that ensure supplier diversity is part of the “order of the day”, this can be achieved in rapid steps.
It All Begins With Supply Chain Dynamics
To appreciate the need for supplier diversity or the use of “diverse suppliers,” a basic understanding of the concept of “supply chain” is needed.
A supply chain is a network between a company and its suppliers to produce and distribute a specific product to the final buyer. This network includes different activities, people, entities, information, and resources. The supply chain also represents the steps it takes to get the product or services from its original state to the customer.
Companies develop supply chains so they can reduce their costs and remain competitive in the business landscape.
Crucial to the efficiency and success of a supply chain is supply chain management because an optimized supply chain results in a lowering of costs and a faster production cycle.
With this understanding, it is easy to see why the use of minority and women suppliers become a necessary component of the supply chain.
The only way they will be effectively and fairly included in the supply chain is through concentrated and intentional efforts of dedicated and committed corporate leaders bent on making sure that supplier diversity becomes part of corporate social responsibility.
Here’s an example of how a supply chain works:
A supply chain begins with the use of raw materials, be it metal, plastic, or some other material.
These raw materials are then, through a system, acquired by a supplier, who may act as a direct connection to the next step in the supply chain, processes, and provides them to another supplier known as a wholesaler or distributor.
From the distributor, the materials are taken to a manufacturer that turns the material into a finished product that can be consumed or used by an intended end user.
The manufacturer sells these finished products to a retailer who through its various channels (logistics) moves them around the country and around the world to be consumed. This process is repeated over and over again and this is what the supply chain consists of.
Along each of these supply points goods are sold and purchased and the money flow keeps America’s economy humming. Of course, it hums better and with a much more melodious tune when people from all backgrounds, cultures, genders, and ideologies are equitably included along the supply chain pathway.
What’s the Current State of Supplier Diversity?
The challenges
The difficulty that diverse suppliers meet in trying to become a meaningful part of the corporate supply chain is numerable, some of which are as follows:
- Difficulty in being discovered by bigger companies. Having a lack of ability to ramp up expensive marketing campaigns and create awareness and branding keeps diverse suppliers from being noticed on the supply chain radar of large companies
- Purchasing, procurement, and other decision-makers within corporate purchasing departments are not attuned to how their supplier diversity program works. This is a direct reflection of the lack of commitment to supplier diversity. Although companies preach that they have the policy to include supplier diversity as part of their corporate social responsibility initiative, often there is no practice of that policy.
- There is still, in many instances, an underlying fixation through the corporate supply chain, that corporate bottom lines will be adversely affected with emphasis on supplier diversity, something that is entirely refuted by the evidence of those corporations that have fully embraced the supplier diversity concept.
- Corporate purchasing departments often view diverse supplier services as a commodity and do not see the full value of working with ethnic minority or women-owned businesses.
There has been some progress within the last several years with the use and inclusion of diverse suppliers. Unfortunately, with the onslaught of the coronavirus pandemic, everything has taken a back seat to efforts to remove our nation and the world from its clutches.
This will likely have an effect on the advancement of supplier diversity within the supply chain as recovery efforts are enacted.
Why Corporate America Should Have a Stake in Supplier Diversity
It’s profitable
Studies show that those corporations that embrace and implement supplier diversity positively increase their brand awareness within the communities they serve and it has a positive and profitable effect on their bottom line.
According to Forbes, the benefits to corporations that have supplier diversity initiatives and makes sure they are implemented enjoy the following benefits from their efforts:
- Companies discover more innovative products/services for them to use or sell.
- There is a positive increase in competition, resulting in better prices and service levels.
- Diverse suppliers enable large corporations to serve, emerge, and engage in untapped markets.
- Diverse suppliers purchase more of the corporation’s products and services.
- Diverse suppliers may become acquisition candidates that allow large corporations to grow and capture markets that they otherwise might not have been able to without them.
- It helps large corporations to be more flexible, agile, and resilient.
One of the most important reasons corporate America should have a stake in supplier diversity is it helps to boost company profits.
As an example, the previous referenced Forbes article points out that United Parcel Service (UPS) increased its consumer engagement and use of its services by a whopping 86% because of its concerted effort to make sure the public knows of its commitment to supplier diversity.
This was verified by a study conducted by Hootlogy.com entitled Supplier Diversity Indicator.
It’s the right thing to do
In the final analysis, supplier diversity and use of it in the corporate supply chain is just the right thing to do.
The effect that inclusiveness of diverse suppliers within the supply chain is it has a profound effect on the surrounding community. By contracting with these suppliers it increases spend and consumption and promotes job creation.
Corporations that do this also create a memorable brand that is emblazed in the minds of the consumers and they don’t forget it. They shop at those brands and spread the word that the branded company is committed to changing things in society for the better. After all, isn’t this what “Corporate Social Responsibility” should be about?
Where Do We Go From Here?
Some challenges face the growth and ultimate effectiveness of supplier diversity and the efforts to get diverse suppliers solidly within the supply chain to the extent more significant impact will occur. However, these challenges are not insurmountable.
Quite frankly, the solutions are simple and, in large part, can be summed up as follows:
- Stop the empty words and walk the walk that you talk about.
Many, not all, corporations claim they are committed to supplier diversity and inclusion of minority and women businesses in their supply chain operations. However, when you view their performance they are found “weighed in the balance and found wanting.”
When the policies that they claim to be in place for supplier diversity are enforced from the boardroom to the lowest echelon of management a tsunami of opportunity will open up and much of America’s economic woes will start to decline.
It will also rush in the calmness that equality brings to a chaotic environment riffed with racism, sexism, and other ill-conceived discriminatory practices.
2. Open up supplier diversity to the marketing supply chain
Getting the word out that a corporation is open to and actively seeking diverse suppliers is crucial to making it happen. One of the best ways to do this is to utilize communication sources that have an intimate understanding and direct link to diverse suppliers.
These sources are the media and news outlets that speak directly to diverse suppliers daily.
Ethnic newspapers, magazines, radio stations, and television programs, and other media sources that concentrate on communicating with this demographic should be utilized. This could be done through a marketing supply chain of ethnic marketing suppliers.
How Everyone Can Play a Part in Increasing Supplier Diversity and Help Make America Be Its Best.
Everyone can play a part in creating more opportunities and involvement in supplier diversity. The power of change is within the purse and the wallet. Everybody who purchases goods and services has a voice that can speak to corporate America and let it know how you expect it to conduct itself as a citizen.
Shop and spend money at those stores and companies that show they are serious about inclusiveness and equality by their use of diverse suppliers. Those that you find that don’t engage in supplier diversity send them a letter, a note, or social media message to let them know that your dollars are not spent at where there is no effort to make a change for the better.
Your dollars count and your voice collectively with all persons of good will be heard. They’re already making a difference. Corporation Social Responsibility is a concept whose time has come.
It has been one of the missing links to a reconciliation of the division that exists among our nation.
Our nation is worth fighting for each of us, our family, our children, and our future.
“What connects us is stronger than what divides us.”
“This is the 4th in a series of articles I’ve written regarding “Corporate Social Responsibility .Click the links to get the full picture of the power of Corporations to shape politics, the economy, and society in general.”
