Small suppliers are a major part of the economy as they make up 90% of the global business population. Diverse suppliers form a smaller group within that population in the United States. However, they’re great to work with, especially if your business needs specific materials, niche services, or certain innovative tools, all delivered with agility and cost-effectiveness.

Partnering with small, diverse suppliers is becoming increasingly important. While this has its benefits and challenges, the positives now clearly outweigh the negatives. In the long run, conducting business with small, diverse suppliers can reward you in many ways.

Let us explore more reasons why corporations working with small, diverse suppliers makes sense.

Advantages of Working with Small, Diverse Suppliers

There are many benefits to working with small, diverse suppliers. Among other things, small, diverse suppliers:

  • Adapt better to your specifications
  • Can work with reduced size of minimum orders
  • Offer high level of customization
  • Give better pricing structures
  • Deliver superior service levels
  • Provide greater attention from management
  • Allow greater space for control over the materials, tools, and techniques being used
  • Are nimbler and more responsive

Besides, by buying from small, diverse businesses, large corporations are also supporting local communities.

Creating Supplier Diversity

There’s a strong imperative to create supplier diversity in a large corporation. While most have taken the easy way out and have given contracts to a few large diverse suppliers, they should be bringing in smaller diverse suppliers to truly create the impact in local communities they have stated they want to make.

This strategy would help increase capacity and scale their business. These small, diverse suppliers work, hire, and spend in their local underserved communities. They provide a multiplier effect on each dollar spent by large corporations with these small, diverse suppliers. It is also these small, diverse suppliers that employ people from local and underprivileged communities. That way, they help large corporations reach out to these entities who would best benefit from their products and services. Here are the main steps involved in creating an equitable supplier diversity program:

1.      To Define Your Supplier Diversity Program and Create a Comprehensive Policy

You will be able to create a solid diversity program that will drive your overall DEI achievements. You will also be able to figure out what kind of diversity initiatives are most suitable for your business. Perhaps you want to work with more women-owned businesses. Or maybe you want racial diversity in your supplier mix. You can decide what makes the most sense for you and create a policy statement that would define those criteria. Internal stakeholders and buyers would be able to evaluate new suppliers with those objectives in mind.

2.      To Meet Your Supplier Diversity Goals

By diversifying your supply chain, you will be able to meet your DEI goals. You will find it easier to reach out to small, minority suppliers and engage with them in a meaningful way. Your actions will create supply-chain transparency, you will identify diverse businesses, and more. You will also be able to understand each supplier better. That will give you a deeper understanding of the diversity in your current supply chain.

3.      To Integrate Supplier Diversity Throughout Your Company

In any business strategy, supplier diversity becomes a reality when it is ingrained in the company’s daily systems. You will be able to integrate diversity initiatives into your ordering and tracking processes, and more. You will also create more comprehensive metrics. Digitization and automation improve the overall procurement function and will make supplier diversity more manageable. You will also be encouraged to track and analyse your spending by supplier and supplier category.

4.      To Secure a Commitment Throughout the Organization

Diversity initiatives must start from the top of the organization. Many companies have their CEOs personally signing off on their goals and metrics. When the CEO has bought in, you will need to appoint a senior executive to lead this program. That person would direct corporate purchasing, find diversity champions to raise awareness, and identify opportunities and ways to achieve diversity targets. Measuring buyers within an organization on their usage of small, diverse suppliers and rewarding them on attaining those goals will act as a factor in support of this commitment.

5.      Look For Diverse Opportunities Proactively

Supplier diversity goals must be integrated into your company’s sourcing strategy. That would encourage buyers across the organization to purchase from small, diverse suppliers and help you create a fair and friendly screening process, too. Your procurement pros will also be able to leverage their business networks and use industry organizations such as NMSDC and WBENC to reach out to certified small, diverse suppliers. That will ensure your whole process is consistent and suitable for your specific needs.

6.      Keep Commitment to DEI Strong

After establishing your program, you will constantly monitor and improve your program over time. Additional audits every year will help you verify activities that will align with your plans and policies. You will also get feedback from internal stakeholders as well as outside suppliers. This is vital to make sure everyone in your supply chain will meet your expectation. You can highlight programs to maintain momentum. Use a dedicated space on your website to draw the attention of the appropriate organizations and keep your commitment strong.

In Conclusion

The misconception is that small, diverse businesses are less capable than their mainstream counterparts and therefore need training and development more than they need contracting opportunities. Or that as long as financing is made available to them, these suppliers will be fine. That could not be further from the truth. Without contracting opportunities, no amount of training, development or financing will help. Small, diverse suppliers, because of their background and the difficulties they face in establishing their businesses, tend to work harder and run faster. What they need more than anything else are contracting opportunities on a level playing field. And not just the cosmetic kind, the one and done. What is needed are long-term contracts that will grow over time, allowing them the opportunity to scale their businesses. The pandemic has been particularly devastating for small, diverse businesses. It is time to make a meaningful change to supplier diversity and engage small, diverse businesses in a sustainable manner.