Adding value to your business

Some days ago I found an interesting discussion of “diversity”, the idea that variety is a central feature of the world that we share with other species. Diversity is both natural and enriching: it provides opportunities for more experiences than would a totally homogeneous world. In business, variety manifests itself in many ways.

Diversity applied to the supply chain can bring good business opportunities. Supplier diversity can be explained as: initiatives aimed at increasing the number of diverse (such as ethnic-minority-owned, or women-owned) businesses that supply goods and services to both the public and private sector, either directly or indirectly.

Although supplier diversity policies can operate on a stand-alone basis, often they are part of an organization’s approach to, or policy on, Corporate Social Responsibility.

Indeed, large companies can benefit from supply diversity, including:

* Increased commitment and flexibility: Orders from large corporations could represent a significant share of the turnover for small and medium-size companies and ethnic minority businesses, therefore encouraging greater commitment and higher levels of service. Having a broader supply base can also help a large organization by offering greater flexibility in its procurement decisions, and can help provide additional supply chain security in the event of a disruption.

* Sources of innovation and competitiveness: Sourcing products and services from ethnic minority businesses can also bring value and innovation to the supply base. Diversity among suppliers opens up possibilities of using innovative and/or cost-effective solutions that might help to provide an organization with a strategic advantage either through differentiation or through cost leadership.

An additional consequence is, by engaging in socially responsible procurement, organizations can reduce the risk of a negative response by important stakeholders. It can also help to put the organization ahead of any change in government regulations, which could help to reduce the future costs of compliance.

Establishing a supplier diversity program should not be seen as simply a public relations exercise; it could also provide business opportunities, which could be critical to the success of an ethnic community and often the wider local economy.

However, we do not live in a perfect world. Achieving diversity in the supply chain can encounter roadblocks. Organizational change of any kind needs the support of senior management. Achieving that support can often present a significant challenge, particularly within the existing corporate structure. In many large organizations, procurement is still not a boardroom agenda item. This lack of knowledge and understanding can represent a substantial barrier to introducing a supplier diversity program. Opposition may also be felt from other areas of the organization, whether it’s from employees or other suppliers. Those firms may also feel threatened by this new development and may feel that preferential treatment is being given to one group of bidders.

Incorporating a supplier diversity program into an existing set of corporate policies and processes raises a number of strategic and operational questions. For instance, does the new initiative contribute to the organization’s current strategic position? Will it add value to the procurement process, and is it consistent with the existing procurement strategy? To what extent will it give rise to difficulties in co-ordinating the objectives and activities of members of the supply chain, both internally and externally? These and other issues of alignment and co-ordination require careful consideration prior to introducing a supplier diversity program… undoubtedly aspects to bear in mind.