Some business leaders believe that dedicating resources to supplier diversity programs will divert attention from other strategic activities, however new research shows that is not the case. Indeed, virtually all diversity suppliers meet or exceed expectations, and top corporate performers in supplier diversity experience no loss in efficiency, according to new research from The Hackett Group. What’s more, the researchers found that these companies see improved quality and often gain other benefits as well.

 

The Hackett Group’s research found that, to “truly unlock the full potential benefits of supplier diversity efforts,” executives cannot simply focus on improving the corporate image in the marketplace and complying with regulations. Instead, they should look beyond basic measures such as the percentage of spend with diverse suppliers and calculate the true value of supplier diversity by using performance metrics that are aligned to long- and short-term plans and objectives, the group recommends.

 

Companies with top-performing supplier diversity programs focus on several areas to make the most of their efforts, and go beyond the basics, the research found. For instance, they develop supplier partnerships, mentor local suppliers, collaborate with suppliers on product innovation, and share their experiences with other companies. They also use supplier diversity as a reputation-builder to help increase market share and retain talent, and rely on social media to develop customer and brand awareness. Finally, they actively educate internal stakeholders on the value of supplier diversity, and interact with local communities of suppliers and consumers to better understand the market, establish relationships, and share supplier diversity goals, the researchers found.

 

While most supplier diversity programs have a domestic focus, The Hackett Group’s research found that more than 40 percent of all global companies with a U.S. supplier diversity program plan to expand globally within the next two to three years. The firm recommends that companies manage U.S. and global programs as a single initiative, where appropriate.

 

“Supplier diversity is evolving from a ‘check-the-box’ corporate social responsibility requirement to a strategic enabler providing access to innovative products and increased market share in new and developing communities,” says Laura Gibbons, research director at The Hackett Group. “Top-performing organizations are taking advantage of this opportunity, and applying the tenets of social diversity to new areas such as supplier partnering, reputation management and global expansion with exceptional results.”

 

Nonetheless, Gibbons notes that challenges clearly remain. For example, some business leaders worry that dedicating resources to diversity requirements will impact procurement savings or even quality, but the firm’s research shows that this is not true, she adds. Top performers aren’t seeing losses in efficiency, and quality often improves. Overall, the risks to focusing on supplier diversity are quite low, and the potential upside is significant, she explains.

 

“In fact, up to 10 percent of sales come with supplier diversity requirements, suggesting that the lack of such a program can even result in lost revenue,” Gibbons says.

 

What are your thoughts on supplier diversity? Secondly, does your company have a diverse supplier requirement in every country where it operates?