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Supplier Diversity: What & Why

We all know that supplier diversity is important, right? But ask yourself … do you really know exactly what that entails and more importantly, do you understand WHY it’s so vital for a percentage of a company’s annual spend to be centered on diverse suppliers? Simply put, a supplier diversity program is a business program that proactively encourages the use of minority-owned, women owned, veteran owned, LGBT-owned, service disabled veteran owned, historically underutilized business and Small Business Administration (SBA)-defined small business concerns as suppliers. Okay, that makes sense, right? But what’s this all about and why is it important?

 

First and foremost, supplier diversity programming adds economic value because it encourages the growth of diverse businesses. Diverse businesses are typically smaller to mid-sized companies and they aid in the economic recovery and sustainability of their communities. Secondly CEOs recognize that major customer/buying groups include diverse clients that also own businesses.

 

We are seeing more and more diverse suppliers sky rocketing their businesses by way of the products and services they provide. In fact, according to Fortune Magazine, the top 50 women owned companies generated a combined $7.2 billion last year, up from $74 million in 2007, the first year the list was compiled. Hooray for companies that are committed to increasing their spend with diverse suppliers!!!

 

Supplier Diversity typically begins at the “C” level, however it takes a company wide effort to meet these lofty goals. Procurement then typically takes the lead on supplier diversity, though we are now seeing more divisions of the company, such as HR, partnering in meeting these goals. It makes sense since Human Resources is a large buyer/influencer of benefits including on-boarding, relocation, health insurance, rewards & recognition programs, etc.

 

Supplier Diversity begins at the top – when you’ve got buy in from your C-level, that commitment will trickle down throughout the entire company. But don’t take my word for it. Below are some important quotes from some of the top CEOs in the country:

 

“At PHI, Supplier Diversity is a key strategic initiative. We understand that when we help companies grow, they hire people; those people buy our products and services and that helps fuel the growth of PHI and the economy.” – Joe Rigby, Chairman, President, and CEO of Pepco Holdings

 

“AT Walmart, we believe we’re at our best when we promote diversity across our supply chain.” – Doug McMillon, President & CEO Walmart Stores

 

“Through our Supplier Diversity Program, we’re not only strengthening our bond with minority and women-owned companies, but helping them grow their businesses, as well.” – Shira Goodman, CEO Staples

 

“This program provides minority and women-owned and operated companies equal footing to effectively work with us and grow their businesses at the same time. While we work with many different kinds of companies from grocery products to office suppliers these companies all have one thing in common. They share our passion for serving customers.” – Sam Duncan, President and CEO, SUPERVALU Inc.

 

“At Pfizer, we are committed to developing and sustaining relationships with a diverse set of partners, including minority, women, veteran, and LGBT owned suppliers to support our business.” – Ian C. Read, CEO Pfizer

 

There are hundreds of national, regional, local non-profit and government organizations that certify diverse suppliers as well as new Chambers of Commerce’ committed to growing and networking suppliers together. The list is too large to include on this post but they include The Women’s Business Enterprise National Council (WBENC), The National Minority Supplier Development Council (NMSDC) and The National Gay & Lesbian Chamber of Commerce (just to name a few).

 

We’ve only just scratched the surface here but fear not, I’ll be back next week to go over the difference between Tier 1 and Tier 2 spend programs.

 

Does your organization have a supplier diversity program?

 

 

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RICK CALANNI
VP of Business Development Northeast Region

 

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