Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Procurement Supplier Diversity:

Improving Profitability and Social Responsibility

Key takeaways

  • Procurement supplier diversity is a strategic initiative of sourcing goods and services from businesses owned by underrepresented groups.
  • Diversity offers a wide range of options for companies that follow unique sourcing strategies.  
  • Including supplier diversity in the company’s operational strategy enhances reputation and relationships between more suppliers.

Discrimination doesn’t have a place in 2023. That said, social responsibility is something that most modern businesses incorporate into their mission. One way organizations display their interest in social responsibility is through diversifying their suppliers. Not only does it exhibit innovative leadership but a growth mindset that aims to adopt diversity, equity, and inclusion.

Aside from that, sourcing goods and services from a wide range of suppliers, particularly those owned by traditionally underrepresented groups can help organizations get competitive pricing and reduce supply chain risks.

In this blog, we’ll discuss what supplier diversity is, its importance to procurement, and how organizations can develop supplier diversity programs. So, if you’re interested in creating a positive impact in society, read on to learn more.

I have created a free-to-download editable supplier relationship management scorecard template. It’s a PowerPoint file that can help you assess your supplier’s performance effectively. I even created a video where I’ll explain how you can use this template.

What is Supplier Diversity?

Most modern organizations are realizing the social impact of creating equal economic opportunities by partnering with diverse businesses such as those owned by a minority, women, LGBTQ, veterans, and other underrepresented groups. In procurement, it’s called diversifying.

Supplier diversity in procurement is a strategic initiative that gives importance to sourcing goods and services from a wide range of suppliers, from different races, ethnicities, genders, religions, and cultures. This also includes sourcing from small and medium-sized enterprises (SMEs) or minority business enterprises (MBEs) in your communities.

Benefits of Supplier Diversity in Procurement

In the dynamic landscape of modern business, embracing supplier diversity in procurement is more than just a strategic move—it’s a gateway to a myriad of benefits that significantly impact an organization’s success. From fostering commercial advantages to contributing to economic development, the advantages are both tangible and intangible.

Here’s a closer look at why integrating supplier diversity into procurement practices is a game-changer:

1. Commercial Benefits

The commercial benefits of supplier diversity are numerous, from gaining access to diverse markets and innovative solutions to cost-effective products and services from diverse suppliers. These benefits significantly enhance an organization’s competitive advantage and profitability.

2. Economic Development

Partnering with your local small and medium-sized enterprises (SMEs) or minority business enterprises (MBEs) positively impacts your community by creating opportunities for underrepresented businesses, driving job creation, and enhancing local economies.

3. Promotes Innovation

Having diverse suppliers provides unique skills and fresh perspectives that lead to innovation. This would otherwise be challenging if organizations restricted their supplier selection to a non-inclusive approach.

4. Cost Savings

Supplier diversity in procurement can lead to cost savings as sourcing from a broader selection leads to competitive pricing and reduction in supply chain risks.

5. Good Reputation

Supplier diversity programs show an organization’s commitment to the economic growth of the community. This elevates an organization’s reputation among socially conscious consumers and partners.

How to Develop a Supplier Diversity Program

Below are the steps on how to develop your supplier diversity program:

1. Establish the scope of your diversity program.

Determine the objectives and focus of your organization’s efforts to promote diversity and inclusion in procurement. This means identifying categories of suppliers your program aims to include (minority-owned businesses, women-owned businesses, LGBTQ+-owned businesses, veteran-owned businesses, disabled-owned businesses, etc.) and the geographic areas in which you plan to source diverse suppliers.

2. Create a policy statement

Acknowledge the value that a supplier diversity program can contribute to your organization and encourage senior leadership to support it. Your policy statement should clearly communicate your commitment to supplier diversity and outline the expectations and responsibilities of all stakeholders.

3. Audit your existing supply base

Assess your current supplier base to determine diversity opportunities. You can enlist a third party to validate the diversity status of your current supply base. This audit helps identify areas where supplier diversity efforts can be enhanced and expanded.

4. Measure diverse supplier inclusion. 

It is important to track your program’s progress. Assess the effectiveness of your supplier diversity program and ensure that it aligns with your organization’s goals of promoting diversity, equity, and inclusion. Use key performance indicators (KPIs) and metrics to gauge the inclusion of diverse suppliers and the impact of your efforts.

5. Integrate inclusive sourcing processes

Identify where you can actively promote supplier diversity as standard operating procedures. This requires deliberate efforts to incorporate diversity and inclusion into every aspect of the procurement process, from supplier identification to performance evaluation. Ensure that your sourcing practices actively seek out and support diverse suppliers, fostering an inclusive supply chain ecosystem.

Conclusion

It’s important to note that supplier diversity is not just a social trend but actually has an economic advantage. Showing support to diverse communities can improve an organization’s reputation and competitiveness—a great opportunity to reach new markets and attract socially conscious customers and partners.

Hopefully, the list we mentioned in this blog on developing a supplier diversity program help you in your procurement processes. Adopting supplier diversity programs will surely boost your organization’s bottom line and position you as a leader in social responsibility and diversity, equity, and inclusion efforts.

Frequentlyasked questions

What is supplier diversity in procurement?

It is a strategic initiative that involves sourcing goods and services from a wide range of suppliers representing different races, ethnicities, genders, religions, and cultures. This also includes partnering with small and medium-sized enterprises (SMEs) or minority business enterprises (MBEs).

Why is supplier diversity important in procurement?

Supplier diversity is crucial as it promotes social responsibility and equal economic opportunities. It leads to benefits like access to diverse markets, innovative solutions, cost-effective products, and enhanced competitiveness.

How does supplier diversity lead to cost savings?

Supplier diversity can result in cost savings by increasing competition among a broader selection of suppliers. This leads to competitive pricing and reduces supply chain risks, ultimately lowering procurement costs.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

Marijn Overvest Procurement Tactics