Building Supplier Diversity Through Education

Many companies are diversifying their supply chain to improve business results and support their social responsibility goals
Educating suppliers on your needs and learning about how their businesses work are essential to creating a successful supplier diversity program
Diversifying your supply chain may help you build resilience, serve customers better and contribute to your community’s economy

The business case for building a more diverse supply chain is stronger than ever, and many companies have seen that doing so can help build operational resilience and make them more responsive to customers. The percentage of the U.S. population made up of minorities, including people of more than one race, is expected to reach 47% by 2030, according to the U.S. Census Bureau. Meanwhile, nearly 40% of all privately held firms are owned by women. Serving the needs of all of your customers well can bring tangible business results: Companies that dedicate 20% or more of their spending to diverse suppliers can attribute 10-15% of their sales to their supplier diversity program, according to research by The Hackett Group consultancy.

Benefits of a diverse supply chain

And why education is key to your success

Mark Bennett

Bank of America Business Banking Southeast Region Executive

Mr. Bennett: One way companies partner with minority business enterprises and companies from underrepresented groups is starting a supplier diversity program.

Supplier diversity program

It’s always a good business practice to really widen the pool of suppliers because it ultimately helps you maintain a competitive edge.

Competitive edge

And what I mean by that competitive edge is really around innovation. It allows you to continue to make sure that you're developing the right new products and services. Many companies have corporate responsibility policies and procedures. Supplier diversity perfectly aligns to that actual strategy. As you're focusing on building out the actual right policies and procedures, one of the key foundations to that is making sure that you have the right education and relationships with your actual suppliers.

Education and relationships

A great way to ultimately engage with diverse business owners and diverse suppliers is by offering your own outreach event and offering an open house. This is an opportunity for you to engage in the local community by inviting them in, to have a better look at your overall process, your product and service and what you are offering the actual communities and your customers. It gives you an opportunity to start building that relationship with some of those key diverse business owners in your local community, and potentially pulling them into your supply chain process.

It has to be a two-way street with your suppliers, and really making sure that you're sharing with that supplier what your requirements are for whatever product and service that you're delivering and making sure that they have input into that product and service and solution as well. And ensuring that it's truly a two-way street allows you to unlock the innovation for your product and service, as well as it may unlock potential new markets for you and your product to be deployed in as well, because that supplier may have access to demographic information that could truly move your product forward.

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"So what’s the foundation of any program to increase supplier diversity? Education," says Mark Bennett, Southeast Region Executive for Bank of America. The more you do to reach out to suppliers from underrepresented groups to let them know what your company’s needs are — and the more efforts you put into understanding your suppliers’ businesses, the more successful your initiative will be. “It really is a two-way street,” Bennett says. Fortunately, there are many suppliers to tap. There are now 1 million minority-owned employer firms in the U.S., according to the U.S. Census Bureau.

Expanding your pool of suppliers can ultimately foster economic growth in the community and help you achieve your company’s corporate social responsibility goals. “It has a multiplier effect,” says Bennett. “It creates jobs and helps with job preservation in the local community. It also helps increase salaries and wages and improves the overall tax revenue in the community.” The more you educate diverse suppliers about your needs and respond to the insights they share with you, the more you can make a real difference.