Supplier diversity (SD) initiatives can be implemented into Australia’s leading corporate and government agencies’ supply chains. Before this can occur however, member companies must first understand supplier diversity and its benefits. Afterwards, they can ascertain the essential strategies needed to embed supplier diversity into their company’s DNA.
What is Supplier Diversity?
The Commission for Racial Equality defined supplier diversity as “a process through which equal opportunities are provided to all businesses including minority businesses”. In the Australian context, supplier diversity (SD) promotes the purchase of goods and services supplied by majority-owned Indigenous businesses, which are often economically excluded and marginalized.
Why is Supplier Diversity so important?
Supplier Diversity offers Indigenous businesses the opportunity to compete for the supply of goods and services. In other words, it aims to provide a ‘level playing field’ for all, allowing Indigenous enterprises an equal opportunity at securing contracts with large corporate and government agencies. For many corporate and government organisations, the supplier diversity business case is established because of one or all of the 3 C’s.
What are the 3 C’s?
Competitive Advantage – The introduction of new goods and services to the market from Indigenous businesses can enhance the competitive advantage
Corporate Social Responsibility – Being a good corporate citizen and taking responsibility for the company’s actions by ensuring they have a positive impact on the environment, consumers, employees, and communities.
Compliance – Comply with regulatory guidelines. This might include the Indigenous Opportunity Policy (IOP) or Australian Government Exemption, and deliver compliance that is assured and transparent.
What are the benefits of Supplier Diversity?
Supplier diversity increases the opportunities for Indigenous businesses to supply their goods and services to large public and private sector organisations. SD has the potential to bring real benefits to both purchasing companies and Indigenous businesses.
Two most notable benefits for buying firms are;
- Encouraging competition within the supply chain – as the more competition you get for your contracts, the more chances you have of finding the best supplier. The best supplier will provide the company with such advantages as cost efficiency, quality, speed, flexibility and innovation.
- Encouraging local economic development – Indigenous businesses are the key in local, regional and rural communities and economies. They are an important source of employment and business opportunities for Indigenous people. Supporting the growth of the Indigenous business sector through SD will create real and lasting benefits for Indigenous business owners, employees, families and communities.
How do you embed Supplier Diversity into your Supply Chain?
Follow these simple steps to embed supply diversity into your company’s supply chain.
- Clearly define your company’s business case for supplier diversity
Being able to clearly articulate why your company is undertaking supplier diversity is critical to the success of any supplier diversity program. A supplier diversity policy can assist you to state your commitment to supplier diversity, your goals on what you hope to achieve, and how you will go about meeting those goals.
- Review your company’s procurement strategy, policy and processes
Reviewing your current procurement strategy, policy and process can help you to understand how supplier diversity can be embedded into your supply chain. Consider areas of strength, weakness, and opportunity. After the analysis you may consider revising your processes or policies to allow greater opportunity and ease of access for Indigenous suppliers to provide the goods or services you need.
- Audit your spend and suppliers
A supplier audit and spend audit might be something your procurement team tracks already in relation to supplier quality and compliance management. This can be useful for you in relation to implementing your supplier diversity program as well, as it can assist you to compare your spend with your current suppliers. Auditing could assist you to identify strategies to increase Indigenous supplier representation. This could be by directly procuring services from Indigenous businesses or identifying second tier opportunities within your current prime supply base.
- Track procurement trends
Tracking your procurement trends is critical in the management of your supply chain. Understanding your own buying behaviour will assist you to detect trends that form in the what, when and how of your buying. It can also assist in identifying niches in your supply chain.
- Identify new opportunities for Indigenous suppliers
Identifying new opportunities for Indigenous suppliers could include identifying niche markets for Indigenous businesses to enter and provide their unique goods and services. Member organisations may also wish to invest in supplier development programs and second-tier initiatives. As Indigenous suppliers grow through development efforts, they will move up the value chain, creating two-fold benefits for the buyer.
- Empower supplier diversity advocates
Empowering leaders within the procurement team to be supplier diversity advocates is instrumental in the implementation of SD. Robert Scavone, Vice President of Corporate Services for the Michigan Minority Business Development Council, suggests that supplier diversity advocates must be change agents and that they “must be able to influence all levels of employees by getting everyone to see and understand the ‘big picture’ of supplier diversity” (Scavone, 2005, p.69).
- Use communication strategies
An effective strategy that communicates a company’s SD program and achievements serves to build internal and external commitment to the program as well as build a culture of achievement. Integrating the communication plans with the company’s overall marketing strategy ensures that information flows between procurement and sales team and in addition promotes and engages all business units in SD activity.
- Engage all business units in supplier diversity activity
Engaging all business units throughout the organisation is important for the success of the program. If managers fail to engage or involve the business units impacted by the introduction of changes, this will cause resistance and hinder the initiative. Regularly communicating the SD message internally will foster a culture of commitment and understanding, and may encourage key influencers to become advocates.
- Use a program management approach
Developing a defined program management process and system to track your supplier diversity goals is essential for the successful introduction of SD to the organisation.
Effective program management involves the strategic day-to-day implementation, monitoring and review of the SD program. Another key determinant of a success is an effective Program Manager. The Program Manager has to be an integral part in procurement, be credible with internal decision makers, possess knowledge of supply chain excellence and business principles, government regulations and has the drive to advocate for Indigenous suppliers.
Another important aspect of program management includes effective measurement and reporting. Having a solid reporting system that measures the performance of the SD program will allow for ongoing feedback; highlighting the overall performance of SD and need for improvements. To ensure that the performance monitoring and evaluation is effective, it must be relevant, appropriately analysed, timely, and distributed to those who will act on that information, such as the Program Manager.
Following these steps will see you on your way to implementing an effective supplier diversity program within your organisation. It will help to take your company from transactional purchases to longer term sustainable relationships with Indigenous business. Supply Nation’s vision is to create a prosperous, vibrant and sustainable Indigenous enterprise sector. Advocating for the supplier diversity initiative and facilitating the integration of Indigenous businesses into the supply chains of private sector corporations and government agencies will enable us to realise our vision