Global supply chain woes have taken center stage as of late. Since bottlenecks will not solve themselves, each challenge proves to be an opportunity for procurement and finance leaders. It takes a qualitative and quantitative approach when evaluating, integrating and measuring the right success of each company’s unique challenges and changing growth.
A company’s future position in the marketplace will depend on the foundational strength of its procurement program and determine the core strength of its vendor base.
Supplier diversity in today’s marketplace can seem like a daunting task, with constant moving goal posts that make measurement of success seem undefined. While businesses try to figure out their “social” component in “environmental, social and governance,” we often hear procurement teams feel like their stakeholders don’t understand the true value of supplier diversity. The procurement and supplier diversity teams we work with often feel like they are just checking a box, without taking a deeper dive into the diverse suppliers that can decrease costs, increase innovation, add competition, provide better quality goods and services, and mitigate risk in a company’s supply chain.
Increasing the diversity of your vendor base does not have to be a dramatic overhaul. Companies can get substantial value out of making small, strategic changes. We see a significant impact from companies leveraging their internal champions to further drive the change of supplier diversity throughout the organization. A study by the Hackett Group shows organizations that focus heavily on supplier diversity generate a 133% greater return on procurement investments than the typical business.
As economists debate the potential seismic impact of a looming recession on our economy, it’s prime time for procurement officers to take stock and take action by getting their supply chains in order now. Building resiliency against a recession requires proper planning and stabilization. Expanding the diversity of your supplier base will infuse $280 billion of income in diverse communities, provide new jobs to the growing demographics of your region, strengthen the local economy and build a stronger relationship with your customers. This aspect of supplier diversity has the power to drive positive change from your organization through to your local consumer. As a result, we see increased sales and improved customer and employee perception.
Pledges to diversity are a great start, as we all know, but true business strategy is all in the execution. Dragging our feet is no longer an option. While Corporate America has been championing qualitative measures to expand the supplier base, the proof of being a good corporate citizen will be in the actual execution and integration of the diversity policy.
Sourcing new suppliers is often focused on resetting costs, but it’s also about reshoring and improving your business performance. Taking an active leadership role in building up your local economy is worth the investment of time and effort building in these programs. Businesses looking to give a renewed focus on their supplier diversity commitments should start by getting complete buy-in support from your leadership team and then assembling a diverse team to fulfill sourcing goods and services.
In my role as the board director of supply diversity and certification for New Jersey Pride Chamber of Commerce, we have been meeting with procurement and supplier diversity leaders from around the world to discuss the state of their pipeline. My team is assisting corporate partners by matching them with NJPCC members — diverse suppliers — vying for government and corporate contracts. A common issue we hear is an accessibility gap based on the limited networks and resources available.
The accessibility gap rightly focuses on how sourcing is done, what suppliers are available and what is needed to win contracts — the information of what they need is often unknowingly gatekept. Diverse suppliers that are looking to better position themselves, must highlight not only attractive pricing, but their innovative goods or services, increased quality, more efficient delivery, ability to mitigate risk and countless other advantages that will give them a competitive edge.
In order for corporations to grow their pipeline of women-owned, Black-owned, veteran-owned, disability-owned, Hispanic-owned and, now, LGBT+-owned businesses, they need to focus on attracting them by understanding who they are, including them in sourcing exercises, introducing them to primary contractors and providing the resources they need to build up their capacity.
Recently, I met with leaders across several industries at the Women’s Business Enterprise National Council conference in Atlanta. A common issue among private equity, tech, health care and professional services is the lack of accountability from their end users. The procurement and supplier diversity professionals are often handcuffed with their lack of empowerment to drive the change. Corporate leaders need to empower these employees by creating measurable goals and rewarding employees that achieve them.
Transformative growth can only come from strategy with intentional actions. We believe that this holds true in all aspects of business. It’s important to gather information that will build up diverse-owned businesses. The future of our economic viability depends on those who will act and spend conscientiously. Diversity is no longer just a talking point. Nonaction will be a real consequence to any business’s future. Now is the time to get the right plans in place to attract the right diverse suppliers. Cultivating the right relationship is an investment that will not only meet your needs, but also your customers’ needs.
Stephanie Lokker is the founder and CEO of Lockerbie & Co., a management consulting firm headquartered in New Jersey. Lokker is a board director at the New Jersey Pride Chamber of Commerce, where she oversees its statewide initiatives for supplier diversity and certification programs.