If you’re here, you’re likely wondering what the difference is between ‘supply chain diversity’ and ‘supplier diversity’ – two terms that we often seen used interchangeably, despite meaning two rather separate things! Nonetheless, both are important aspects of building a risk-savvy and forward-thinking supply chain that can support the growth of your business.
Supply chain diversity refers to the expansion of an organisation’s supply chain network – utilising a more diverse range of suppliers rather than a small network of them. To many organisations, the concept of supply chain diversity goes against previous procurement ‘best-practices’, in which a smaller base of suppliers facilitated more personal inter-party relationships. However, in a global age whereby supply chains can be impacted by macro factors from across the globe, supply chain diversification helps to protect the ongoing functionality of business supply chains. In fact, a Deloitte survey (Global CPO Survey 2019) revealed that 67% of top CPOs have already implemented supplier diversification strategies into their IT procurement systems.
· Reduced risk: supply chain diversity reduces organisational reliance on a single or small number of suppliers, helping to prevent disruptions to business activities if a supplier is unable to deliver on an order
· Access to more talent: by increasing the number of suppliers that businesses are working with, organisations have access to a wider pool of talent and innovation
· Enhanced supplier performance: supply chain diversity programs make individual suppliers more expendable as organisations are not reliant on a single supplier. The result of this is more pressure on the supplier to conform with contract compliance and increase their performance in order to retain contracts.
· More cost-leverage: supply chain diversity also increases competition between suppliers. This not only improves performance, but also helps businesses to gain greater cost-leverage over suppliers, able to negotiate more competitive rates.
· Better responsiveness: supply chain diversity allows for greater supply chain flexibility; in turn, this allows organisations to respond to macro factors such as changing market trend sand customer demands at a faster rate, and provide a higher quality service through strategic decision-making.
Supplier diversity refers to the use of a more diverse range of suppliers from across the globe, with organisations proactively seeking smaller and often minority-owned businesses. The importance of a supplier diversity strategy has grown in recent years in conjunction with many global movements such as #MeToo and Black Lives Matter, with a recent Hackett Group Survey (2021) revealing that 77% of organisations are planning an increased spend with black-owned businesses.
Supplier diversity can be an important part of a company’s ethical and social justice efforts, signalling to consumers that they’re taking an active role supporting diversity and social responsibility. Nonetheless, supplier diversity programs can also offer a host of other benefits to businesses.
· Attract fresh talent: by widening the pool of vendors that organisations are looking to procure from, businesses increase the chances of sourcing new, fresh talent – talent which has not already been utilised by their competitors or other market-leaders. In turn, this can help to improve competitive advantage by increasing innovative thinking within the organisation.
· Appeal to new demographics: According to The Census Bureau minorities will account for nearly 90% of the total growth in the U.S. population between1995 and 2050. Likewise, the buying power of such minority groups is projected to be around $3.9 trillion by 2030 and as such, businesses should not disregard the importance of appealing to such groups if they wish to ensure the future progression of their organisation. A diverse supply base can help to align organisations with new demographics, increasing their potential customer base.
· Increase profits: Inline with the above, a supplier diversity strategy can help to increase profits through increasing the customer base. In the US, women make up between 70% and80% of all consumer spending. Unsurprisingly, women-owned business is now the top diverse category in all regions across the US, as businesses grapple to take advantage of the potential consumer base attained through working with women-owned businesses.
Looking to consult a procurement expert? Look no further. At Athena Commercial we offer procurement consulting and software solutions across a diverse range of areas. With specialists in all areas of procurement we have the skills and expertise to guide you through the procurement process, including devising a supplier diversity program or a supply chain diversity strategy for your next business.
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