Why a Robust Supplier Diversification Program Matters

Supplier diversity programs are nothing new, but recent attention to gender and race inequities have prompted many businesses to prioritize and update their initiatives on the supplier front. Supplier diversity programs, introduced with the 1953 establishment of the U.S. Small Business Administration, have come a long way in recent years.

Nike, Nordstrom, Target, Coca-Cola, Kroger and Walmart are examples of some big-box retail enterprises that have responded to changing demographics — a more diverse America (and world), if you will — by revising and modernizing their supplier programs to support diversity and inclusion.

Kellogg Co., for instance, ended 2020 with 8% of its North American spend attributed to diverse suppliers, and has increased its supplier diversity goals every year for the past 40 years. Albertsons’ straightforward supplier diversity program, for example, invites “minority, LGBT (lesbian, gay, bisexual and transgender), service-disabled veteran, and women-owned businesses to join our large list of suppliers for both goods and services.”

There’s been plenty of press about retailers’ bolstering their supplier diversity programs, and it’s no wonder since conscious consumerism is a hot topic these days.


Regardless of your size — a large, medium or small retailer — welcoming a diverse mix of suppliers into the fold could do wonders for your business. Here’s why, along with some tips for gaining new culturally diverse vendors.

Consumers Want Transparency

Let’s go back to today’s conscious consumerism movement. These shoppers care about what and from whom they buy and are often willing to pay more for ethically sourced, fair labor-ensured or locally grown or crafted goods. The pandemic hit many smaller retailers and minority-owned businesses hard. More than half of consumers surveyed indicated they would be more likely to purchase from a local retailer than a national one during the COVID-19 crisis.

The conscious consumer wants to know whether child labor was involved in getting goods to market, the source of raw materials and whether the companies they buy from espouse sustainable practices. Along those lines, U.S. consumers are expected to spend $150 billion on sustainable products by the end of this year.

In younger generations in particular, it’s hip to be healthy and cool to be conscious, and it’s expected that they and the businesses they frequent care for the planet. They want retailers to pay attention and be fully transparent about sourcing their goods.

Current State of Diversity Efforts

In a recent survey of supply chain organizations by Gartner and the Association for Supply Chain Management (ASCM), the following trends emerged in relation to engagement with diversity and inclusion issues and where businesses are currently focusing their efforts:

  • 62% of supply chain organizations are looking at the dimensions of ethnicity/race as part of their recruitment strategy.
  • 30% of the full-time supply chain workforce are people of color, but only 9% of supply chain VPs are people of color.
  • 41% — about three of every seven — supply chain organizations have no plans to improve D&I.
  • Most D&I initiatives in place at supply chain organizations prioritize education and awareness-raising (30%), followed by recruiting (20%) and integrated pipeline planning (20%).

That said, nearly three-quarters (74%) of companies leverage supplier diversity, according to James E. Harris, Director of Diversity & Inclusion and Supplier Diversity at H-E-B and a member of the FMI Supplier Diversity Committee. He shared this information during a food industry conference earlier this year.

However, if your procurement team has yet to create and implement a supplier diversity program, perhaps it’s time to reconsider.

Smaller vendors, for instance, could be more agile and nimble than their larger counterparts. Younger companies may have newer, streamlined ways of producing goods and services.

Diverse suppliers can bring different cultural perspectives and fresh products into a retailers’ array of goods and in turn can lead to a broader, more diverse group of consumers. Diversity breeds creativity and innovation.

Tips for Implementing a Supplier Diversity Program

Perhaps your procurement team is already stretched to the limits and isn’t sure how to start. If this is the case, consider the following when entertaining working with and/or onboarding a new suppler:

  • Get executive buy-in. It all starts at the top — you must get the C-suite on board. If it’s a hard sell, win them over by explaining the cost-benefit ratio and provide profit and growth impact estimate projections.
  • Ask questions. When you’re considering a new vendor, use a questionnaire that requires them to answer things like:
    • Where are your products sourced?
    • What is the percentage of sustainable materials that goes into your goods?
    • Do you supply local goods or ones from across the world?
    • Is your business minority-owned and what is the ownership structure?
    • If not minority-owned, have you implemented a diversity program, and how close are you to achieving your goals?
  • Be proactive. Supplier diversity goals should be integrated into your company’s sourcing strategy, but if you don’t know where to start, search online for what other retailers are doing to make this initiative a reality. Consider too what your goals are — to provide more sustainable goods? To ensure minority-owned suppliers make up at least 20% of your vendor master file?
  • Invest in a supplier management solution. Supplier relationship management software can help you keep track of supplier details in one easy-to-find place. This technology can be customized to make sure you’re meeting your requirement and KPIs, can alert you when something changes and can generate supplier performance reviews.
  • Implement ongoing review routines. It’s great to kick off a supplier diversity program, and even better to have a great tool to help you track your data. However, if you don’t periodically review it, there won’t be anything holding you accountable to achieve your goals.
  • Report on it. If you don’t inform the public of your progress against your goals, how will stakeholders know about your diversity efforts? Consider preparing a quarterly, semi-annual or annual report and publish it on your website’s press page.

A successful supplier diversity program doesn’t come together overnight. It takes planning, commitment and buy-in, not only from the top but from across the organization. Yes, it does add some work to procurement’s load. However, it provides numerous benefits, including expanding your supplier base, becoming more culturally diverse and reaching out to new — and hopefully loyal — customers.

Once established, monitor it and improve it regularly. Using a supplier relationship management module/tool can help keep your goals front and center and flag when something is awry.

The bottom line? Making the effort to create and sustain a supplier diversity program results in a broader, larger vendor base that can enable company growth, a more loyal customer base and ultimately greater profit.

Shannon Kreps is the VP of Product Marketing at Medius, a global provider of spend management solutions. Kreps specializes in product marketing, using her expertise to intimately understand customer needs, influence product development and develop irresistible product messaging.

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