As businesses increasingly recognize the value of supplier diversity, building a robust program has become a priority. However, getting such a program off the ground takes more than just good intentions. It requires a strategic business case backed by accurate data, proper tools, and internal support.
In a recent Supplier.io webinar we heard from industry experts Bryan Wiggins (Cisco), Wendy Rocco (Associated Materials), and Molly O’Brien (Supplier.io), who have helped organizations successfully launch and grow their supplier diversity programs.
Why Supplier Diversity Matters for Your Business
Over the last few years we’ve seen more data proving how a well-implemented supplier diversity program delivers tangible business value. These programs now go beyond corporate social responsibility to drive supply chain competitiveness, brand value, revenue growth and innovation.
In a recent State of Supplier Diversity report, 65% of respondents reported that their programs improved their supply chain competitiveness. Additionally, almost 50% said these programs enhanced their brand reputation and drive RFP success. This growing recognition proves that a supplier diversity program isn’t just a feel-good initiative—it’s a business imperative.
How to Build the Business Case for Your Program
Building a supplier diversity program requires leadership buy-in, financial investment, and the right resources. While interest in programs exploded in 2020 because of the pandemic and George Floyd incident, leaders now need to gain support by focusing on business value. Here are the key components for creating a successful business case:
1. Align Supplier Diversity with Corporate Values and Strategy
For your supplier diversity program to gain traction, it must align with your company’s mission and values. Wendy Rocco shared her experience at Associated Materials, emphasizing how crucial it is to connect the program to the company’s vision.
“Our corporate values focus on enhancing the places we live and work. Our supplier diversity program is directly linked to this by supporting local communities and promoting inclusive business practices.”
To strengthen your business case, outline how a supplier diversity program aligns with your company’s long-term goals, whether it’s fostering innovation, enhancing community relationships, or meeting corporate social responsibility (CSR) objectives.
2. Highlight the Business Value
Molly O’Brien stressed the importance of tying the business case to competitive market forces.
“If your competitors are investing in supplier diversity programs, you risk falling behind in RFPs and missing out on new business opportunities.”
Additionally, many organizations now face customer or government requirements for supplier diversity, adding another critical layer of necessity for these programs.
When crafting your business case, outline the potential for business growth. For example, you can emphasize how a supplier diversity program can help your company secure government contracts, meet customer expectations, and foster innovation through partnerships with diverse suppliers.
3. Leverage Data to Demonstrate Impact
Data is one of the most powerful tools you can use to advocate for supplier diversity investment. Bryan Wiggins shared Cisco’s journey: “Since 2021, we’ve nearly tripled our diverse spend. Having this kind of quantifiable data is essential when presenting the business case to leadership.”
Present data that highlights the potential cost savings, risk mitigation, and revenue opportunities tied to a supplier diversity program. Studies show that working with diverse suppliers can lead to 8.5% lower costs year over year, while also increasing supplier retention rates by 20%, according to Bain & Company.
4. Invest in Supplier Diversity Tools and Resources
To properly manage and track supplier diversity metrics, companies need the right tools and systems. Investing in technology to track certification, monitor spend, and analyze results will ensure your program runs smoothly and delivers results.
“Tools are essential for capturing the full picture of your diverse spend,” Bryan emphasized. Without adequate systems in place, it becomes difficult to monitor progress and make data-driven decisions. By investing in the necessary tools upfront, your organization can ensure its supplier diversity program achieves its goals.
5. Engage Stakeholders for a Successful Supplier Diversity Program
A successful supplier diversity program requires collaboration across departments, from procurement to sales, CSR, and executive leadership. As Wendy Rocco highlighted, “Executive alignment is critical to get the program off the ground.” Without leadership buy-in, it can be challenging to secure the budget and resources necessary for a supplier diversity initiative.
Bryan Wiggins noted that having a champion in your CPO (Chief Procurement Officer) or another key executive is instrumental.
“Having someone who can advocate for the program and push it forward is essential.”
Identifying internal champions in procurement, sales, and CSR teams can help you build momentum and ensure your program is integrated into the company’s overall strategy.
Beyond executive buy-in, it’s important to educate stakeholders throughout the company on the value of a supplier diversity program. Molly O’Brien shared how supplier diversity programs also impact sales.
“Many of our clients see direct benefits from supplier diversity in their customer RFPs, as more and more businesses look to partner with companies that have a strong supplier diversity program in place.”
Measuring Success and Setting Realistic Goals
Once you have secured leadership buy-in and initial funding, you need a plan for measuring the success of your supplier diversity program. Establish key performance indicators (KPIs) that align with your company’s goals, such as:
- Cost savings: Working with small and diverse suppliers can lead to lower costs. Research from McKinsey shows diverse suppliers often deliver 8.5% lower costs over time.
- Supply chain resilience: Diverse suppliers improve supply chain flexibility and retention, with a 20% higher retention rate compared to non-diverse suppliers.
- Revenue growth: Companies with supplier diversity programs often see growth through government contracts or increased customer acquisition.
Wendy shared her own company’s approach: “We’re starting with a modest goal of increasing our diverse spend by 0.5% in the first year, but we’ll be ramping that up as the program matures. It’s important to set realistic, achievable goals and celebrate the small wins along the way.”
Final Thoughts: Supplier Diversity as a Strategic Asset
A supplier diversity program is not just a checkbox for CSR or regulatory compliance. It is a strategic asset that can enhance competitiveness, drive innovation, and contribute to long-term business growth. As you build your business case for investing in supplier diversity, ensure you tie your program to the company’s core values, provide data to demonstrate its impact, and engage key stakeholders to drive success.
As Bryan Wiggins wisely put it, “Supplier diversity is a marathon, not a sprint. Small, incremental wins will build momentum over time.” By making the business case for supplier diversity investment, you can lay the foundation for a program that delivers value for your organization, its customers, and the broader community.
If you need help building your supplier diversity program or creating a business case, Supplier.io offers templates and tools to guide you every step of the way. Contact us today to talk to our experts.