The Drive to Increased Supplier Diversity

Studies show supplier diversity spend to rise in next two years


As 71.79 percent of organizations expect their total supplier diversity program spend to increase within the next two years, according to a recent study from CAPS Research, it comes as no surprise to the number of recent headlines touting company’s commitment to achieving increased supplier diversity spend.

In 2011, AT&T spent $12 billion with diverse suppliers, surpassing its corporate goal— to reach 21.5 percent of its total spend with certified diverse businesses by 2012—one year ahead of schedule. Others, such as transportation and supply chain management solutions provider Ryder System Inc., are recognized by major manufacturers—Toyota Motor Engineering & Manufacturing North America Inc. (TEMA)—for their Minority Business Enterprise (MBE) development efforts. Some reach even higher diversity spending goals, as the Kellogg Company spent $353 million on goods and services from diverse, first-tier suppliers in 2011.

So what’s driving this added spotlight to supplier diversity programs? While most companies justify having a supplier diversity program because “it’s the right thing to do,” (approximately 76.9 percent according to the 2011 ISM Supplier Diversity Survey) 61.1 percent of companies cite federal reporting regulations as another core reason; while 59.8 percent confirm that since their customers are diverse, so should they be as a business.

“The interest in supplier diversity is coming from a lot of different directions,” said Elizabeth A. Vazquez, President, Chief Executive Officer and Co-Founder, WEConnect International, Washington, D.C. “The fact that Dun and Bradstreet shone a light on what is possible, what the obstacles are and what some of the best solutions are in effectively implementing a supplier diversity program is critical because not all corporations understand its full value proposition throughout the organization. It has to start at the top. The top folks have to embrace it and then the ones who are responsible for implementing it have to have the resources to be able to sell it throughout the organization, track and measure it and ultimately earn the recognition for the good work that they are doing.”

Commercial information and business insight provider Dun & Bradstreet, Short Hills, N.J., provides its D&B Supplier Diversity Data Services via a database which includes more than 5.8 million socio-economic and diversity classifications from over 400 sources as well as over 20 million small businesses.

“You really have to have the certification organizations and the Dun & Bradstreet’s to make it easier for these corporations to find the right suppliers at the right time,” Vazquez continued. “It’s not a charity sale—it’s a competitive bid. The easier we can make it for corporations to source from diverse suppliers because we have really good databases, good events and initiatives that help to increase the chances to get that connection—that is where we can see a lot of impact going forward.”

No easy task

While many businesses possess successful supplier diversity spend, it’s important to understand that it is not achieved without hard work, committed efforts and the right team to not only run the program but find the right suppliers to make up the program. In fact, 71.8 percent of respondents in ISM’s Supplier Diversity Survey agreed that their biggest challenge was finding quality suppliers. Other challenges that topped the list included higher prices with diverse suppliers (32.8 percent of respondents) and the lack of budget to do outreach and training (27.2 percent).

To overcome such issues, corporations must identify what diversity groups and certifications they want to include in their program before reaching out to suppliers within each of those groups.

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