The Untapped Potential of Logistics as a Diverse Spend Source

Supplier diversity is here to stay but there are challenges that lie ahead to make sure the transportation and logistics industry is set up for success with these programs.

Adobe Stock 404885698

In recent years, supplier diversity programs, or programs that benchmark a certain level of an organization’s operating budget to be spent on purchasing products and services from diverse businesses, have been on the rise. Adoption of such programs have seen a steady increase in prioritization and today, dedicated supplier diversity programs can be found in 85% of U.S. organizations.

These programs are a result of growing diversity, equity and inclusion efforts across the country. In fact, a recent Gartner study found supply chain organizations with formal DEI objectives rose from 27% in 2022 to 49% in 2023. This is in part because data has shown that organizations with DEI in the workplace see an increase in profitability and outperform their competitors in the marketplace.

There are a multitude of paths and programs that procurement officers, supply chain leaders and other executives can direct their budgets to, but data shows that those diverse spending dollars are typically spent in areas like contingent labor, advertising and marketing and technology - spend categories that are typically viewed as high-budget line items in industries with broader awareness of diverse suppliers in the marketplace.

But what about logistics?

Diverse-owned carriers, who account for more than half of the transportation industry, carried just 0.07 percent of the industry’s total spend in 2021, a spend that exceeded $800 billion in the U.S. On paper, this makes the logistics industry a fruitful gap for supply chain leaders looking to increase their diverse spending; however, the reality is that many carriers struggle to communicate and position themselves for these opportunities.

One important caveat to the discussion is that most programs define a diverse business as one with an industry-recognized certification, like the veteran-owned businesses (VOSB) or the women’s business enterprises network council (WBENC). In fact, McKinsey & Company has committed exclusive lanes and business for carriers certified as diverse owned.   

That definition could be the reason why diverse-owned carriers, or businesses that are at least 51% owned and operated by members of underrepresented groups, are often overlooked sources of diverse supplier dollars. The process to acquire these state and federal certifications is often confusing, time-consuming and expensive.

Drivers are aware of the benefits of securing their certification as diverse-owned businesses, including the opportunity to network with like-minded organizations, but the process to get the piece of paper that proves you’re diverse-owned is cumbersome. Many Drivers’ offices are their truck cab and they’re on-the-road when doing business. There is no front office allocated to track down what can be a months-long process of paperwork and interviews. Couple that with the out-of-pocket expenses, which can be hundreds of dollars depending on the state the business is incorporated in, and the certification can become unattainable.

Supply chain executives should lean into their partnerships with third-party logistics providers to help them navigate the landscape to see where dollars can be optimized. Below are a few questions supply chain executives who are looking to increase their diverse spend should propose to logistics partners.

1. Can you give me visibility into how much of my current spend is going to certified-diverse owned carriers? 

Visibility is critical to every part of the logistics process, and DEI initiatives are no exception. One of the best ways to start planning your investment in diverse logistics is to ask your partners how many of your current loads are being carried by underserved groups. Setting a baseline and understanding the opportunities to diversify the spend will make it easier down the road when evaluating what programs to support.

2. Do you have a program in place to track certified-diverse owned carriers?

Not every partner will have the ability to curate this information or the process in place to track it, but the ones that do will be able to provide you with data that can support future business decisions. Even better, ask how they’re supporting the carriers in their network with the certification process. Partners with a pulse on the challenges facing their drivers can provide better context, more accurate timelines and market considerations on how to begin investing diverse supplier dollars within logistics.

3. What does your company do to support your customers' DEI initiatives?

This question flips the script and forces partners to look at their programs through the lens of their customers. If a provider is actively investing in DEI initiatives that will support their customers’ own key performance indicators, you can feel confident that they’ll be able to support your own DEI efforts.

Supplier diversity is here to stay but there are challenges that lie ahead to make sure the transportation and logistics industry is set up for success with these programs. These programs are a benefit to our industry and will play a key role in growth and recovery in years to come and for stakeholders looking to increase investment in diverse spending, logistics is an untapped opportunity.