There is growing evidence that supports the positive impact of diverse spending in the supply chain on businesses. Diversifying business spending decisions is an important strategy for managing risk and maximizing returns. By spreading spending across different areas and investments, businesses can reduce their exposure to any one particular risk or opportunity, and increase the likelihood of achieving long-term financial success.
McKinsey & Company research found companies in the top quartile for gender diversity are 25% more likely to have above-average profitability than companies in the bottom quartile. Additionally, companies in the top quartile for ethnic and cultural diversity are 36% more likely to have above-average profitability than companies in the bottom quartile. While this evaluates diversity within an organization and the impact on business performance, the same can be applied to diversity within vendor ecosystems.
Optimizing spending in supply chain management can be a complex and challenging undertaking as it involves multiple stakeholders, processes, and factors that can affect overall cost and efficiency of the supply chain. Leveraging data is an effective way to influence spending habits. Analyzing spending patterns and identifying areas of inefficiency allows businesses to make informed decisions to optimize spending, which have direct implications on increased competitiveness, achievement of long-term growth and adaptation to changing market conditions over time.
Data and analytics have grown increasingly popular as a means of methodology to evaluate business spending and inform investment decisions. Through analysis of market trends, customer and consumer behaviors, organizations can identify new opportunities and investment areas that align with their strategic goals and risk tolerance. Data and analytics empower decision makers with insights into various aspects of the supply chain, such as inventory levels, demand patterns, production capacity, and transportation costs.
By analyzing relevant data, organizations are then able to identify and uncover areas where costs can be reduced, processes can be streamlined, and resources can be allocated more effectively. Businesses can use data analytics to not only identify emerging markets or industries poised for growth, but to also track performance of existing investments and adjust spending decisions accordingly.
Bridging Supply Chain Visibility Gap with ESG
Procurement is the single biggest cost driver for any organization and with corporate social responsibility at an all-time high, more and more, companies are looking for ways to diversify their purchasing decisions without breaking the bank. ESG tracking and reporting has quickly become a major topic for shareholders, boards, C-Suites, employees and consumers - as expectations for diversity and sustainability continue to increase post-pandemic. PcW says that the global interest in ESG investing will accelerate to an even grander scale. By 2026, there will be $33.9 trillion in various ESG assets.
Organizations that prioritize investing into diverse vendor ecosystems can outperform competitors and reap several business benefits, including improved innovation, increased competitiveness, and better risk management. A Deloitte study found that organizations are six times more likely to innovate, eight times more likely to improve business outcomes and 35% more likely to outperform their industry peers.
Working with diverse suppliers and promoting sustainability can help businesses improve their reputation and attract customers who align themselves with the same values. Additional keyways in which supply chain diversity improves business performance include:
Accelerated Innovation: diverse vendors bring a variety of perspectives, ideas and experiences to the table. This leads to more creative and innovative solutions that can help businesses stay ahead of the curve and meet the evolving needs of their customers.
Competitive Advantage: working with diverse vendors, businesses can tap into new markets and customer segments that they may not have otherwise been able to reach. This can provide a competitive advantage by expanding the business's customer base and increasing its revenue potential.
Risk Management: relying on a single vendor for critical goods or services can create significant risk for businesses, as any disruption or failure by that vendor can have serious consequences. By working with a diverse range of vendors, businesses can spread their risk and minimize their exposure to any single vendor's failure or disruption.
Improved Supplier Relationships: working with diverse vendors can help businesses build stronger and more collaborative relationships with their suppliers, which leads to better communication, increased trust and more effective collaboration.
Increasing Supply Chain Transparency With Technology
To complement data and analytics, other technologies like artificial intelligence, machine learning, automation tools and blockchain can also be used to optimize spending in supply chain management and increase transparency. Advancements in technology have allowed significant inroads to be made in supply chain management and logistics operations.
Utilizing third-party platforms to analyze diversity is integral for businesses. The evolution of SaaS has proven invaluable in streamlining businesses and creating transparent supply chains, playing an increasingly important role in identifying and vetting potential suppliers, efficacy of new contracts and purchases and ensuring time-sensitive decisions are in alignment with procurement strategies. These platforms also integrate communications in one place, to foster relationships and greater connectivity, enhancing an organization's ability to withstand supply chain disruption on both a local and global scale.
Cloud-based SaaS technologies offer a flexible way to enhance operations, improve customer experience and make better decisions, allowing organizations and decision makers to usher supply chain and procurement into the modern age, while maintaining competitive advantage.
