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"Bettering Business Specialists!"
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Business Case for Supplier Diversity
"Bettering Business Specialists!"
SUPPLIER DIVERSITY: THE BUSINESS CASE
Introduction
Organizations and communities have embraced the concept of
“diversity” in the work force for many years. Organizations have realized
both the economic and social benefits of these programs. Many of the
same arguments can be made to justify and support diversity in
contracting. Not only do contracting opportunities help develop small
companies into viable suppliers, but in turn, these companies reinvest
their resources and hire individuals who support the local economy, and
ultimately may begin their own businesses. The future community
growth will be led by the growth of small business.
There are numerous benefits in implementing a strong supplier
diversity program. Whether minority, women-owned or disadvantaged
businesses are the target, the benefits can be readily demonstrated. The
“business case” can be divided into seven (7) primary factors. Though
not exhaustive, the factors represent commonly recognized business
principals justifying supplier diversity program implementation and
management.
Market Factors
- Access to new markets of customers and supporters in
realization of the increasing economic, social and community-
based “capital” status experienced by minorities, women and
other traditionally “disadvantaged” groups.
- Keeps money circulating within the local economy
- Supports economic health of urban neighborhoods
- Programs are readily integrated into community wide
comprehensive planning initiatives where public funds are
leveraged to enhance living wage scales, local hiring
preferences, affordable housing development, etc.
- Programs often strongly focus on construction activities such as
new housing, infrastructure and physical community
improvements, and tend to be fully funded and primarily self-
supporting.
- Businesses are primarily local and know their markets well.
- Creates healthy local businesses resulting in the creation of jobs
within the minority and majority communities and adding to the
local tax base.
- Corporations and individuals support and locate into
communities where diversity is valued and supported.
Cost Factors
- Small businesses tend to carry less overhead loads. This allows
for these businesses to be among the lowest cost suppliers of
goods and services.
- Increase in the supplier base results in an increase in
competition for dollars. As supplier concentration risks diminish,
contract costs will be driven down.
- Due to a desire to compete effectively against established
business, the firm’s profit margins trend lower to allow for greater
degrees of affordability.
Loyalty Factors
- Helps to create a local jurisdiction and corporate loyalty base. As
history has shown, vendors that do business with organizations
tend to desire a continued and constantly enhanced relationship.
Loyalty is rewarded with the same.
- Loyalty creates cost-savings potential wherein suppliers reduce
rates even further with assurances of continued business
opportunities, (i.e. preferred client pricing structures).
- Loyalty drives down costs through supplier acquisition and
retention savings.
Supply Chain Flexibility Factors
- Increases the pool of viable suppliers and spreads resources
throughout the community.
- Creates partnering opportunities whereby smaller firms are able
to work closely with larger majority organizations to develop and
increase their capacity within a structured environment.
- Creates joint venturing opportunities where multiple smaller firms
are able to pool their resources and compete on larger and more
complex projects.
Stakeholder Satisfaction Factors
- Stakeholders of an organization are becoming more and more
diverse and supplier vendor diversity programs will enhance
stakeholder support.
- Programs are consistent with corporate or governmental
objectives of vendor opportunities reflecting the diversity within the
organization and/or community at large.
Regulatory Factors
- Programs are designed to demonstrate good faith compliance
with governmental mandates without sacrificing profits and/or
increasing costs.
- Programs are designed to fulfill organizational commitments that
carry no regulatory mandates, but have become corporate
priorities.
Intangible Factors
- Creation of new contracting opportunities will create incentives to
add value above and beyond what would be contractually required.
- Organizations will experience high levels of responsiveness to
their needs and concerns from vendors who traditionally were
unable to obtain contracts.
- Vendors tend to be more flexible with organizations as
circumstances require modification to contractual requirements.
