Given that supplier diversity is, by definition, broader than the supplier diversity certification process, supplier diversity is often only discussed in terms of supplier diversity certification. What this article will do is approach supplier diversity from a different perspective and discuss how supplier diversity benefits companies and organizations on both the supply and demand side. The focus will be supplier diversity certification but discussion about supplier relationships outside of supplier relationship management software or systems will also be included.
The first step in any supply chain strategy should always be to select top quality suppliers for sourcing goods and services. Given that supplier selection criteria can vary widely based upon customer requirements, it’s impossible to create an all inclusive list of criteria for selecting suppliers. However, there are several key areas that should be considered in supplier selection regardless of the industry or marketplace which will provide insights as to how supplier diversity fits into supplier relationship management.
The first area that should be looked at during supplier search is supplier service level agreements. Service level agreements are important for identifying potential supplier risks and can help reduce supply chain costs while improving service levels. The second important area of supplier selection criteria is corporate social responsibility (CSR) initiatives. CSR initiatives fall directly in line with supplier diversity when discussing suppliers’ work force and environmental impacts. In fact, one might go so far as to say that supplier diversity certification is a form of CSR initiative. As such, sourcing socially responsible suppliers should always be a priority due to its impact on supply chain risk reduction and cost savings through supplier diversity.
Another supplier selection criterion that organizations can use is supplier responsiveness. Supplier responsiveness measures supplier performance against the customer’s expectations and requires supplier commitment to meet those expectations consistently. The supplier relationship management organization should also evaluate supplier cost structures given that supplier costs are often a top factor in deciding where to source products and services from. In terms of supplier relationships, supplier diversity will be important when benchmarking prices and contracts as it allows for greater competition between suppliers for valuable contracts.
Finally, companies should be aware of contract open periods which give potential suppliers time to review their requirements before beginning negotiations with the company or organization so they can determine whether or not there is a fit. Open periods allow everyone involved in the supply chain process to perform additional due diligence and can help to improve supplier diversity by opening the sourcing process up to a wider supplier base.
One key supplier search metric that supplier relationship management systems should be able to provide is supplier risk, supplier diversity metrics, supplier performance measures, supplier history, supplier accessibility information and real time pricing data on all suppliers within the network in order for the organization to be able to make better supplier diversity decisions based upon supply chain information.
In addition to supplying products or services through already established contracts with suppliers who are part of your existing supply network, one of the most important ways that organizations can benefit from supplier diversity is through strategic sourcing – which has expanded beyond traditional commodity purchases into non-traditional areas such as consulting services. The goal of strategic sourcing is to expand the supplier base with suppliers that have capabilities and expertise that can increase supply chain efficiency, but who may not already be a supplier to the organization.
Companies should always work towards supplier diversity certification in order to reduce supplier risk and improve supplier performance through supplier diversity initiatives. Certification helps ensure supplier quality while enhancing the overall customer experience. It’s one way of increasing accessibility to new suppliers without sacrificing existing supplier relationships or creating additional costs associated with maintaining multiple supplier contracts for similar goods or services.
Supplier relationship management programs are a great way to access products sourced from socially responsible contractors who commit themselves to providing equal opportunity employment practices while working within an environmentally friendly business model which promotes sustainability. A strategic sourcing program will provide companies with increased visibility into their entire supply chain while creating supplier diversity metrics that can be used to measure supplier performance against the company’s supplier standards.
This will help companies improve their supplier diversity and supplier performance by developing honest relationships with suppliers who are responsive, reliable and understand the customer’s needs. As such, supplier relationship management programs are an important part of any organization’s CSR program as they offer a great opportunity to improve supplier diversity within an existing supplier network through increased visibility into suppliers’ strengths and weaknesses so that social responsibility issues can be identified and addressed more quickly than in traditional supply chains.