The history of supplier diversity in the United States is firmly rooted in the civil rights movement of the 1950s and 1960s. Early movers in the electronics industry such as Xerox and IBM were early adopters to establish supplier diversity programs. Later, Public Law 95-507 established a program to encourage government contractors to include minority-owned businesses in their supply chains. According to the Detroit Chamber, when the civil rights movement called for an end to the struggle for justice and equality for Black Americans, various protests paved the way for many groups to participate in the marketplace. Below is a timeline of the history of supplier diversity:

1950s

• With the Small Business Act of 1953, Congress established the Small Business Administration to “aid, counsel, assist, and protect, the interests of small business concerns” and ensure that small businesses received a fair portion of government contracts.
• The Small Business Investment Act of 1958 provided programs for investment, such as small business investment companies and certified development companies.

1960s

• Neither of the Acts established in the 1950s required that small businesses be owned by a member of a minority group. That directive was authorized by the Civil Rights Act of 1964, which called for an end of discrimination that gave greater opportunities to majority-owned companies.
• Another boost to anti-discrimination initiatives came in 1969 when the Office of Minority Business Enterprise was established. Two years later, the scope of the OMBE was expanded to provide grants so that business groups could provide technical and operational guidance to diverse suppliers.

1970s

• The OMBE expansion gave rise to the founding of the National Minority Purchasing Council, now known as the National Minority Supplier Development Council, in 1972. The group has a vast network that supports and facilitates minority-owned businesses into corporate and public sector supply chains.
• The Small Business Act of 1978 redefined minority firms as socially and economically disadvantaged small businesses and required federal agencies to establish contracting goals for major federal contracts. The act also established the Office of Small and Disadvantaged Business Utilization to heighten awareness among small and diverse businesses of federal contracting opportunities available within the federal government.
• In 1979, the United States Hispanic Chamber of Commerce to promote the economic growth of Hispanic-owned businesses.

1980s

• The S. Pacific Asian American Chamber of Commercewas created to represent the interests of the diverse pan Asian business and professional community.
• In 1987, the National Defense Authorization Actcalled for a 5% contracting goal for SDBs.

1990s

• The Federal Acquisition Streamlining Act of 1994 created a 5% contracting goal for women-owned small businesses.
• In 1997, two important events impacted supplier diversity:
  • The launch of the Women’s Business Enterprise National Council was launched in 1997 to foster the success and advancement of certified women-owned firms.
  • The HUBZone Empowerment Act was passed in 1997 with the goal of awarding at least 3% of federal contract dollars to small businesses located in Historically Underutilized Business Zones.
• The Veterans Entrepreneurship and Small Business Development Act of 1999 established spending goals for Veteran-owned Small Businesses and Service-Disabled Veteran-Owned Small Businesses.

2000s AND BEYOND

• The National Veteran-Owned Business Association was founded in 2001 to create corporate contracting opportunities for America’s veterans and service-disabled veterans’ business enterprises.
• The National LGBT Chamber of Commerce was founded in 2002 to ensure the implementation of pro-business LGBTQ-inclusive policies at corporations of public entities.
• In 2010, the Small Business Jobs Act expanded access to capital for small businesses, increased exporting initiatives and strengthened contracting opportunities.
• Supplier diversity continues to gain momentum in the U.S. and around the world as more companies realize the benefits of an inclusive supply chain. Challenges likely lay ahead for corporations and entrepreneurs, but the path to a stronger economy and marketplace is paved with the benefits of engaging diverse suppliers.

The original article can be read here.

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To establish your program, you must first achieve executive buy-in as this program may create a shift in practices with who you’ve secured for business previously. There may also be a change in the process of securing supplies and good. In developing the business case for your supplier diversity program, you should answer the following questions:

• Why is your organization investing in supplier diversity? What do you want to achieve?
• How diverse is your current group of suppliers?
• In finding the best suppliers are you researching the competitive advantage and customer satisfaction of potential supplier?
• How will your program demonstrate corporate responsibility by providing opportunities for marginalized communities?
• How will your program demonstrate social responsibility?
• What will be the economic impact on vendor demographics?
• Does your current vendor selection represent, in any way, the demographics of your customers?
• How will your program increase sustainability by having a diversified supply chain?
• How will you communicate the need to your Board of Directors?

You will also want to share the benefits of having a supplier diversity program.  You will develop benefits that are specific to you, however, we have identified the following:

Promotes Innovation

If you always use the same suppliers, you may not be exposed to new, diverse products and services. It’s a benefit also when companies look toward new, small and medium-sized businesses because they often offer innovative products and services.

Provides Multiple Procurement Channels Drives Down Costs

Exploring multiple suppliers allows you to promote and engage several suppliers which helps you consider price, service levels, and more. This drives competition between suppliers, which reduces your direct and indirect spend.

Promotes an Inclusive Approach to Procurement and Creates Equity

As you map the history and social impact of vendor/supplier programs, you can see that many small and medium sized businesses, as well as companies owned by diverse and marginalized communities of people have not had the same opportunities to start businesses, or source products at the same price as larger organizations.

And finally, it’s the RIGHT THING TO DO. It can lift up disadvantaged communities of people. As you move to being a more inclusive and equitable organization, this involves being socially conscious in addressing injustice through a supplier diversity program that promotes an inclusive approach to procurement.

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A supplier diversity strategic plan outlines an organization’s commitment to how they will source goods and services from suppliers that are owned by underrepresented groups such as women, ethnic groups, disabled, veterans, and others. The goal of a supplier diversity strategic plan is to create a pathway to increase how you’ll incorporate create more economic opportunities for Minority Business Enterprises (MBEs) within the supply chain and to foster a more diverse and inclusive workplace. The plan should lay out specific goals and target percentages for MBE utilization, and the actions for how to achieve these goals. The tactics you use might include:

• Identifying a certain percentage of procurement spend for MBE/WBE-owned businesses.
• Establishing mentorship programs between established suppliers and MBE/WBE businesses.

Your strategy will provide guidelines and mileposts for both internal stakeholders and external entities, telling them what your program’s goals are and how you plan to achieve them. There are four key elements that must be taken into account:

• Conduct a Supplier Diversity Assessment: This would be an assessment of your current supplier pool to help identify if you have any gaps or areas where improvement is needed to achieve your desired goal.
• Define the Goal(s): What does your organization want to achieve by implementing a supplier diversity strategy and plan? We suggest no more than 3 goals to focus on per year. This will help you put adequate time and attention to developing the actions needing and executing with intention.
• Create Procurement Policies: This will outline the overarching goals, and identify the high level goals that your supplier diversity strategic plan hopes to achieve.
• Create Actionable Steps: This would include setting specific targets for spending with minority-owned and women-owned businesses.

Governance

If there is not a dedicated procurement department, you will also need to determine where supplier diversity resides. In many small to medium side organizations, the procurement process does not have governing policies and processes that are driven by one department, and many departments manage purchasing on their own. The IEDEIA team recommends that a department OWN driving and accountability of the policy and practices, with the support of the executive sponsor and CEO. It might reside with the Finance and Accounting department or the DEI department where someone is assigned to manage the spend across various supply chain functions. Whomever will hold this responsibility will manage:

Wherever the central procurement responsibilities lie, there should be accountable for establishing policies and leading the change management processes and for ensuring goal alignment throughout the organization. Your organization will need to determine who they report directly to and how they will be held accountable for recruiting diverse suppliers, creating a competitive environment, continuously measuring performance, building relationships with diverse suppliers, and contributing to best value sourcing & procurement. These activities also have the intangible ability to improve brand recognition, which will be an area of measure of success.

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Getting Executive Support

Just as you’ve been encouraged to get an executive sponsor for the entire DEIA journey, you will also need a vocal advocate for creating a supplier diversity program. Your sponsor will attend supplier diversity events, network with groups like the national minority supplier development council and be a true sponsor of your supplier diversity program.

It doesn’t just need to be leadership from your procurement function either, the more organizational support the better, but this person will be the main driver for both your internal culture and your external supplier diversity program.

Read the “Finding an Executive Sponsor” and follow the same process  to find an executive sponsor to be a vocal voice with other executives regarding developing your program.

Want to learn more about supplier diversity? Check out the Supplier.io 2021 State of Diverse Suppliers report.

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Create a Policy

Now that you’ve gained executive level support and have your leaders onboard, it’s time you create your policy that states your overarching mission and outlines your supplier diversity program. Your supplier diversity policy should clearly state the purpose of your supplier diversity program (your WHY). What your company wants to achieve with a supplier diversity program (your WHAT)? You should determine your purpose FIRST then include that into your supplier diversity policy because it will be much easier to be strategic about setting goals and creating initiatives. Some common reasons are (from supplier.io):

• To find the best suppliers (competitive advantage and customer satisfaction)
• To demonstrate corporate responsibility (providing opportunities for marginalized communities)
• To increase sustainability (stronger, diversified supply chain)
• To promote diversity (innovation and social responsibility)
• To support the local community (economic impact and reflection of customer demographics)

Diverse suppliers to consider

Some best practices in defining the parameters of your program can be found in some of the many examples of supplier diversity programs other organizations have developed. One of the main determinations in setting your policy is WHO will you want to engage to be a part of your program. The main categories are:

• Minority-owned
• Woman-owned
• LGBTQ+-owned
• Veteran-owned (including disabled veteran-owned)
• Disability-owned
• Small businesses

The small business category is the only category on the list that does not require the business to be at least 51 percent owned and operated by a member of a diverse or marginalized community. A small business is a company that is categorized based on revenue and/or employee size as determined by the Small Business Administration’s classification standards. Some government contracts require prime contractors to subcontract with a small business.

Certifications

When crafting your supplier diversity policy, be up front about what types of certification you will accept. Another consideration in your supplier diversity policy is whether or not you require third-party certification or self-certification. One advantage of requiring third-party certification is that it ensures the integrity of your supplier diversity reporting. Some of the most popular certifying agencies are:

• National Minority Supplier Development Council
• Women’s Business Enterprise National Council
• National LGBT Chamber of Commerce
• Disability
• National Veterans Business Development Council

There are hundreds of other certifying bodies as well as many cities, states, and municipalities have their own certification processes, along with private and government certifying agencies as well.

Policy considerations

Remember, this policy is meant to be dynamic, so make it as clear and relevant as possible for your current program, knowing that you will update it as your supplier diversity program matures and your business changes. It can be as simple as setting a rule that for every RFPs you award, at least 10% of suppliers invited need to be diverse. As you think about what to include in your policy statement, you might consider:

• This statement will be utilized in internal and external DEIA strategy guidelines, marketing and PR activities.
• Showing that you have executive level commitment provides credibility to your program, both externally and internally, and can help create buy-in from management and staff.
• It provides a reference point for how equity and inclusion are at the cornerstone of your organization’s mission and strategy.

Examples of supplier diversity policies

Xerox
Coca-Cola
Relx
Cleary Gottlieb
Enbridge
Bain

Supplier Diversity Policy Template

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Organizational Assessment to Gather Data

Before you begin a supplier diversity program, you may want to conduct an organizational assessment to identify areas of strength and opportunity for your company. Use the scoring below as a benchmark to determine areas that need additional focus.

Use a 5 point Likert scale to rate the following statements on a scale of 1 to 5. (1=Strongly Disagree; 2=Disagree; 3=Neutral; 4=Agree; 5=Strongly Agree)

• We have a formally written Supplier Diversity policy.
• We have executive level support for Supplier Diversity.
• We have set meaningful and measurable supplier diversity goals for our organization.
• Our supplier base is fairly diverse (ethnicity/race, gender/disability status, LGBTQ+, Veterans, etc.)
• We report regularly to our C-level Executives and/or Board of Directors on our Supplier Diversity metrics and progress.
• Our Supplier Diversity initiatives have been organizationally communicated throughout the company.
• Our Supplier Diversity programs and policies are publicly accessible through printed materials or on our website.
• We have a formal mentorship and/or development program in place for Women or Minority-Owned businesses.
• There is personal accountability for all of our managers in helping us meet our Supplier Diversity goals.
• We have developed a process for sharing diverse supplier candidate information across departments/divisions.
• We actively seek out diversity in our vendor process and do not solely rely on previous supplier relationships.
• Our organization is extremely accepting of personal diversity in the workplace .

Total points possible: 60 (5 at all levels)

• Great score: 50-60
• Good score: 40-49
• Average score: 25-39
• Needs improvement: 24 or lower

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Develop Goals

Your supplier diversity policy clearly outlines the desired outcome for your supplier diversity program in both tangible and intangible results. The goals you develop will help you measure what success look like and what you want to get out of your supplier diversity program.

Tangible goals might include conducting a supplier diversity assessment within your organization, or increasing diversity spend, or to train and develop a certain number of suppliers. An intangible goal might be to increase competitiveness within the marketplace, or to enhance your organization’s external brand.

Tools in developing your strategic goals

Tools you may use to develop your strategic goals include:

SWOT Analysis

Similar to a traditional business SWOT analysis, a diversity SWOT analysis will identify the diversity strengths, weaknesses, opportunities, and threats of your organization. This SWOT analysis should take place after data has been collected and analyzed. Try to have three to four entries for each quadrant.

Diversity Survey

The diversity survey will give you insight into how diverse your organization’s supplier/vendor population is.

Diversity Scorecard

A diversity scorecard provides an overall diversity grade for an organization. There are various ways to create a diversity scorecard. Additionally, several categories can be added to a diversity scorecard. Some have four categories and others include up to eight or 10.

In my work with Brooks Enterprise and Consultants I look at eight main areas when determining an organization’s overall diversity scorecard.

• Policies and procedures
• Demographics/representation
• Supplier diversity/procurement
• Recruiting and retention
• Company internal commitment/culture
• Company branding/reputation
• Diversity intelligence (learning and training)
• Customer profile/external partnerships.

The scores can be determined by items such as the number of diverse suppliers, sales in a certain market, or representation in leadership. In addition to calculating actual scores, also include benchmarks and targets to help develop SMART diversity goals to improve a scorecard.

Whether or not you choose to publicize your supplier diversity goals, make sure they are specific, attainable, measurable, and clearly communicated in your supplier diversity policy.

Identify gaps of marginalized groups

By conducting an assessment of your current suppliers, you can get actionable and reliable information that will highlight where your organizational gaps in supplier diversity lay. Let your suppliers know that your organization is focusing on equity and inclusion in your supplier program. You can utilize this template, customized to your organization, to send to existing suppliers, as well as any new suppliers as part of their interviewing or onboarding process.

Supplier Diversity Questionnaire Template

Once you capture the information from your existing vendors, you will be able to see if there is a gap that exists. In mitigating any disparities, it’s important that you identify the communities of people you are NOT engaging.

Develop diversity spend goals

Your program should also measure and determine, at the least, an amount of diverse spend, number of diverse suppliers in the supply chain which should be reported regularly both to your Organization’s leadership.

Examples of diverse spend goals are:

• 10% of prime contracts for small businesses
• 10% of prime and subcontracts for women-owned small businesses
• 10% of prime and subcontracts for Veteran owned businesses
• 10% of prime and subcontracts for disabled-owned small businesses
• 10% of prime subcontracts for LGBTQ+ businesses

Please keep in mind that an organization may fit into multiple categories. This should be taken into account when tracking your diversity spend.

Evaluations

An effective way evaluate if you’ve successfully met the desired outcomes is to track quantitative and qualitative objectives. Both objectives and key results must be defined in the early planning phases to allow for efficient tracking of your program’s success. Some common areas to evaluate are:

These will vary based on your needs and goals, but here’s a few to get you started:

• Number of new diverse suppliers onboarded
• Number of diverse suppliers invited to an RFP
• Percentage increase of diverse spend
• Brand enhancement to external stakeholders
• Increase in internal customer satisfaction

To establish key success metrics you may consider the following:

Define what success looks like
Each industry defines success differently based on their values, mission, and industry efforts regarding supplier diversity. Look back at the WHY you organization developed. What is your intent in creating a supplier diversity program.

• Implement an accountability program

1. Leadership accountability – Supplier diversity key metrics are reviewed regularly by C-Suite and other executives leaders such as the Chief Executive Officer, Chief Financial Officer, Executive Directors or the executives accountable for oversight of the supplier diversity process.
2. Operational performance reviews should be administered to track how the program is progressing towards main objectives and to hold each business unit accountable for reaching their specific key results.
3. Quality reporting systems should be reported on a quarterly basis to identify areas that need further improvement.

• Establish quantitative metrics

1. Number of diverse suppliers
2. Increase in revenues/contributions from diverse business partnerships
3. Diverse spend (on the aggregate and based on various identity categories, as well as small business)
4. Track diverse suppliers’ cost savings/cost reduction contribution

• Establish a minority supplier tracking system to enable results reporting

Keep a record of each diverse supplier and their transactions with your organization. This can be tracked in a CRM system or an online supplier tracking system.

Communicate your policy

Whether you’re announcing the launch of your new supplier diversity program or highlighting the success of your existing program, you should highlight your supplier diversity progress, success and opportunities for improvement, both internally and externally.

internal awareness campaigns; educational opportunities about your company, your procurement process, and your supplier diversity program for diverse suppliers; supplier summits and networking events to build relationships and identify potential new suppliers; attending industry conferences; and partnerships with diverse supplier councils to maximize your supplier diversity program.

Internal Communication

The goal of your internal communication is to inform every one of the policies and activities that will be implemented or have been implemented. You can use your communication channels to help employees better understand the purpose of the program and the goals that have been established in your policy. Your communication strategy will also create awareness of the supplier diversity you are seeking and encourage employees to assist in identifying new suppliers. Some effective communication vehicles internally include email campaigns, newsletters, website banners, SMS text blasts, video messages from organizational leaders and more.

External Communication

Establishing effective communication channels with external business partnerships will help with widespread awareness for your supplier diversity program and its objectives. The external communication can include the company informing diverse suppliers on training on development opportunities, or how to seek certification. You can educate them supplier selection criteria, how to submit a competitive bid, or provide a debrief  on best practices of prior bid-winners.

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You can find qualified diverse suppliers thru many channels. Many organizations use third-party databases to search for diverse suppliers, and some leverage certification agencies such as the National Minority Supplier Development Council and the Women’s Business Enterprise National Council.

Other outlets to search for Disadvantaged Suppliers are:

• NMSDC– National Minority Supplier Diversity Council
• USPAACC– US Pan Asian Chamber of Commerce
• USHCC– US Hispanic Chamber of Commerce
• NGLCC– National Gay & Lesbian Chamber of Commerce
• NaVOBA– National Veteran-Owned Business Association
• Visit The SBA Dynamic Small Business Searchsite and search for small and diverse businesses
• Visit the VetBizdatabase contains U.S. Department of Veterans Affairs, Center for Veterans Enterprise online directory of Veteran-Owned (VOSB) and Service Disabled Veteran-Owned (SDVOSB) small businesses.

You can also look into industry groups in social media platforms such as LinkedIn, Facebook or Reddit.

Attending events to source vendors

There are a number of events and groups that exist to promote supplier diversity and provide networking opportunities. You can also host a supplier networking event and inviting diverse suppliers to give you valuable insights on their challenges, how to best work with them and more.

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Research has shown that the diverse suppliers you bring into your organization may have great ideas, superior initiative, and alignment with other disadvantaged vendors and suppliers. Yet in the progression of building their companies, they may need additional resources to fully contribute to your supply chain.

Supplier development can include:

• Creating pathways for diverse suppliers to receive training
• Creating opportunities for diverse suppliers to receive technical assistance such as strategic planning and certification assistance.

Examples of effective mentoring

Supplier Diversity Mentoring Program – Sprint
In this program, Sprint executives mentor diverse suppliers over a 12-18 month period. Each supplier is assigned an executive mentor with a goal that the suppliers will earn Tier I and Tier II business with Sprint.

Diverse Supplier Mentoring Program – Southern California Edison Company
Southern California Edison Company conducts an 18-month program for 7-10 vendors. The program includes a supplier leadership component, a bid process segment (including how to review a score sheet to perceive weaknesses in the bid) and the use of power teams with operational unit mentors. Vendors selected for the program have products or services that tie into SCE’s likely future procurement needs.

Mentorship Trial Program – Cox Communications
Cox Communications has initiated a mentorship program in collaboration with the National Minority Supplier Development Council – including one-on-one meetings, progress reviews, accountability tracking and solution identification.

Mentor Protégé Pilot Program – California Water Association
The California Water Association member companies have created a Mentor Protégé Program, in which companies mentor a selected WMDVBE to provide developmental assistance and enhance the protégé firm’s ability to perform as a prime contractor or subcontractor.

Operation Hand Salute – AT&T
Operation Hand Salute is a national mentoring program for service-disabled veteran CEOs, which helps them improve their business operations and enhance their ability to win corporate contracts. Participants are paired with AT&T executives and suppliers for one-on-one mentoring and support of a “blue-ribbon” task force composed of service-disabled business owners and industry experts. Participants also take part in a four-month course with JFK University and have the opportunity to take part in a final presentation with AT&T procurement decision makers

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Small Business Administration (SBA) a federal agency whose primary role is the administrative regulating body and advocate of small business. In recent years, Congress has re-emphasized the advocacy function of SBA to bring about visible, substantive changes in public policy toward small businesses and to champion more effectively their cause. SBA’s goal is to help small businesses survive in an economic marketplace dominated by large corporations.

Office of Minority and Women Business Enterprises (OMWBE) offers certification for Washington’s small businesses that meet the criteria for minority and women-owned business enterprises (M/WBE). OMWBE develops programs designed to improve the contributions of minority and women-owned small businesses to the Washington State economy. http://www.omwbe.wa.gov/

National Minority Supplier Development Council (NMSDC) an organization comprised of a network of 39 affiliate regional councils across the country (including SCMBDC), all of whom provide minority business certification and business development opportunities. Since 1972, the goal of NMSDC has been to provide the direct link between corporate America and minority-owned businesses. NMSDC has over 3,500 corporate members and more than 15,000 certified minority owned businesses in its network. http://www.nmsdcus.org/

Women’s Business Enterprise National Council (WBENC) the nation’s leading advocate of women-owned businesses as suppliers to America’s corporations. It also is the largest third-party certifier of businesses owned and operated by women in the United States. WBENC works to foster diversity in the world of commerce with programs and policies designed to expand opportunities and eliminate barriers in the marketplace for women business owners. WBENC works with representatives of corporations to encourage the utilization and expansion of supplier/vendor diversity programs. http://www.wbenc.org/

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