5 Ways to Ensure Value Based Supplier Diversity Program Contracts. What is a diverse supplier? A diverse supplier is a business that is at least 51% owned and operated by an individual or group that is part of a traditionally underserved group. Common classifications are small business enterprises (SBEs), Minority Business Enterprises (MBEs) and Women Business Enterprises (WBE). The definition of diversity continues to evolve as time moves on and has expanded to other minority groups such as the disabled, LGBTQ+ and Veterans. Supplier Diversity is important for many reasons but according to a McKinsey Report Supplier Diversity could add $280 Billion to the US Economy as reported in Forbes. Certainly, that adds to the list of reasons Supplier Diversity makes good business sense. The Importance of Value Based Contracts. Ensuring that Supplier Diversity Contracts are value-based involves not only promoting diversity but also achieving positive outcomes for both the organization and its diverse suppliers. Here are five actionable steps an organization can take to ensure Supplier Diversity Contracts are value-based:
1. Define Clear Objectives and Metrics:
· Clearly articulate your organization's goals and objectives for supplier diversity. Ensure that these objectives align with your overall business strategy. · Develop specific, measurable, and time-bound metrics to track the success of your supplier diversity program. Metrics might include the percentage of diverse suppliers in your supply chain, cost savings, revenue generated, and supplier performance. · Once you have a strong framework, vendor alignment is seamless.
2. Establish Robust Supplier Evaluation Criteria:
· Develop a comprehensive set of evaluation criteria that assess the value suppliers bring to your organization beyond just diversity. · Consider factors such as quality, cost-effectiveness, innovation, reliability, and sustainability when evaluating diverse suppliers. · Weigh these criteria appropriately, giving preference to suppliers that excel in areas critical to your organization's success. · Track and monitor performance.
3. Implement Supplier Development Programs:
· Offer training, mentoring, and capacity-building programs to help diverse suppliers improve their competitiveness. · Train buyers and procurement professionals on supplier diversity best practices. · Collaborate with industry associations, business development centers, or other organizations that specialize in supplier development. · Encourage knowledge-sharing and best practice exchange between your organization and diverse suppliers.
4. Promote Collaboration and Innovation:
· Foster a collaborative environment where diverse suppliers are encouraged to share their innovative ideas and solutions. · Consider co-development opportunities where your organization and diverse suppliers work together to create unique products or services. · Recognize and reward innovation from diverse suppliers with incentives or additional business opportunities.
5. Regularly Review and Adjust Contracts:
· Periodically review supplier diversity contracts to ensure they continue to align with your organization's evolving goals and strategies. · Adjust contract terms and expectations based on supplier performance, market conditions, and changing business needs. · Maintain open communication channels with diverse suppliers to address any concerns or opportunities for improvement.
Manage contracts with transparency and integrity. Maintain "arm's length".
It is key to note the nature of a given contract and the issuing body often drives the associated terms and conditions. This is especially true in highly regulated, government funded environments. Nevertheless, by following these proven steps, your organization ensure that Supplier Diversity Contracts go beyond mere compliance by adding value.
When supplier diversity is properly operationalized, aligned, and widely accepted across the organization it contributes genuine value to both your business and the diverse suppliers you engage with. This approach not only promotes diversity but also fosters innovation and drives long-term success for all parties involved.
I would love to help your organization meet your diverse vendor management goals and objectives. Give me a call today.
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