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The benefits of supplier diversity:
Grow revenue and brand image with minority vendors
Ramesh Swami and Orrin Benn
Companies typically strike up a supplier diversity strategy for one good reason: because it's the right thing to do. Considering Canada's unique demographics, creating a procurement policy that taps into burgeoning minority and aboriginal groups is also the smart thing to do.
Aboriginal people and minorities constitute the fastest growing segments of the Canadian population. According to Statistics Canada, the rate of growth of the visible minorities' population between 2001 and 2006 was 27.2 per cent-five times faster than the 5.4 per cent increase for the population as a whole. Over the same time period, the aboriginal population grew by 45 per cent). By 2017, minorities will constitute 20 per cent of the population, and aboriginals will constitute 4.1 per cent.
Because these groups are more likely than the population as a whole to start their own businesses, it makes sense for government and corporate Canada to engender an economic environment through procurement that integrates and grows these upcoming enterprises.
Moreover, Canadian corporations "doing the right thing" also reap un- expected rewards. As they get deeper into business relationships with these diverse suppliers, they begin to capitalize on all the other benefits that come with the pursuit of supplier diversity.
Level 1: doing good for society
At first, most companies get involved with supplier diversity out of a sense of social responsibility. Doing so enhances the image and reputation of organizations as good corporate citizens. It also stimulates economic growth and development, and provides sustainable poverty alleviation strategies.
Once relationships with minority and aboriginal suppliers get underway, however, companies quickly appreciate how they begin to positively impact the business.
Level 2: Bottom line impact
Off the bat, companies benefit from minority and aboriginal suppliers' competitive prices and lower cost structures. In one survey by the Center for Women's Business Research, 43 per cent of companies said their rationale for doing business with women and minority suppliers is because of competitive prices and quality products and services.
At the same time, because minority and aboriginal suppliers are smaller, they're more agile, and therefore better able to respond to the needs of the corporation. Companies also quickly learn that minority and aboriginal suppliers bring innovative solutions, because of their different perspectives and strengths. For example, these suppliers may tailor custom solutions that incorporate new cultural flavours, subsequently boosting customer satisfaction. The pursuit of a supplier diversity strategy also promotes more competition for contracts from people who have not traditionally been invited to the table.
Working closely with minority and aboriginal suppliers fosters an inclusive culture within organizations. This encourages new perspectives among employees to help them respond to market changes; and cultivates innovative thinking. As relationships grow yet stronger, companies discover their supplier diversity programs give them a competitive edge.
Level 3: Competitive advantage
While Canada's population diversifies, so do organizations' customer bases. And many make the argument that companies' supply bases must reflect their consumer bases. When the two are closely aligned, companies are able to better tailor their product offerings to meet their customers' needs-increasing their success, which in turn, gives them more dollars to spend back on companies' products.
As a business case in point: AT&T cites supplier diversity as a key factor behind an $11-billion increase in its revenue. Yet another competitive advantage of supplier diversity: these partners are able to tap into resources within their networks that corporations otherwise would not be able to reach.
Certainly, in times of trouble, such as scandal or negative publicity, a company can depend on its minority suppliers to act as advocates in their respective communities and provide support. But access to the new business contacts can be also sources of incremental revenue. Indeed, some of these suppliers are very well connected, both from a personal, business or political standpoint. During competitive bids or other revenue enhancing situations, their support can be invaluable.
Over time, companies that develop relationships with minority and aboriginal suppliers will find the old customer-supplier model of doing business gives way to a "strategic alliance." Both sides reap the benefits: suppliers through newly-opened business doors and purchasing organizations through a new and more dynamic approach to doing business—for all the right reasons.
Ramesh Swamy is a senior manager at Deloitte & Touche in Toronto, and leads a group focused on performance improvement and turnaround. Orrin Benn is president of the Canadian Aboriginal & Minority Supplier Council (CAMSC). For more information on CAMSC and supplier diversity visit www.camsc.ca
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