Benefits of Diversity in Your Supply Chain
Supply Chain diversity programs have been steadily evolving as the benefits to organizations and the economy as a whole have become increasingly evident.
Strategic consultancy and benchmarking firm, the Hackett Group, found in its 2016 Supplier Diversity Study that the benefits of diversity in the supply chain are many. Among the top benefits include the correlation of high levels of diversity spending with increased market share. Hackett found, “…companies that allocate 20% or more of their spend to diverse suppliers attribute 10-15% of their annual sales to supplier diversity programs, much higher than the 5% of sales companies that direct less than 20% of spend to diverse suppliers identified.”
Moreover, many businesses now even have goals or requirements – as set by federal or state governments – to assign certain contracts to diverse businesses. These requirements are also codified for suppliers of government contractors.
The NMSDC echoes the Hackett Group’s support to the benefits of supplier diversity. NMSDC president, Joset Wright-Lacy states, “…there is clear and strong evidence that working with minority-owned suppliers provides business benefits for both buyer and supplier.” In addition, a study by the NMSDC indicates minority business enterprises, “generate more than $1 billion in economic output every day, which equates to $401 billion annually in direct, indirect, and output effect.” Plus, in the U.S., certain federal and state tax advantages are available to organizations that employ diversity businesses within their supply chain.
Besides increased market share, use of diversified companies in the supply chain offers much in terms of knowledge and flexibility. This may be due to the fact that many minority-owned companies tend to be smaller in size. These smaller organizations are more likely to generate patents – at a rate of 13-14 times more patents per employee – than larger firms, as found by CHI Research. Also, being smaller tends to allow minority-owned businesses to react quicker and be more flexible as they respond to the changing demands of their customers and the marketplace.
While the inclusion of diversity in supply chains offer clear bottom-line advantages, it can serve another important purpose, too – one more inherent to an organization’s underlying fiber. For some companies, it’s important to work with organizations that reflect their values; partner with suppliers who encourage diversity and support equal opportunity for sectors that have traditionally experienced unfair limitations in the marketplace.
Veteran-Owned Minority Businesses
Though minority-owned businesses are often thought of in terms of minority races and/or the female gender, one area of such companies that should not be overlooked is U.S. veteran-owned businesses or Veteran Business Enterprises (VBE). According to the SBA, there are more than 2.5 million veteran-owned businesses in the United States. These types of diversity or minority-designated companies have experienced approximately 3% growth from 2007 to 2012, and continue to expand in the marketplace.
Among the veteran-owned business community, Service-Disabled Veteran Business Enterprise (SDVBE) is another distinction carried by qualified companies. A certified SDVBE has gone through the process to be fully authorized to present their corporate certificate for diversity credit as either a Tier I, II, or III supplier.
Both SDVBEs and VBEs operate similarly to other companies, with the exception of maintaining a diversity certification through a nationally accredited organization (National Veteran Business Development Council – NVBDC; or the Certified Veteran Enterprise program, offered by the U.S Veteran’s Administration – VA CVE).
Regardless of the type of minority-owned business a company employs as part of its strategy, the facts seem clear…the more diverse an organization – including within its supply chain – the more opportunities it will encounter.
Thank you for reading Universal’s Learning Series on Supply Chain Diversity. If you would like to learn more about how we can address your supply chain needs, visit us online at www.UniversalLogistics.com. If you would like to read this article in its entirety, please check out the News section on our website.