Supplier diversity guide: How to operate inclusive procurement

Supplier diversity is a key part of achieving your responsible purchasing and compliance goals. But the process of researching, contacting, and vetting vendors can quickly become time- and labor-intensive for procurement teams of any size, which makes the execution of a supplier diversity program feel overwhelming.

Despite the challenges, achieving supplier diversity is within reach—your team just needs the right solution and strategy to power your diversity program. With both technology and data on deck, you can build a network of diverse business partners who are equally committed to scaling operations and maximizing their impact. 

Keep reading to learn how to create a foundational, data-driven strategy that elevates diverse businesses in your network.

Why supplier diversity matters

Supplier diversity means maintaining a network of vendors of all sizes and ownership, including small, minority, women, LGBT, and veteran-owned businesses. It’s a growing priority for organizations across industries, with significant initiatives like the National Minority Supplier Development Council helping connect suppliers to buyers, generating $548.2 billion. 

By expanding your supplier network to include minority-owned businesses, your organization can support economic growth in local communities, bolster its resilience to supply chain challenges, and open the door to long-term scalability. 

Below are some ways that these factors transform supplier diversity into a critical part of your operations:

Enhance resilience and reduce risk 

If your procurement operations rely on just a few primary vendors, you face a greater risk of disruptions should one fail. That’s because you don’t have a backup vendor to turn to if your primary is suddenly unable to meet your organization’s needs. In this situation, a resilient network means your team can quickly pivot in an ongoing interruption or in recovery from one.

Supply chain resilience and risk reduction are especially crucial for modern procurement teams that face disruptors like a pandemic or geopolitical shifts. The best way to mitigate these potential disruptions is by planning ahead and building a contingency plan if your supply chain runs into a barrier. A diverse supplier network can help you do this. 

With a diverse network, your team can swiftly recover after an interruption by accessing a large base of vendors. That way, if one supplier has to stop its operations, you can switch to a secondary vendor to reduce the impact your primary supplier’s setback has on your network.

Uncover SRP and reputation benefits

To achieve your socially responsible purchasing (SRP) goals, you need supplier partnerships that align with your values. Say, for example, your team sets a goal to maintain a supplier base that contains 30% locally owned small business vendors. A diverse supplier network helps you maintain this percentage because you have a wide range of vendors and can prioritize local ones.

In addition to your internal SRP objectives, it’s important for your team to monitor expectations from external partners. Investors, regulators, or prospective suppliers often expect inclusive sourcing transparency as they most likely have their own internal responsible purchasing goals. Being transparent with your responsible purchasing mandates make it easy for these external parties to see how your SRP goals line up with their objectives.

However, to demonstrate this level of transparency, your team must first have in-depth visibility into your suppliers, their diversity qualifications, and how these factors impact your SRP goals or requirements.

For some industries, supplier diversity is a compliance requirement, not just a nice-to-have. That said, it’s a good idea to familiarize yourself with the rules your organization must follow to comply with these regulations.

Attract partners and customers with inclusivity

Because an organization’s purchasing practices and supply chain network can impact everything from the environment to an individual’s health, supplier diversity initiatives are becoming an increasing priority for all industries. However, this means your potential procurement partners must have responsible purchasing mandates, just like you do.

By building a reputation for prioritizing underrepresented suppliers and backing up your advocacy with data, your organization may attract high-value partners that are seeking a long-term relationship. As a result, your contracting opportunities can expand, giving you more options for operational growth, resilience, and financial security.

Common challenges with supplier diversity

It’s easy to identify the benefits of supplier diversity, but executing on your strategy to build a diverse supplier network can prove to be more challenging. Here are the most common obstacles your team may face when initiating a supplier diversity program:

Manually tracking supplier certifications

No matter the size of your network, relying on manual workflows to track and maintain a record of supplier certifications is prone to error and time-consuming. The process can be even more difficult when certification requirements change or a supplier qualifies for a new one, shifting how they align with your goals and values. Managing all this by hand for one vendor is complicated enough. But attempting to do so for a wide network of diverse suppliers is often frustrating at best.

Sluggish approval chains

Without automation, most approval workflows are slow and cumbersome. Because of this, new suppliers may avoid partnering with you because they can’t afford a slowdown to their workflows. Additionally, small suppliers often have tight budgets, which means they could be less inclined to seek procurement opportunities with your organization as it could pose a greater risk to their operations and finances.

On your side of the procurement process, lengthy and tedious approval workflows don’t have the flexibility to compensate for delays or provide enough time to establish a new supplier connection. If your team doesn’t feel like it can spare time or resources to find new diverse vendors, it could make them gravitate toward sticking with known suppliers. However, doing so doesn’t necessarily mitigate risk since you could still experience delays due to a primary vendor failure.

Missing or inaccurate supplier data

A successful supplier diversity program relies on accurate data because your team needs insight into your suppliers’ certifications and your organization’s purchasing habits. However, if you use fragmented systems, your dataset could be missing information, containing duplicates, or presenting errors, which makes it untrustworthy.

Inaccurate supplier data also makes managing your network harder because your team lacks the critical insight it needs to make good decisions and achieve your diversity goals. Without accurate data, routine tasks like reconciling supplier lists, invoices, and spend categories are more likely to be error-prone or experience costly delays.

Tools that simplify supplier diversity programs

Understanding common supplier diversity pain points and how they appear in your network is the first step in diversifying your vendor base. Once you pin them down, consider the following digital tools and procurement systems integrations to simplify your supplier diversity program:

Supplier tagging and certification tracking

Your team can simplify strategic sourcing by leveraging digital tools that tag suppliers as minority-, women-, LGBT-, or veteran-owned, which makes it easy to find and track vendor certifications. That way, your buyers can quickly consider their options and purchase from a supplier that meets your organization’s diversity goals.

Auto-matching buyers with certified diverse suppliers

Automation technology uses procurement AI or rule-based tools to connect buyers to qualified, diverse suppliers by setting purchasing guidelines that nudge them toward those preferred vendors. This type of software reduces the pain points that manual processes create, such as delays or accidental errors. Auto-matching buyers and certified diverse suppliers also helps you better manage tail spend.

Reporting dashboards for stakeholders

Robust reporting dashboards shed light on your suppliers and their certifications, which helps your team get more control over which suppliers you purchase from and how to select new ones. A dashboard is also a straightforward way to demonstrate to stakeholders the impact of your supplier diversity efforts. That way, you can show real-time return on investment (ROI) and maintain support for the program.

Best practices for successful supplier diversity

As you work toward your internal goals or regulatory mandates, there are a handful of go-to strategies you can use to increase the odds of a successful supplier diversity program. By pairing your strategy with a solution like Amazon Business, for example, you’ll empower buyers to order from preferred suppliers while meeting your organization’s responsible purchasing guidelines. 

The following best practices can help you operationalize your supplier diversity plan:

Empower buyers with training and policy nudges

For buyers to purchase in compliance with your supplier diversity program, they need to know its goals and conditions. When buyers understand these areas, they are more likely to make purchases that help your organization achieve its goals. 

However, it must additionally be easy for buyers to comply with diversity purchasing guidelines. Overly complex or tedious purchasing processes can dissuade buyers from sticking to your purchasing guardrails. 

Luckily, your team can use procurement technology to curate a positive experience for your buyers and make compliance possible. 

Take Amazon Business’ Guided Buying (a Business Prime feature) as an example. It provides buyers with prompts and filters that surface approved and certified suppliers that meet their purchasing needs. This feature also saves teams time and reduces confusion that could arise from sourcing vendors without guidance. 

Amazon Business also aggregates data from all purchases within a shared dashboard. This real-time data fosters alignment among procurement, finance, and SRP teams, which is crucial to the continued success of any supplier diversity program.

Simplify supplier diversity with integrations

A quick win for your organization can be replacing manual tracking and spreadsheets with intuitive technology that identifies, sources, and manages diverse suppliers. But to ensure the success of such technology, it must integrate with your other systems.

Amazon Business does this by tagging suppliers to tell buyers which diversity certifications they possess at a quick glance. Your buyers will also have the option of filtering product results by certifications, which makes it easier for them to comply with internal purchasing goals and regulations. Both of these features automatically update supplier certifications, which reduces your administrative workflow when verifying a vendor and ensures your team is moving toward organizational goals with every purchase.

Another key part of simplifying diverse supplier selection is monitoring their performance. Amazon Business Analytics helps your team identify the highest-performing diverse suppliers so you can consider their reliability when choosing one to work with. Vendor performance also indicates the potential for a long-term partnership. From the data, your team can understand if the potential supplier partner maintains operations that promote scalability and collaboration in a way that supports organizational growth for both parties. Analytics provide insight into a vendor’s preparedness for this kind of operational acceleration and partnership potential.

Use transparent reporting to track progress

Analytics provide concrete proof that your supplier diversity program is making a positive impact. These insights give you crucial visibility so you know where to make adjustments to your strategy and when. But visibility is also important for maintaining leadership support and proving ROI, both of which are critical to gaining executive buy-in on the program.

To have this data on hand, your team will need robust technology that’s able to extract spend insights from across your operations and consolidate it. To help teams accomplish this, Amazon Business offers Spend Visibility (a Business Prime feature). This feature automates diversity spend tracking and collects the data across categories and business units into an easy-to-read format. That way, you know precisely how you use every dollar and if that spending aligns with your supplier diversity objectives.

As a general rule of thumb when setting these goals, focus on measurable KPIs, such as percentage of maverick spend, number of certified suppliers that you onboard, and Tier 2 supplier participation. Each KPI illuminates part of your process and program maturity. 

For example, by tracking your Tier 2 suppliers, you’ll gain insight into your Tier 1 suppliers’ supply chain. This knowledge enables you to extend diversity expectations to your prime contractors, thereby instilling responsible purchasing guidelines from a product’s origin to destination for every purchase. To make sure this information is readily available, your team can record it in a robust reporting dashboard. Doing so simplifies sharing your progress with leadership, SRP boards, and auditors, which builds accountability and helps sustain momentum.

Assess maturity and scale your program over time

A good supplier diversity program grows with your organization. Yet, as your plan ahead for program long-term growth, you must first know your organization’s current maturity. You can do so using this three-stage maturity model:

• Foundational: As a baseline, your team needs to implement procurement technology to record supplier performance, monitor spending, and improve network visibility.
• Developing: Once you have a firm grasp on your network, the next step is leveraging automation to streamline processes. Automation makes enforcing your purchasing mandates easier.
• Advanced: The final stage includes fully integrating all your procurement systems and implementing Tier 2 tracking. These two steps will grant you even more control and visibility over your operations.
   

As you determine your network’s current maturity, it’s important to think of supplier diversity as a long-term, scalable journey. For it to grow with your organization, your team needs to monitor, track, and assess diverse supplier data often. That way, you can make sure it always operates in a way that supports your organization’s maturity objectives and adheres to compliance mandates.

Ease supplier diversity with Amazon Business

With the right approach, a supplier diversity program can help you achieve your responsible purchasing goals and build a more resilient supply chain. Your team can increase the odds of a successful supplier diversity program when you connect your strategy with an agile procurement solution.

The key is implementing a solution that simplifies supplier diversity rather than adding complexity, and Amazon Business offers features to assist with this. From real-time supplier certification tracking to robust analytics dashboards, this solution can support your supplier diversity program while remaining flexible so it can scale with your operations.

Supplier diversity doesn’t have to be complex. With the right technology, your team can make inclusive sourcing second nature. To learn how, contact Amazon Business today.