Benefits of a Diverse Supply Chain

31 Mar 2023

Benefits of a Diverse Supply Chain

A growing number of companies are realising the value of having diversity in their supply base and procurement teams are ideally placed to help affect this change. They are in a prime position to help set a diversity policy, drive it forward and gather the metrics and measures needed to evidence success and maintain momentum. Those who are already demonstrating good or leading practice in this field are not only winning awards for their work driving economic impact and empowerment in underrepresented communities, they credit these programmes with helping to increase their own company’s competitive advantage. If you get supplier diversity right it can drive revenue growth. If not, it can destroy your reputation. According to Minority Supplier Development UK (MSDUK), which @ Alexander Ash is a member of, less than 1% of corporate spend currently goes to the minority community.

The accepted definition is of an organisation that is at least 51% owned and operated by a group or individual that is traditionally part of an under-represented or under-served demographic. This includes Indigenous people, women, veterans, people with disabilities, and those from ethnic minorities – with what constitutes an ethnic minority group varying from country to country.

The way the Chartered Institute of Procurement & Supply (CIPS) puts it, the most successful businesses know that by creating diversity in their supply chains – as well as in the workplace – they can unlock innovation and agility, and improve their ethical credentials.

@ Mayank Shah, founder and CEO of @ MSDUK, agrees: “University students attending careers fairs now ask far more questions ‘Why and how businesses should focus on supplier diversity’: than the generation before them about how employers make a difference. They demand action and evidence of serious commitment.” Shah says when people ask him about the case for including minority businesses, he asks the counter question: ‘What is the business case for exclusion?’ In the UK alone, one in six businesses are minority-owned, Shah says. This covers three million people, which accounts for 10% of the UK’s workforce and contributes £78bn to the British economy. “In Europe there are more than 800,000 minority-owned businesses. And not all are small companies. Around 8-in-23 of the UK’s unicorns [privately owned firms that reach a valuation of $1bn] are founded by ethnic minorities,” he adds. The power of procurement means that money spent wisely can have a much broader impact.

Shah believes the pandemic has helped to highlight that change is needed: “People saw deprivation in ethnic minority communities on their TV screens and realised that they could make a difference through procurement.” An increase in legislation designed to boost commitments to improve social and environmental outcomes is also having an impact, but it will take time to alter a decade-long trend of supply base consolidation designed to cut costs.

Diverse sourcing is a business and social imperative that’s good for the top and bottom line. It boosts resilience, creates value, and shows your company is serious about its responsibility to make a positive impact.