There is a lot of talk happening in Southeastern Wisconsin about minority participation in business contracting. But WHY are these conversations important? Business contracting that includes minority participation allows diverse groups to participate in the global marketplace and its economic expansion. This is called Supplier Diversity. According to Felecia Roseburgh, Supplier Diversity Business Expert, “To implement a successful supplier diversity initiative, a company must first understand what Supplier Diversity is, and then determine why it will be important to their business. In today’s highly socialized climate, if a company does not have a business case for Supplier Diversity they have already missed the train and are running to catch up.” A company’s supplier diversity initiative, or lack thereof, can have a significant impact on its sales, profitability, and market share.
Supplier diversity is a business strategy that opens the doors of commerce to business owners of ethnic groups and other federally protected classes (i.e. women, the disabled, veterans, LGBT, etc.) that have historically had a difficult time accessing viable business opportunities. These types of firms are all classified as diverse. Debate may be had amongst everyone as to why access to opportunities for ethnic groups and others is still challenging, but one thing we know for sure is that companies that do business with diverse firms are more profitable than companies that do not. (https://gbr.pepperdine.edu/2010/08/supplier-diversity-and-competitive-advantage-new-opportunities-in-emerging-domestic-markets/). According to Lindsay Clark, referencing a 2015 study by The Hackett Group on average, supplier diversity programs add $3.6 million to the bottom line for every $1 million in procurement operation costs,” “The high return on investment is undeniable… A positive ROI that boosts socially conscious reputation should push supplier diversity to the forefront of business strategy.” (https://www.diversitybestpractices.com/news-articles/profit-supplier-diversity#_edn1)
Why does such as positive ROI happen when you do business with a diverse firm? Here’s the science: doing business with diverse firms creates economic value for the community as a whole. Because most diverse businesses are also small businesses, they are a major contributing factor to economic recovery and sustainability of their communities. Showing a company’s commitment to doing business with diverse firms contributes to that ROI, but it also drives competition between the company’s existing and potential vendors, which may result in a lower cost of doing business, which contributes to a company’s profitability. Many diverse firms that provide products and services to larger companies are actually able to provide a high quality product that companies are looking for for significantly less (sometimes up to 20%). Let’s take The Business Council, the affiliate of the MMAC that focuses on making the connection between ethnically-diverse businesses and local corporations. Since TBC’s inception, $165 million dollars of spend can be tracked between local corporations and TBC members. This may not be huge as the national average is about $400 billion the last time it was tracked, but the ability to allow ethnically-diverse businesses to grow in Southeastern Wisconsin has had a major impact on the community at-large. Not only has supplier diversity allowed many diverse firms in Southeastern Wisconsin to grow, it has also contributed to a growing workforce and sustainability for many areas southeastern Wisconsin, with the opportunity for more growth. Should you have any questions about how to diversify your supply chain or are a diverse business looking for additional opportunities, please give TBC a call at (414) 287-4172.
