Supplier Diversity: Why it Matters
When you shopped for the holidays in the last few months of 2017, did you think about the nuances of supplier diversity? Most of us did not, of course. Yet where we bought gifts for our loved ones — clothes, toys, electronics, books, accessories, tools, perfume, and even gift cards for massages, movies tickets or restaurants – has a critical impact on the economy. All of these items came from suppliers – the companies and individuals who sell their goods and services to organizations and retail stores.
Department stores and retailers buy from manufacturers. Grocery stores buy from farmers and food distributors. Your corporate office buys its office furniture and office equipment from suppliers. Suppliers are the backbone of commerce. In fact, without a healthy and diverse community of suppliers, our economy would suffer greatly.
So what is supplier diversity?
Supplier diversity is a proactive initiative that organizations use to ensure they are considering all types of suppliers from which to buy goods and services for their operations and customers like you and me. Diverse suppliers are small businesses and businesses owned by women, minorities, veterans, and people with disabilities, LGBT and other historically disadvantaged vendors.
What prompted the creation of the term “supplier diversity”?
The practice of supplier diversity stemmed from necessity. During World War II, Congress passed legislation to enable small manufacturing plants the opportunity to be considered to win bids to produce badly needed war products, and subsequently passed legislation that continued similar benefits during peacetime. Further iterations were created over the years, and in 1953, Congress created the Small Business Administration (SBA), which has since furnished millions of loans, loan guarantees, contracts, and other forms of assistance to small businesses.
It was not until 1969 after much civil unrest, protests and deaths of Malcom X and Martin Luther King Jr. that President Nixon signed Executive Order 11458, which focused on developing a national program for federal agencies to seek to actively pursue business opportunities with minority-owned business enterprises.
It’s from that executive order that successive federal government acts were passed such as the Federal Acquisition Streamlining Act of 1994, which included small businesses owned and controlled by women within the goals for awarding procurement contracts to small businesses, and the HUB Zone Empowerment and Veteran’s Entrepreneurial & Small Business Development Acts in the late 1990’s, which focused on awarding contracts to HUB Zone and Veteran and/or Service Disabled Veteran-owned companies. All of the above legislation was passed to ensure that small and diverse businesses are provided every practical opportunity to participate as viable suppliers in our government and marketplace.
Why is supplier diversity important to you and your organization?
According to the SBA, small businesses make up 99.7 percent of U.S. employer firms. They also comprise 64 percent of net new private-sector jobs, 49.2 percent of private-sector employment, 42.9 percent of private-sector payroll, 46 percent of private-sector output, 43 percent of high-tech employment, 98 percent of firms exporting goods, and 33 percent of exporting value.
Without small and diverse businesses playing an active role as strong suppliers of goods and services in the U.S. marketplace, our economy would face serious decline. The jobless rate would exponentially increase and innovation would deteriorate. Organizations that support supplier diversity and small businesses show their understanding of the great impact that these businesses have not only on the U.S. economy, but also on their organizations as a whole. These organizations are able to provide the best and most competitive products and services to their customers and improve the efficiency of their operations. They are also able to tap into and understand new market opportunities where they can promote their brand, products and capabilities.
What are some ways you can support Supplier Diversity?
You don’t have to be a corporate or government buyer to support supplier diversity. Here are some simple ways you can show your support for doing business with small and diverse companies:
- Reach out to small businesses in your neighborhood when you’re looking to purchase items or services for your home
- When shopping for office products from major office supply stores catalogs, look for products that are manufactured by small and/or diverse businesses
- Publicize and provide small and diverse-owned businesses a chance to bid on your upcoming work related projects
- Donate your time or resources to mentor small and diverse businesses
- Ask your larger suppliers to subcontract or hire small and/or diverse businesses where possible
- Attend small and diverse business networking events in your city to meet and engage with the owners of these businesses and learn their stories (you might just catch the bug to start your own small business!)
- Sponsor small and diverse business events in your community
- Create a program or process within your company to proactively provide opportunities to do business with small and/or diverse businesses
Have any further questions about supplier diversity? Please contact Lissa Miller, First Vice President – Supplier Diversity at SunTrust Banks, Inc. at firstname.lastname@example.org.