The Proven ROI of Supplier Diversity

Bill Duggan:  How do you define supplier diversity?

Simona Rabsatt Butler:  Supplier diversity is a business strategy that encourages a diverse partner ecosystem in the procuring of goods and services that support the fiscal and business goals, innovation, growth and evolution of any business.  Supplier diversity strategies encourage the use of companies that are 51 percent owned and operated by a woman, ethnic minority, veteran, person with a disability, or a member of the LGBT community.

Duggan:  What segments does supplier diversity typically cover?  Are there any emerging segments now being covered?

Rabsatt Butler:  Diverse partners can be found in a myriad of markets and/or business areas.  The challenge is often finding them and/or their ability to manage the size and scale of most large companies.  Just like areas of business, there are pockets of industries that have little or no diversity, but there are opportunities to diversify if we think about things differently and consider joint venture opportunities.  Wherever there is growth, new ideas and innovation, there is sure to be a diverse supplier in the mix or on the horizon.

Duggan:  Does supplier diversity have proven ROI?  If so, how do you know?

Rabsatt Butler:  It does, and each company measures that ROI differently, based on their business.  Whether first tier (direct) or second tier (indirect) spend, measuring is a part of the strategy.  Ernst & Young shared a study where 54 percent of companies claimed a "strong link" between supplier diversity and new business development.  Companies with diverse partner business strategies claim around $3.6 million in re-investible funds for their company bottom lines for every $1 million spent in procurement costs.  The return on cost (ROC) generated for procurement operations by diverse partners over average partner performers EY reported as 133 percent.  Second tier spend is an evolving ROI measurement and conversation.  For partners that provide goods or services, there can be a direct link between a company's supplier diversity strategy and a partner's ability to win business.

Duggan:  Is supplier diversity typically led by sourcing or the multicultural marketing team or both?

Rabsatt Butler:  Different companies have this team and/or lead in either of those business areas or they can sit within the diversity and inclusion team that may sit within an HR group or on its own.  I sit within the accounting team, within a centralized procurement team.  I have a dual function leading marketing procurement and supplier diversity.  I connect cross-functionally with team member resource networks, Hispanic marketing efforts and others.  I aim to work this strategy into the cultural footprint of the company's DNA.  By doing so, it becomes an important business strategy that can become an assessment factor for potential team members giving our business another element to attract top talent.

Duggan:  Today, many ANA member companies are challenged with the diversity of their own internal teams.  Why is it important then for ANA members to also be concerned about the diversity of their suppliers?

Rabsatt Butler:  ANA member companies shouldbe concerned about it all -- diversity and inclusion, multicultural marketing and supplier diversity. What it means to be diverse is ever-changing in our society and that change equates to your consumer.  The browning of America, majority minority by 2041, multiethnic unions, poly-culturalism, the state of America today, it all matters, and it matters to a company's bottom line.  I can't say it any better than P&G's Marc Pritchard: "If you are not doing multicultural marketing today, then you're not doing marketing."  It is the cycle of company success; your company should reflect your consumer in as many ways as possible -- employees, partners, product, advertising, etc.  Plus, when you support a diverse business you are supporting your community.

Duggan:  Are there any unique considerations for supplier diversity in marketing?

Rabsatt Butler:  I see supplier diversity as I see hiring diverse talent.  We all have unique and individual qualities, backgrounds, knowledge, experience, etc. that make us who we are, but core skills against a job or service is the level playing field.  I either have the skill or service you need or I don't.  I either can manage your scale or I can't.  My diversity shouldn't matter.  I think today companies are looking for the next big thing but aren't taking a moment to determine if they are overlooking a potential win for growth and evolution by diversifying in the multitude of ways you define diversity.  I may over simplify, yet if I have the skill or service you need, hire me and compensate me fairly.  If I don't, figure out if there is a way to help me grow and evolve.  Let's find ways to measure the ROI, understand what discounts or added value I bring to the table and let's grow and innovate together.

Click the social buttons above or below to share this story with your friends and colleagues.

The opinions and points of view expressed in this content are exclusively the views of the author and/or subject(s) and do not necessarily represent the views of MediaVillage.com/MyersBizNet, Inc. management or associated writers.