Wanting to implement a supplier diversity program to increase diverse spend and actually doing so are two very different things. While 70% of procurement professionals globally say they hold supplier diversity as a high or medium priority within their organizations, 63% admit they have yet to begin or have only just begun these initiatives. These numbers—and the amount organizations are committing to diverse spend—continue to vary within different geographical regions.
No matter the location or industry, supplier diversity is vital to an organization’s procurement strategy. It’s not just the right thing to do, but it is good for business because it enables teams to meet ESG commitments for shareholders and consumers, improves agility to navigate inflation and other disruptions, and allows for greater innovation, increased competition, and improved brand reputation.
Why does starting a supplier diversity program seem to be so difficult? The short answer is that teams lack the data needed to successfully implement and grow these programs. Without strong data to build insights, procurement teams will struggle to identify current and potential diverse suppliers to achieve spend goals.
Let’s take a look at current challenges and the power that better supplier data can have in driving supplier diversity programs.
Software doesn’t fix supplier data
For a while now, procurement professionals have been sold a lie that software itself can improve access to strong supplier data. Unfortunately, this is far from the truth. While implementing new software can help in managing data, it rarely has any positive effects on the quality of the data itself.
Manual management leads to poor data quality
The way the architecture of procurement software currently stands, teams will implement new programs that use third-party services to manually manage and cleanse supplier data. These processes often put the burden on suppliers to update multiple portals that don’t connect to each other. What’s more, the data fed into these softwares has usually been outsourced for a one-time enrichment process that results in momentary accuracy that quickly declines.
As long as manual efforts are still being made to gather and manage supplier data, data will quickly become stale, leaving teams unable to leverage the right information to establish or grow effective diversity programs.
Systems don’t connect with each other
Procurement teams typically have access to the right data needed to build and grow supplier diversity programs, but in many cases, there are separate portals that house diversity data, preventing diversity from becoming a core part of the data set.
Both sides face challenges
Supplier diversity, for all the good that it does, continues to pose several challenges for both procurement teams and suppliers. Only when these challenges are addressed by using stronger data can procurement professionals work to drive diversity initiatives.
On the procurement side
One of the biggest issues buyers face when implementing diversity strategies is a reliance on suppliers to manually update portals. As mentioned above, many small and diverse suppliers don’t have the wherewithal to maintain dozens of portals on their own, so they simply don’t—meaning buyers are left with outdated, inaccurate data.
Due to a lack of strong supplier data, there is also often less visibility into qualified and potentially-qualified diverse suppliers. This applies to both Tier 1 and Tier 2 suppliers and could result in buyers leaving thousands, if not millions, of dollars of diverse spend on the table.
Manual reporting efforts also force buyers to wait weeks before they gain insight on diverse spend. Not only does this result in an inability to leverage these insights to be used in strategic sourcing decisions, but it also causes procurement teams to miss opportunities to share successes with stakeholders.
On the supplier side
Diverse suppliers have to jump through a lot of hoops to prove they qualify as diverse—and earning this certification requires a lot of time, money, and resources that many small businesses don’t have to spare. This has resulted in many suppliers who technically qualify remaining uncertified. Since buyers tend to keep their sourcing efforts limited to certified businesses, countless suppliers miss out on business opportunities.
Additionally, for those who do go through the process of getting certified, it may take years before reaching a positive return on investment. While the time frame in which diverse suppliers can vary by industry and individual business, this waiting period can be discouraging after putting in the effort to receive certification. Overall, there is no definitive way to prove diverse suppliers will receive new business after certification, adding to the dilemma of whether or not to pursue it.
The future of supplier diversity
As it stands now, supplier diversity is a challenge in itself for procurement teams and suppliers alike. However, those challenges can be addressed by moving away from traditional methods of supplier data management that revolve around individual supplier portals. Taking a data-first approach and recognizing the key role dynamic supplier data plays can allow procurement professionals to have a much easier time achieving supplier diversity goals.
At TealBook, the future of supplier diversity looks a lot brighter and focuses on four key factors.
1: Make diversity accessible
It’s time to democratize certification and make it more inexpensive for suppliers to achieve. Doing so gives organizations access to 100% of the supplier ecosystem and helps create more business opportunities for both buyers and suppliers.
2. Capture spend in real-time
Better reporting functions can allow teams to see their small and diverse spend in real-time, track key insights to adjust spend as needed, and share improvements over time with stakeholders.
3. Integrate suppliers into all functions
In order to drive diverse spend, small and diverse suppliers need to be included in all sourcing decisions, not just focused solely on diversity initiatives.
4. Increase visibility across tiers
The best supplier diversity programs will be founded on data that gives them visibility across Tier 1, Tier 2, and Tier 3 suppliers as well as the impact their initiatives are having on the world around them.
Drive supplier diversity with TealBook
TealBook gives you the dynamic supplier data you need to begin or expand a diversity program, discover diverse suppliers and generate supplier diversity reports in a single click.
We have enabled current customers to expand their diversity programs and incrementally increase their diverse spend without relying on net new suppliers—and we can help your organization do the same. See the real results one customer received within the first year.
If you’re ready to achieve your supplier diversity goals, reach out to our team today!