Supplier Diversity As New Source Of Revenue

New research shows that that world-class procurement organizations that focus heavily on supplier diversity generate 133% greater return on their cost of procurement. A study done by the Hackett Group, reported that companies dedicate 8% of their spending to women-and minority-owned suppliers, and that these suppliers make up 9.7 % of the total supply base. Under a supplier diversity program, companies drive an additional $3.6 million to their company's bottom line for every $1 million in procurement operations costs according to the study.

"Many people will tell you that they don't use more minority suppliers because they can't afford to," said Hackett senior business advisor Kurt Albertson. "They automatically assume that supplier diversity programs are an administrative nightmare, a burden that increases spending. But that's simply not true. Companies that focus in this area, driven by a sense of social responsibility, government mandates, or a range of other factors, are just as able to run effective procurement operations as their peers that ignore supplier diversity."

In some cases adopting a diversity program creates a competitive advantage. "Top performers in this area often heavily promote them [supplier diversity programs], internally and externally, because they believe it's something their employees and customers care about. While the direct revenue impact of these programs is very difficult to measure, we've seen cases where companies directly attribute supplier diversity programs to specific improvements in market share," explains Chris Sawchuk, Hackett procurement practice leader.

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