Using a Supplier Enablement Platform to Support Your Supplier Diversity Strategy
Supplier diversification means much more than an industry-specific way of saying “don’t put all your eggs in one basket.”
If you’ve been in the world of manufacturing, distribution, or retail for any amount of time, you likely already understand the importance of your supplier relationships. You may have even begun a supplier diversification effort in the wake of major shutdowns in top supply regions.
That said, building a successful diversity strategy has never been more challenging, especially in the face of widespread, ongoing supply chain disruptions and new business trends.
Whether you’re looking to learn more about supplier diversity or to find better, smarter ways to grow a diverse supplier base, the best place to start is by clarifying what supplier diversity means and why it’s important.
What is Supplier Diversification?
No two suppliers are the same. That’s true on several levels. Different companies come in different sizes, with different modes of communication, different locations, different legal and compliance requirements, different routes, and different goods. Supplier diversification simply refers to the conscious choice you make in choosing to expand your suppliers to include a wide range of differing characteristics.
It may mean choosing to work with large as well as small and medium-sized businesses. Or choosing to work with businesses from a variety of regions instead of just one. The idea is simple, but there’s a lot to consider when making these decisions, starting with the reasons behind doing so.
Benefits of Increased Supplier Diversity
Not unlike diversifying your investments, choosing to diversify your suppliers is crucial for two main reasons - flexibility and risk reduction.
Firstly, it offers you the ability to be more flexible. You have greater access to different products from different suppliers or the same products from different suppliers.
Maybe one supplier has “Product A” at a lower price but with longer lead times. Another has Product A for a higher price, but you know you will receive it in two days after placing the order. Having multiple options strengthens your business and that flexibility leads to greater savings, more profit, and better customer satisfaction.
The second major reason you should diversify your suppliers is to mitigate risk, a crucial aspect of successfully running any business. This point has become especially important in the face of COVID-19 and unprecedented, ongoing supply chain disruptions.
Greater diversity across your suppliers gives you more options, meaning you’ll be more insulated from disruptions, like:
- Natural disasters
- Extreme weather
- Health/outbreak disruptions
- Financial changes
- Labor actions
- Ownership changes
- Trade or tax policy changes
- Stock shortages
Should one line of trade become unavailable due to extreme weather, or one supplier unable to fulfill orders due to materials shortages, you’ll still be able to keep your business running efficiently. You never want to have a single point of dependence in case it fails.
With reduced risk, increased efficiency, and greater profits working together, your business is immediately more competitive in your market. At the same time, your business also becomes more attractive to potential shareholders and investors.
Diversity as a Social Responsibility
In addition to the financial and logistical benefits of supplier diversification, expanding your supplier pool is also a great way to support your corporate social responsibility goals. For example, you may use supplier diversity to start trading with sustainable brands in addition to more traditional suppliers. Or, you can focus on adding SMBs, minority-owned, or women-owned suppliers to your base.
A diverse supplier pool enables you to support new businesses, small businesses, or even businesses with new practices, without drastically increasing supply chain risks. It benefits both you and your community and can even make your company better-liked by consumers.
The Challenges of Growing Your Supplier Base
Taking all this information into consideration, you can start to build your criteria for your first step of expanding your supplier base. Finding the companies that meet your criteria will take research, especially outside your local region.
But growing your supplier base is easier said than done, mostly because even after you find the right suppliers, there is a lot that goes into (or, at least, should go into) the onboarding process. A typical supplier onboarding program might include:
- Identification of security risks. In 2016, businesses spent an average of ten million dollars in response to vendor-related security breaches. Better to get ahead now than pay later.
- Providing guidance on acceptable communication methods and compliance requirements
- Set-up and testing if you have a supplier portal or trade via EDI
In some cases, partners may be onboarded quickly. But without a proven process or the right tools, it could take months on end.
How would your supply chain be affected by a six-month lead time to trade with a new supplier? That’s six months of downtime not getting your product to market or, worse, not getting the raw materials to manufacture your product in the first place.
Another issue you’ll find with some vendors is different levels of technical maturity. Some of them are comfortable with the latest tech, and some prefer to stick with landlines, fax machines, and email. Some can’t afford, or aren’t big enough, to warrant a complete EDI software solution. And while a diverse supplier base has significant benefits, the workload of managing different communication methods and document formats can quickly become overwhelming and error prone.
If you’re struggling with these supplier onboarding challenges, a supplier enablement platform can be the tool that takes your supplier diversification to the next level.
How a Supplier Enablement Platform Can Help You Manage Suppliers
A supplier enablement platform simplifies managing supplier relationships. Vendor onboarding can be quite the puzzle and this platform is designed to streamline every piece of it.
This platform can be used to ensure that compliance checks are met, guidelines are understood, and that every piece of communication is available in one place. For example, the TrueCommerce platform plus service model is designed to streamline both onboarding and management by way of standardized information sharing. No matter how large your supplier pool becomes, it’s made to be integrated with your systems to process documents and share information more quickly.
Here are three specific areas in which supplier enablement helps streamline the supplier diversification process:
By streamlining compliance and legal checks, and making all documentation available in one place, the problem of onboarding confusion is reduced. This prevents onboarding steps from getting caught up in going from the compliance team to the legal team, losing track of progress and accountability, and so on.
Everything is transparent to whom it needs to be, making the progress visible and clear at all times. Not only does this make things easier and faster for your team, it also opens up a solid line of communication with your vendor.
And if you can onboard faster, you can get your product to market faster, so everybody wins.
Consolidated, Electronic Communication
Keeping track of every invoice from or to every partner is no small task when done manually. Diversification is great. Having a different method of sharing documents (invoices, purchase orders, tracking information, etc.) for each vendor is not.
However, you can use a supplier enablement platform to integrate EDI (electronic data interchange) capabilities so you can easily share between vendors using transaction codes. EDI vastly simplifies and unifies communication but the fact is, not every vendor uses EDI.
A supplier enablement platform can offer a range of connection options, all of which convert to EDI and can be accessed by the vendor through an easy-to-use web portal.
Or you have the option to outsource your onboarding tasks, freeing up your IT (and other) teams to focus on more value-added actions. A firm will act as an extension of your team to handle the more tedious side of things as they focus solely on onboarding. This can increase the speed and accuracy of onboarding and ensure a greater success rate.
Choosing a fully managed service like TrueCommerce also means you’ll get access to in-depth EDI reporting analytics, allowing you to focus on specific key performance indicators (KPIs) like:
- On-time fulfillment performance
- In-full performance
- Compliance performance
These help your business understand supplier performance and costs to make smarter, more informed purchasing decisions.
Want to Learn More About How Supplier Enablement Platforms Can Help You?
If you’re in the process of growing a more diverse list of suppliers or you are trying to manage the ones you’ve already partnered with, a supplier enablement platform can reduce your team’s headaches. Want to learn more? Reach out to us today to speak with a supply chain expert and schedule a free demo of our platform.
About the Author: Ben Taylor has held a variety of roles on both the vendor and client side under the banner of digital commerce / digital enablement for more than a decade. Currently, he shares his expertise with customers and prospects as a Pre-Sales Consultant. Ben has deep experience across the procurement, sale and implementation of EDI, master data management, B2B ecommerce and Omnichannel trading solutions, including a wide range of use cases. He's passionate about identifying and installing digital solutions that deliver tangible commercial benefits and oil the cogs of commerce.