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
• Cyberattacks
• 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.