The importance of supply chain diversity is yet another lesson Covid-19 has taught businesses over the last eighteen months or so. Before the pandemic wreaked havoc on supply chains, many businesses confidently narrowed their supplier numbers to cut costs and reduce admin burdens. However, as a new virus rapidly swept across our connected planet and countries forcefully locked down, these isolated supply chains were significantly disrupted.
However, pandemics are far from the only threat to supply chain dynamics. No-one can predict the future, but wars, political unrest and climate change all have the potential to disrupt supply chains across the globe. And it is not merely the threat to supply chain logistics that businesses need to consider when diversifying their vendor options.
Start-up businesses are often at the forefront of innovation and incorporating them into supply chains can deliver numerous benefits, offering new innovations, transformative business solutions, technological advancements, and new approaches to traditional product offerings. Moreover, supply chain diversity can encompass social responsibility into procurement, supporting smaller businesses or not for profit organisations to encourage greater socio-economic mobility and equality across communities.
Diversity and inclusion policies are becoming an increasingly important part of many organisations’ HR strategies. In recent years, the term ‘supplier diversity’ has become industry-speak for inclusive procurement, defined by the Chartered Institute of Procurement and Supply (CIPS) as ‘a proactive activity undertaken by contracting authorities to ensure that all relevant potential suppliers have the fair and equal opportunity to compete for new business opportunities. New, innovative suppliers can easily be missed if procurement restricts its sourcing efforts to its usual pool of providers.
Actively encouraging supply chain diversity can open businesses up to fresh ideas, more flexibility and even, in some cases, better customer service. Smaller upstarts are often keen to impress and know they must differentiate to compete against larger more established vendors. Without a diverse supply chain, businesses are limited; organisations deny themselves access to the best suppliers, the best products, and exciting innovations. Furthermore, as consumers and the business community demand CSR from the organisations they buy from, partner with or supply to, inclusive procurement can help demonstrate a proactive commitment in support of this fairer and more sustainable business landscape.
Building a more diverse supply chain doesn’t need to mean to starting from scratch. Here are our seven top tips for building a more diverse supplier base:
- Review and monitor all vendor agreements – does one particular supplier dominate in a specific category? If so, look to widen your options.
- Do your current agreements allow for increased capacity if there’s a short-term increase in demand? If not, how can you boost your options?
- Electronic sourcing tools help simplify and speed up the tender process making it easier for suppliers to respond and for procurement collect and manage responses from a wider pool of potential new vendors.
- Ask appropriate questions to uncover diversity and find out what the supplier can do to add value to your business.
- Review your current compliance requirements to check they aren’t putting unnecessary barriers in the way of attracting new suppliers.
- Consider offering extra support (such as pre-tender workshops) to new potential partners who may not be familiar with formal tendering processes and corporate contract arrangements.
- Choose automated tools that offer detailed reporting so it’s easy to get the data you need to make diversity-focused decisions.
Post-pandemic, businesses across the globe, and throughout a variety of industries, continue to battle with delays and disruptions to supply chains. Facing challenges such as the HGV driver shortage, Brexit and the blockage of the Suez Canal has brought attention to the dynamics of procurement and their supply base from consumers, business communities and the media. With all eyes on supply chains, it is now vital to diversify and challenge normative procurement practices.