Intro to Supplier Diversity
Many of the suppliers EventMover partners with are new to Supplier Diversity and unaware of the important role it plays in their clients’ Tier I and Tier II spend goals. To help familiarize them with government and corporate supplier diversity initiatives, we’ve compiled the following information to explain:
- What Supplier Diversity Is
- The Benefits Of A Diverse Supply Base
- How Diversity Efforts Effect Prime Suppliers
- How To Help Your Clients Meet Their Tier I and Tier II Spend Goals
A Changing Landscape
One of the most prominent changes facing business in the U.S. today is the rapid growth of the minority population and its implication for business success.
Over the past decade, minority-owned businesses have grown at approximately double the rate of all firms in the U.S. economy. Currently, there are over 2 million minority firms in the U.S. generating an excess of $205 billion in sales annually. According to the U.S. Census Bureau’s 2002 Survey of Business Owners (SBO), 50 percent of the growth of all firms between 1997 and 2002 came from minority business alone.
Government agencies and corporations have recognized diverse businesses as an under-tapped force that can reignite the economic expansion, and are implementing measures to diversify their supply chains through Supplier Diversity.
What Is Supplier Diversity?
Supplier Diversity is part of the Purchasing Department in government agencies and corporations. Their mission is to ensure their organization meets its diversity spend goals by buying goods and services from small and diverse businesses.
How Does This Affect Prime Suppliers?
Procurement and Supplier Diversity Departments at government agencies and corporations are requiring many of their prime contractors to implement programs to diversify their own supply chains, in order to meet their own mandates or federal supplier requirements.
What’s The Benefit?
Aside from the “social good” of doing business with diverse suppliers, companies actively seeking out such partnerships have reaped the financial benefits.
1. Greater Savings
According to a study done by The Hackett Group, companies focusing more on supplier diversity generate up to 133% higher return on investments than organizations that don’t.
One of the contributing factors is that minority suppliers tend to be leaner – having more agility and lower operational costs, which allows them to pass the savings on to you.
2. Competitive Advantage
As the demographics in the U.S. continue to change, minorities are making up a greater portion of the population. Companies that want to remain relevant need to learn to appeal to different types of people.
If your company chooses to work with a more diverse group of suppliers, it will be in a strategic position to relate to a more diverse customer base.
Your company will become familiar to a more diverse group of communities, giving you a competitive advantage over companies who do not embrace supplier diversity.
Diverse or diversity refers to all minorities and women. The term “minority” is used to define a group that represents a smaller percentage of the total population than other groups or groups. In the U.S., a minority is a person who is
- American Indian or Alaskan Native
- Black or African America
- Native Hawaiian or Other Pacific Islander
- A person whose ethnicity is Hispanic or Latino
Women, Veterans and Service Disabled Veterans of the U.S. Armed Forces are also included in the disadvantaged category for diversity certification.
What Qualifies A Diverse Business Owner?
51% of the business or more must be owned and controlled by minorities or women.
What Is A Diversity Certificate?
Many state, federal and third-party agencies have programs that are used to certify diverse suppliers. This formal review process is designed to prevent fraud and ensure that only businesses who meet the minimum eligibility criteria are awarded diverse certification. Once a business has successfully completed the stringent process, it is awarded the certificate to prove it is diversity owned.
In many cases, government agencies and corporate purchasing activities require spending a certain percentage of their purchasing dollars with certified-diverse suppliers to qualify for grants and bid opportunities for contracts.
How To Help Your Clients Meet Their Diversity Spend Goals
In order for diverse spend to count, the suppliers you incorporate into your supply chain must be certified. There are approximately 16 categories used to identify diverse businesses, but the most common examples include:
- Minority Business Enterprise (MBE)
- Woman Business Enterprise (WBE)
- Small Business Enterprise (SBE)
Organizations such as the Women’s Business Enterprise National Council (WBENC) and the National Minority Supplier Diversity Council (NMSDC) focus on assuring that businesses are appropriately categorized by offering third-party certification services on behalf of private industry.
Tier I & Tier II Spend
As companies realize the benefits of Supplier Diversity, more are moving to incorporate both Tier I and Tier II spend requirements to grow their diversity programs.
A Tier I supplier spend represents the direct relationship between a company and its diverse supplier.
A Tier II spend counts for when a company’s direct supplier contracts with other diverse suppliers and reports that spend back to the company.
How EventMover Can Help
EventMover has been certified as a Woman’s Business Enterprise (WBE) through the Women’s Business Enterprise National Council (WBENC) since 2011. This means, we are legally recognized as a minority business to corporations and government agencies.
Our WBE certification assists our customers in meeting their Tier I and Tier II spend requirements by providing their purchasing agents a means to track purchases made through a woman-owned company.
We work directly with our clients (as a Tier I supplier) as well as indirectly through their primes (as a Tier II supplier) to ensure we provide the best transportation solutions to meet their specific needs.