The definition of supplier diversity and its function in the supply chain are a little different today. Introduced in 1953 alongside the establishment of the U.S. Small Business Administration (SBA), supplier diversity programs were created to aid small and minority-owned businesses in securing government and major corporate contracts.
Today, the SBA defines supplier diversity as, “an array of small business owners from all ethnic, racial, gender and disadvantaged groups providing products and services to government agencies, as well as major companies and corporations.” The spotlight on supplier diversity has grown in recent years due to increased attention on social inequality among minorities.
Many businesses and government agencies have responded by implementing supplier diversity programs in the face of the changing American demographic. Though there is some doubt among the populous if these programs are done correctly or act merely as “lip-service” to gain favor. That some companies are proud to promote their programs but refuse to show the benefits they may or may not reap.
That is an answer we can give.
Supplier diversity programs are not just about the “feel-good” press associated with progression. The benefits are not only visible but quantifiable and have been increasing since the establishment of SBA in 1953. It will continue to improve in the future as the U.S. demographic continues to change.
After the past few years of uncertainty and change, companies should be taking active steps to multiply their advantages. Implementation of supplier diversity programs and working with a diverse supplier does just that. Here are some of the benefits that come with embracing supplier diversity.
1. Access to New Relationships and Strengthening Old Ones
The world is becoming more diverse. The U.S. abundantly so. The U.S. Census continues to report raising percentages amongst minority groups with greater racial diversity amongst newer generations. This comes with unique perspectives, untapped regions, and lead generation.
As such, diverse suppliers deliver different experiences, thoughts, and approaches to the company while keeping the cost low. During periods of disruption, there is a tendency to lean on partnerships to make it through the worst. One key factor in the difference between diverse suppliers and larger prime suppliers is that diverse suppliers often form stronger relationships.
Small, diverse suppliers build strong partnerships within their supply chain through collaboration with their vendors and customers. This happens because diverse suppliers can navigate the market space easier than large original component manufacturers (OCMs) and sell to newer, untapped regions. Large OCMs can gain new audiences while diverse suppliers benefit from association with prominent OCMs.
Likewise, with diverse suppliers, whether they are small, women, or minority-owned, hosts of government contracts are often readily available. OCMs supply a portfolio of components and diverse suppliers can introduce them to markets OCMs had no way of entering before through these contracts.
As supply chains continue to face disruption in the shape of inflation, labor shortages, rising fuel costs, increasing market demands, and more, access to strong partnerships is needed to combat these problems. Diverse suppliers always work on maintaining a rock-solid relationship with their collaborative partners and always keep it in mind.
2. Increased Collaboration
Collaboration is inherent to the electronics industry and to a greater extent every industry. Supply chains exist due to a variety of factors, but in general, because the world is a global market and has been for decades now. Collaboration is where individuals or groups work together to achieve a business benefit. This business benefit does not have to be the same for each group collaborating.
Diverse suppliers are far more prone to collaboration than larger suppliers. Diverse suppliers are smaller and work with other companies synergistically for the greater good of both. Dr. Siqi Ma, Ph.D. a professor at the Department of Management at the University of Akron, found that gender-diverse workforces achieved higher rates of supply chain efficiency.
This collaborative advantage is described by the Harvard Business Review as “companies in different industries with different and complementary skills link their capabilities to create value for ultimate users.” Since diverse suppliers are often smaller collaboration is a necessity.
It just so happens that collaboration is a mutually beneficial relationship where both parties stand to gain from the other. Not lose.
3. Job Creation
Diverse suppliers have contributed in the past and will continue to do so in the future with job creation. 5 years after the Great Recession diverse companies created 72% of all new jobs critical to bringing back the U.S. economy. Diverse suppliers will be imperative during future shortages and global recessions to stabilize fragile economies.
“In 2008 diverse businesses created 2.5 jobs for every job created by a non-diverse firm,” said Neeraj Shah founder of Supplier.io a supplier diversity program. “Diverse companies are the fastest-growing group of businesses in the U.S. economy today. They are critical to tapping into a talent pool that can provide ideas, knowledge, skills, workforce, and ambitions necessary to create novel solutions in a changing economy.”
With job creation and access to untapped markets, diverse suppliers will be monumental in negating the effects Covid-19 had on the economy. Since the current crisis has brought the problems of reliance on offshore suppliers into the spotlight, domestic production will need to ramp up.
Diverse suppliers with their agility to navigate extreme market trends will be instrumental.
4. Competitive Advantage
Diverse suppliers are found to be more agile, creative, and quick to assess market disruptions with solutions. Most diverse suppliers are often smaller than non-diverse competitors, giving them greater flexibility to meet emerging market trends. Characteristics of good diverse suppliers show proactivity in improving current quality management and practices by becoming early adopters of innovative technologies. Something that takes longer adjustment periods in larger suppliers.
Diverse suppliers often have mixed identities in ethnicity, gender, and other factors that drive innovation rather than hinder it. These differences lead to unique techniques that often provide new solutions to reoccurring problems. Something that was necessary to combat the new challenges of the recent Covid-19 pandemic.
Pair that with collaborative advantage and new markets, diverse suppliers have a plethora of tools that make it possible to compete against larger, prime suppliers. Not only that, but diverse suppliers stand out among the competition. Consumers, even those in B2B supply chains, are more likely to buy from diverse companies as it reflects positively.
It shows a culture that embraces equality and helps sustain other supplier diversity initiatives. As more companies are likely to participate if they see a benefit in choosing a small, diverse supplier trumps a larger one.
Area51 Electronics Has That and More
As a small, disadvantaged business (SDB) and a minority business enterprise (MBE), Area51 Electronics has these rewards and more. Diverse teams outperform non-diverse ones by 35% and this team is no different. As an electronic component distributor that offers our own collaborative advantage, Area51 Electronics continues to find new ways to give our partners the best.
As an authorized and independent distributor, the quality and authenticity of each component ordered are assured. Since Area51 Electronics is a small team, we can tackle market shifts and oncoming shortages with speed and customization that larger organizations cannot. We are constantly innovating our quality management system guidelines and abiding by the latest methods of counterfeit mitigation.
You deserve authenticity and a supplier that has your back. Area51 Electronics has the experts and combined perspectives of many to provide you with just that.