7 Ways Supplier Diversity Can Boost your Profits

In the Australian context, it can be difficult to establish what the return on investment is of running a supplier diversity program. The program is sometimes viewed simply a cost borne by the organisation, without a thorough understanding of the ways in which it can grow revenue. The following article demonstrates seven ways in which a supplier diversity program can grow your revenue, build your brand and make your company more ethical.

In order for a supplier diversity program to be ‘worthwhile’ and sustainable over time, it will need to bring in more revenue than it costs. Luckily, Australian supplier diversity programs can and do bring in significant revenue. Here’s how;

1) Building government relationships:

Supplier diversity programs enhance an organisation’s ability to meet government policy requirements and divert spending without sacrificing profits or significantly increasing costs. Local, state, and federal Governments, as the biggest purchasers in Australia, have various programs and policies that encourage or mandate spending with Indigenous businesses. Active supplier diversity measures can increase the attractiveness of your business to government contractors, thereby providing you with competitive advantage in that market. Given that a strong relationship with government is integral to building contracts, being able to confidently say that your supplier diversity program diverts government spending into other areas will enhance your relationship with such a buyer and will make it easier for that buyer to choose your organisation over another.

2) Increasing your competitive value:

Investing in a supplier diversity program can increase the market appeal of your business, when compared with competing organisations that have a weak or non-existent supplier diversity initiative. In the context of a competitive Australian market place, where it is often just a few organisations vying for the majority of the market, being seen to be more inclusive, ethical, and responsible than your competitors can be the determining factor in winning market share. It can also help when targeting services and products to the diverse purchasing market. Distinguishing yourself as the leader in supplier diversity and incorporating this into your brand strategy may help to build your competitive advantage within the marketplace.

3) Appealing to purchasers from advocacy groups:

Organisations have to adapt to a world where appointing people from minority backgrounds and women to positions of power is necessary (and sound) business practice. As this happens, the businesses, and its internal departments, increasingly reflect the values and principles of these minority groups. Procurement is not exempt form this trend.

Leaders in procurement, who are – for the reasons above – now more interested in diversity measures, are looking to purchase from businesses with strong supplier diversity programs. If your organisation sells B2B, then a healthy supplier diversity program will increase your chances of winning contracts with this new wave of ethically minded procurement teams.

4) Increasing customer satisfaction:

Another way that an enhanced supplier diversity program translates to increased sales is by raising the proportion of B2C or B2B sales revenue from customers who have an interest in supplier diversity or in markets where ethnic identity is integral to shaping consumer demand. Indigenous suppliers can help you serve the growing Indigenous market and can also help you to appeal to customers concerned with diversity, ethical business practices, and social justice. Through this process customer satisfaction will be increased, diversity sub-contracting requirements are more easily met, and you are more likely to pull ahead of your competitors.

5) Increasing your presence within the Indigenous market:

Indigenous businesses are almost all privately held, which means they are going to be responsive, innovative and generally willing to take on more of your risk. In many cases, Indigenous business managers and owners are receiving specialised training from busiensses schools like Murra, which is run out of Melbourne business school, or Jawun, which facilitates corporate partnerships.

If your organisation sells B2B, many Indigenous businesses will already be engaging with your customers; a process that potentially strengthens and broadens your customer base.  Finally, and most importantly, Indigenous businesses are highly visible in their communities. If you are known to be working with them, you have a better chance of successfully winning customers in the fast-growing Indigenous market.

6) Broadening you company’s networks:

Supplier diversity strengthens relationships with a ‘different class’ of supplier, thereby providing your organisation with opportunities in other business arenas. As well as gaining access to the Indigenous market, your supplier diversity program can strengthen your ability to tap into the female market, disability market, or the immigrant market. Additionally, Certified Suppliers are at the centre of the Supply Nation network, which includes over 160 corporate and government members – the biggest purchasers in the country.

7) Procurement:

Indigenous businesses can be the solution to many of the problems faced regularly by procurement professionals. When an existing supplier has poor performance, is struggling to follow your business processes, has a lack of capability, or is situated in unfavourable locations, the solution could be an Indigenous business. By tapping into the Supply Nation database, you will be able to find suppliers in every industry, with impressive track records – a potential solution to your current supplier troubles.

Integrating a supplier diversity program will therefore allow your corporation or government department to tap into broader and more varied markets and industries, whilst simultaneously making your organisation more efficient and growing its brand. As governments and customers push for supplier diversity initiatives it will be essential for organisations vying for their business to be on the front foot, investing in supplier diversity programs. If they do, they will be properly positioned to reap the benefits.