Wanting to implement a supplier diversity program to increase diverse spend and actually doing so are two very different things. While 70% of procurement professionals globally say they hold supplier diversity as a high or medium priority within their organizations, 63% admit they have yet to begin or have only just begun these initiatives. These numbers—and the amount organizations are committing to diverse spend—continue to vary within different geographical regions.
No matter the location or industry, supplier diversity is vital to an organization’s procurement strategy. It’s not just the right thing to do, but it is good for business because it enables teams to meet ESG commitments for shareholders and consumers, improves agility to navigate inflation and other disruptions, and allows for greater innovation, increased competition, and improved brand reputation.
Why does starting a supplier diversity program seem to be so difficult? The short answer is that teams lack the data needed to successfully implement and grow these programs. Without strong supplier diversity data to build insights, procurement teams will struggle to identify current and potential diverse suppliers to achieve spend goals.
Challenges in Supplier Diversity Reporting and Spend
Let’s take a look at current challenges and the power that better supplier data can have in driving supplier diversity programs.
Manual management leads to poor data quality
The way the architecture of procurement software currently stands, teams will implement new programs that use third-party services to manually manage and cleanse supplier data. These processes often put the burden on suppliers to update multiple portals that don’t connect to each other. What’s more, the data fed into these systems has usually been outsourced for a one-time enrichment process that results in momentary accuracy that quickly declines.
As long as manual efforts are still being made to gather and manage supplier data, data will quickly become stale, leaving teams unable to leverage the right information to establish or grow effective diversity programs.
Systems don’t connect with each other impacting supplier diversity programs
Procurement teams typically have access to the right data needed to build and grow supplier diversity programs, but in many cases, there are separate portals that house diversity data, preventing diversity from becoming a core part of the data set.
Both sides face challenges
Supplier diversity, for all the good that it does, continues to pose several challenges for both procurement teams and suppliers. Only when these challenges are addressed by using stronger data can procurement professionals work to drive diversity initiatives.
On the procurement side
One of the biggest issues buyers face when implementing diversity strategies is a reliance on suppliers to manually update portals. As mentioned above, many small and diverse suppliers don’t have the wherewithal to maintain dozens of portals on their own, so they simply don’t—meaning buyers are left with outdated, inaccurate data.
Due to a lack of strong supplier data, there is also often less visibility into qualified and potentially-qualified diverse suppliers. This applies to both Tier 1 and Tier 2 suppliers and could result in buyers leaving thousands, if not millions, of dollars of diverse spend on the table.
Manual reporting efforts also force buyers to wait weeks before they gain insight on diverse spend. Not only does this result in an inability to leverage these insights to be used in strategic sourcing decisions, but it also causes procurement teams to miss opportunities to share successes with stakeholders.
On the supplier side
Diverse suppliers have to jump through a lot of hoops to prove they qualify as diverse—and earning this certification requires a lot of time, money, and resources that many small businesses don’t have to spare. This has resulted in many suppliers who technically qualify remaining uncertified. Since buyers tend to keep their sourcing efforts limited to certified businesses, countless suppliers miss out on business opportunities.
Additionally, for those who do go through the process of getting certified, it may take years before reaching a positive return on investment. While the time frame in which diverse suppliers can vary by industry and individual business, this waiting period can be discouraging after putting in the effort to receive certification. Overall, there is no definitive way to prove diverse suppliers will receive new business after certification, adding to the dilemma of whether or not to pursue it.
How supplier diversity data addresses these challenges
As it stands now, supplier diversity is a challenge in itself for procurement teams and suppliers alike. However, those challenges can be addressed by moving away from traditional methods of supplier data management that revolve around individual supplier portals. Taking a data-first approach and recognizing the key role dynamic supplier data plays can allow procurement professionals to have a much easier time achieving supplier diversity goals.
A data-first approach to supplier diversity can result in:
1. Enhanced identification of diverse suppliers
Accurate and comprehensive data helps organizations identify certified diverse suppliers based on categories such as minority-owned, woman-owned, veteran-owned, or LGBTQ+-owned businesses. By leveraging reliable data sources, businesses can ensure they are reaching out to underrepresented groups that align with their diversity goals.
2. Improved decision-making and goal tracking
With quality data, companies can make informed decisions about supplier selection and allocate resources to meet their supplier diversity goals. Data-driven insights, such as spending reports with diverse suppliers, enable organizations to monitor progress and adjust strategies to ensure diversity targets are met.
3. Strengthened compliance and reporting
Many organizations have regulatory or contractual obligations to work with diverse suppliers. Accurate supplier data ensures compliance with these requirements by verifying certifications, tracking spend by diversity category, and facilitating accurate reporting for internal and external stakeholders.
These factors collectively empower organizations to build a more inclusive supply chain, supporting economic growth in diverse communities while enhancing business resilience and innovation.
The way forward is understanding your supplier diversity data
However, understanding your supplier diversity data is a lot easier said than done. Before organizations can rely on their data to drive supplier diversity goals, they have to know where it stands.
Find a solution that analyzes and cleanses your supplier data, and then enriches it with data you can trust.
Stephany Lapierre is the Founder and CEO of Tealbook. A lifelong entrepreneur, Stephany spent 10 years building a successful strategic sourcing and procurement consulting firm and it sparked her desire to solve the supplier data problem. Stephany is passionate about establishing the gold standard for supplier data and making it accessible to every large organization, which is why TealBook’s Supplier Data Platform automates the collection, verification, and enrichment of supplier data across any data lake or enterprise system. TealBook is a leader in procurement technology and has been chosen by Spend Matters as one of their "50 Vendors to Know," named a top 100 solution by ProcureTech, and recognized as a "Cool Vendor" by Gartner. A highly-coveted supply chain thought leader, Stephany has been recognized as one of the Top 100 Most Influential Women in Supply Chain. Outside of work, you can find Stephany spending time with her husband and three daughters, and keeping active on the ski hill or in a pilates studio.
