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The benefits of a diverse supply base

Diverse supply base

Risk is an inherent factor in supply chains. Organisations that do business with other groups inevitably take on an element of uncertainty that can reflect on a brand – where do sourced products come from? Who’s making it? What are the financial, geopolitical, and legal risks associated with a vendor? After all, consumers don’t differentiate between an element of a product and a product’s brand.

 

Any controversial or unethical business practice, no matter whose fault, can damage a brand’s hard fought for reputation.

 

It’s common therefore to focus on mitigating third-party supplier risk. Many procurement professionals exercise due diligence when it comes to vetting qualified suppliers and sourcing the right people capable of completing a project.

 

What is less common is looking to diversify a supply chain. Diverse suppliers, owned by minority groups, mitigate risk through sustainability, economic impact, and innovation.

 

“Diversity” is not simply defined in black and white terms. Diversity covers a spectrum of businesses and backgrounds: veterans, minorities, LGBT and women among others. Diversity also means different things in different parts of the world.

 

But, doing business with diverse suppliers not only impacts procurement spend, it stimulates the downstream economy. Diverse suppliers create a sustainable supply chain by positively impacting their local economies, creating jobs and generating revenue and taxes. These are important residuals to procurement spend that are often overlooked.

 

Diverse businesses can also impact your bottom line. Many have to be nimble and agile to compete. They have to be innovative and must design creative solutions to make more from less. The nature of these businesses is to drive down costs but add value.

 

Indeed, many diverse suppliers proactively think of new ways to try and solve old problems, leveraging application programming interfaces (APIs), automating repetitive tasks and managing cloud platforms, streamlining archaic processes like legacy systems and cumbersome request for proposals. By collaborating with these businesses, your own organisation can benefit from different ways of thinking.

 

If you’re not being deliberate and intentional about sourcing from diverse suppliers, your organisation may be missing out on some big opportunities. I believe risk is created when organisations don’t diversify their supply chains. By nature, this risk is hard to quantify because it’s measured more in terms of opportunity cost. Though these partners might be challenging to find, they provide valuable long-term insights. Buyers and suppliers can leverage one another’s strengths and opportunities on the common ground of value creation, cost management, economic impact, and innovation.

 

Daryl Hammett is the COO and general manager of ConnXus, a SaaS-based global supplier management software company. He previously founded the Peabody Executive Coaching Group and led Luxottica’s Sears Optical North America as Sr. VP & GM.

This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.

 

This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.

Daryl Hammett
Posted by Daryl Hammett

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