Supplier Diversity
Written on 6:58 PM by Shaun Hutchings
The authors of 'Supplier Diversity and Supply Chain Management: A Strategic Approach,' advocate a step-process for promoting diversity within the supply-chain. Please describe the process they advocate.
In order to promote diversity within supply chain you must first identify what it means for supplier diversity. Supplier diversity means acquiring suppliers that are diversified, that are not the huge suppliers that control the supply chain industry. Supplier diversity can be know by several different groups but are not restricted to these groups. The groups are: Minority Business Enterprises (MBEs), Women Business Enterprises (WBEs) and Disabled Veteran Business Enterprises (DVBEs). MBEs represent the majority of the diversified supply chain realm.
Leveraging supplier – buyer relationships in regards to supplier diversity is pretty difficult and is facing several huge obstacles in order to promote diversity. Some of the issues are:
Even with those obstacles there is a way for corporations to diversify their supply chain. Here are several steps that corporations may take in order to implement this diversity:
1. Supplier diversity and competitive advantage
a. There is a need for integrating supplier diversity into business goals to build competitive advantage. It can contribute to a firm’s profitability and performance
b. Formulate a clear vision of what supplier diversity is suppose to accomplish
c. Have a plan for implementing its supplier diversity initiative
d. Supplier program must be monitored and evaluated periodically
Top management commitment
a. Top management commitment can be the acceptance of supplier diversity as an operational and strategic option, providing visible leadership on the issue, and provide resources and provision to accomplish it
b. Will confer upon the supplier diversity program a term called legitimacy- gain support of internal stakeholders
c. Management should affect the availability of resources and provide a way to accomplish the change and program
3. Supplier diversity champions
a. In order for a corporation to promote diversity in supply chain it needs a certain individual known as a ‘champion’ to take off and run with it, even at the expense of his position and title
b. Posse leadership qualities- ability to engage in influence activities, transformational leadership qualities
4. Organization culture and supplier diversity
a. Develop a culture where supplier diversity is accepted and can thrive
b. Cross-functional cooperation within a firm
c. Collaboration
5. Channel power and relationship building
a. Usually relationships between MBEs and large corporations there is unequal power- it shouldn’t be that way, the buyer should not have more power over the seller
b. Downplay power in large corporations for long-term interest
c. Social Exchange Theory (SET)
d. Build up power of trust rather than control
e. Help build up MBEs operational capabilities
6. Recruitment strategy
a. Place advertisements- in supplier diversity publications
b. Use of web site promotion for diversity suppliers
c. Higher a credible third-party or intermediary organization to identify qualifies MBEs
In order to develop successful supplier partnerships there are several things that the minority suppliers need to accomplish. Here are a couple guidelines:
1. Building core capabilities
a. Develop capabilities- operational and client-specific
b. Use the value chain to develop operational capabilities
2. Learning competency
a. Adaption of new behaviors
b. Absorptive capacity
i. Acquisition- ability to recognize, value and acquire knowledge that is critical to a firm’s operations
ii. Assimilation- ability to absorb external knowledge
iii. Transformation- develop routines that combine old and new knowledge
iv. Exploitation- ability to apply new knowledge to achieve objectives
3. Collaborative mindset as a capability
a. Join consortia or build strategic alliances to pool resources
b. Alliance-building capabilities – clear common goals, trust, frequent and open communication
4. Intermediary organizations
a. Get their foot in the door through intermediary organizations
b. State and regional supplier councils
If both follow these guidelines and more it can prove to be a very beneficial process for both the MBE and the large corporation and they both can get a competitive advantage in supply chain.
Should companies concern themselves with MBE's, WBE's, DVBE's, etc or is this an unwise use of resources?
Some may say that it is unwise to concern themselves with MBEs, WBEs, DVBEs, and etc. because many may think they are giving up quality in both the product and performance by choosing to diversify their supply chain. In this article it shows that ideas such as that one are wrong and it is wise to invest your resources in supplier diversity. The article states that there are economic benefits to incorporating supplier diversity. Supplier diversity can act as a way to increase or expand their customer base, and with more customers means more sales, which means more revenue. It is wise to match your supplier base with your customer base so you can attract more people of that culture. Firms may also use supplier diversity as a part of their overall corporate social responsibility (‘reaching out and building stronger communities, which is good for PR of a company and the public view of your company). Also it can create a competitive advantage. How it can create this is because those that have competitive advantage are those that can do something well compared to its rivals. They can transform their capabilities into core competences so that such capabilities serve as a source of competitive advantage. As we can see there are many advantages to supplier diversity and they all can benefit both the MBEs and the large corporations once the road bumps and obstacles are shot down and understood.
