Supplier diversity is an essential part of procurement, helping businesses drive innovation, tap into a wider talent pool, increase supplier competition and create a more inclusive economy.
In this blog, we’ll break down what supplier diversity means, why it matters, and how you can take practical steps to make your procurement process more inclusive.
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What is supplier diversity in procurement?
Supplier diversity is about ensuring businesses from underrepresented groups have a fair chance to compete for contracts. This includes SMEs, companies owned by women, ethnic minorities, LGBTQ+ individuals, people with disabilities, and other diverse groups.
The goal of supplier diversity is to create equal opportunities for these businesses to compete for contracts, ensuring a more inclusive and diverse procurement process. Many public bodies and large corporations now have set supplier diversity targets to support economic inclusion.
Why does supplier diversity matter?
Diversity in procurement is not just about fairness, it brings real, tangible benefits to businesses, public sector projects, services and the broader economy.
Typical benefits include:
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Increased innovation
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Improved service quality
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Reduced costs
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Greater adaptability to market changes.
Plus, companies that work with diverse suppliers often discover new ways to improve efficiency and develop unique products and services that they wouldn’t otherwise be able to do.
Supplier diversity can also have great benefits to local economies, particularly within underrepresented communities. By giving small and diverse businesses greater access to procurement opportunities, more jobs and opportunities are being created for these areas.
We know that sustainability is becoming all the more important, and looking at diverse businesses can mean gaining access to more local independent suppliers, minimising the project’s carbon footprint and benefiting the local economy.
A diverse supply chain can also be a positive step forward in managing risk within your business. Relying on a small group of suppliers can make a business potentially vulnerable to supply chain disruptions, including geopolitical factors, economic downturns, or natural disasters. By opening up the chain to the wider business world, you’re helping to keep your supply chain resilient, meaning you’ll have multiple reliable sources for goods and services.
Consumers, investors, and employees increasingly expect businesses to prioritise social impact, and if you can demonstrate a commitment to diversity then you’ll be able to build stronger relationships with customers, the local community and other key stakeholders.
6 key steps to increasing supplier diversity
Creating a more diverse supplier base will take time, and won’t happen overnight. It might seem like a challenge, but implementing clear, subtle step changes will make the transition more effective.
Here’s six key steps to take on your supplier diversity journey.
1. Assess your current supplier base
Start by collecting data on your existing suppliers to identify gaps in diversity and help understand where improvements are needed - allowing you to set some realistic goals. We’d recommend conducting regular audits to track your supplier demographics and their impact on your overall procurement strategy.
2. Set clear procurement diversity goals
Now that you understand your current supplier base, you can more easily define measurable objectives, such as a percentage of spending allocated to diverse suppliers or an increase in the number of diverse suppliers in your supply chain each year. We’ve listed some example key metrics you can measure against below too!
TIP: Consider aligning your goals with national and industry-specific diversity targets to ensure best practices.
3. Expand your supplier outreach
Actively seek out diverse suppliers by attending networking events, trade fairs, and using platforms dedicated to supplier diversity. Partnering with advocacy groups and chambers of commerce can help identify potential suppliers that meet your diversity goals.
You could also consider reaching out through organisations that support underrepresented entrepreneurs.
4. Simplify the bidding process
Procurement processes can be complex, making it harder for smaller businesses to participate. But you can help diverse suppliers navigate the bidding process with a series of changes, including:
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Streamlining applications - carefully considering all kinds of diversity and ensure that your application process is fit for purpose
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Offer guidance and support
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Provide training to help
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Removing unnecessary red tape
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Using plain language in application materials
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Offering online resources.
5. Build long-term relationships
It’s important to support diverse suppliers beyond the bidding stage. Offering them mentorship, feedback, and opportunities for long-term collaboration to help them grow and succeed.
Developing strong relationships fosters trust and ensures suppliers are equipped with the knowledge and tools needed to scale their operations.
6. Track and measure progress
One of the best ways to make sure you are activating supplier diversity within your procurement processes is by regularly reviewing your diversity metrics to understand the impact of your efforts.
Here are some of they key ways you can track success:
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Percentage of total spend with diverse suppliers
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Number of diverse suppliers engaged
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Performance improvements driven by supplier diversity
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Economic impact on underrepresented communities
By setting up a diversity dashboard or reporting system, procurement teams can keep a close eye on progress and make data-driven decisions.
7. Be transparent and accountable
Share progress publicly to reinforce your commitment to supplier diversity. Openly discussing diversity initiatives can attract more suppliers and inspire others to follow suit. Publishing annual reports, case studies, and success stories highlights achievements and encourages industry-wide participation.
Overcoming common challenges with supplier diversity
While increasing supplier diversity is definitely beneficial, there are common barriers your organisation might face when planning and implementing changes to your supply chain approach:
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Lack of awareness: Some procurement teams may not know where to find diverse suppliers. This can be addressed by joining diverse supplier networks.
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Perceived higher costs: Some assume diverse suppliers may be more expensive. In reality, many diverse suppliers provide competitive pricing while also delivering unique value and innovation.
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Limited internal support: Without leadership buy-in, supplier diversity initiatives can begin to stall. Educating executives and colleagues by aligning supplier diversity goals with broader business objectives can help gain that all important support.
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Concerns about supplier capability: Some diverse suppliers may lack experience with large contracts, but mentorship programs and phased contracts can help bridge this gap.
Being one-step-ahead of some of these challenges and addressing them proactively, you can create a smoother transition to a more diverse supplier base.
Three ways that we can help you
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The starting point for any business is to have their supply chain diversity policies reviewed, and we’re here to help with our proven expertise to best advise you.
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We are experts in procurement, and can assess your current approach to diversity, or build policies for you if you don’t have them in place.
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We can also support you with your wider procurement strategy, including assessing your current approach to procurement and highlighting opportunities for increasing efficiency and maximising project outcomes across multiple areas.
Find out more about the procurement services and solutions we offer.