Sourcing in today’s global marketplace can be a challenging process. With ever moving goalposts changing geopolitical landscapes, your procurement team has more than margins to worry about: Risk is firmly within the remit of the procurement department.
Procurement is tasked with being bastions of compliance and business transparency.
Supplier diversity is another buzzword that will have found its way into your vocabulary, and it’s likely you have a supplier diversity program with targets to reach.
Achieving supply chain diversity means developing a variety of trusted suppliers, from a wide range of locations and economies, and owned by a diverse array of different types of business owner.
The benefits of a diverse supplier base are multifold.
Risk comes with the supply chain management territory. Doing business with a third party means that organizations open themselves up to an external risk, from cybersecurity to modern day slavery, as well as the more obvious risk of supply chain interruption from natural disasters or political incidents. Due diligence when selecting suppliers, therefore, is crucial. But diversification of the supply chain is just as important.
How does a diverse supplier base mitigate risk?
The threat of natural disaster, political instability or a supplier shutting up shop, or fluctuating component or shipping prices are all risks that can be managed successfully by having a well thought-out, well-researched, diverse base of suppliers.
Smaller companies tend to be more agile and competitive because they need to be to gain traction in the market. This means they are more likely to be able to work with you collaboratively and use innovation to solve your mutual pain points. To win your business, they need to offer more for less – and this means better value for you.
Ensuring a diverse supplier base has undeniable ROI, with a 2015 study by The Hackett Group showing that businesses with supplier diversity program can expect $3.6million return per $1million invested in procurement operation costs.
It isn’t just your bottom line that gets a boost
Selecting minority suppliers doesn’t only have a positive impact on your bottom line: It is key for overall economic growth. A sustainable supply chain has a trickle-down effect, boosting the jobs market and local economies of the business owners.
Through diversifying your supply chain, and collaborating with these businesses, your own procurement processes could benefit from inspiration and become more dynamic. It also demonstrates your business’ commitment to overlook consumerism and your interest in growing economies of all sizes and locations – improving your reputation and strengthening your brand and consumer perception.
When organizations are not onboarding a more diverse supply chain through a purposeful supply chain diversity program, they could be missing big opportunities for growth and long term strategy insights.
How can technology help achieve a more diverse supplier base?
The most inclusive method of sourcing, which opens the market up to potentially the most diverse range of suppliers is reverse auctions. Reverse auctions can diversify the supplier base by leveling the playing field and opening the bidding process to smaller, less established companies. This process allowing them to compete – often anonymously – amongst the major players. And compete they will, as they are often able to be more flexible with the value points as well as pricing.
RFX software will also enable you to compare clients manually and automatically across variable capability and scoring measurements, enabling you to fully research and compare potential vendors, streamlining your onboarding process and supplier due diligence process.
ProcurePort is committed to ensuring your business is equipped to overcome all the challenges facing your procurement team today, and our best in class software solutions can provide you with the tools to ensure you are performing optimally. To find out how our strategic sourcing software packages can help you with your procurement challenges, including supplier diversification, contact our team of experts.