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Diversity Programs Benefit Bottom Line
Buying supplies from women- and minority-owned businesses could benefit a company's bottom line. |
That's the conclusion of research from business advisor The Hackett Group, which contends so-called world-class procurement organizations that focus heavily on supplier diversity don't sacrifice procurement savings by doing so. These leading companies have slightly higher adoption rates of supplier diversity programs as typical companies, and they genereate 133% greater return on the cost of procurement operations than average performers, Hackett says. That drives an added $3.6 million to their company's ledger for each $1 million in procurement operation costs.
"Many people will tell you that they don’t use more minority suppliers because they can’t afford to," Hackett senior business advisor Kurt Albertson said in a statement that accompanied the research. "They automatically assume that supplier diversity programs are an administrative nightmare, a burden that increases spending. But that’s simply not true. Companies that focus in this area, driven by a sense of social responsibility, government mandates, or a range of other factors, are just as able to run effective procurement operations as their peers that ignore supplier diversity."
Companies participate in suppler diversity programs because they want to improve their image or government or other business partners require it.
According to Hackett, a typical company allots 8% of their spending to women- and minority-owned suppliers, and that these suppliers make up 9.7 % of the total supply base. World-class procurement organizations perform slightly better in both of these areas.
Some companies see supplier diversity as a strategic business advantage. World-class companies promote these diversity programs inside and outside their organizations because they think it's something their workers and customers care about. "While the direct revenue impact of these programs is very difficult to measure," Hackett procurement practice leader Chris Sawchuk says, "we’ve seen cases where companies directly attribute supplier diversity programs to specific improvements in market share."
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