Supplier Diversity is Good Business

“The best way to predict the future is to create it,” once said the philosophical management consultant Peter Drucker. It is a quote emblazoned across the home web page of the Billion Dollar Roundtable (BDR) for good reason as the organisation looks to turning supplier diversity on its head.

Established 17 years ago, the group was formed to “celebrate” companies that spend at least $1 billion with suppliers run by minority groups and and women. Inducting new member companies bi-annually, it is an ever-evolving beast, promoting best practice in supply chain diversity by disseminating resources and white papers.

By getting together as a collective, representatives from each company can discuss common issues, opportunities and strategies for building a diverse supply base. And the BDR urges members to keep up their commitments to the cause as well as their investment – and, largely, buoyed and encouraged by fellow members, they do.

Current members include Apple, IBM, Ford, Johnson & Johnson and Microsoft.

There are eight million minority-owned companies in the US out of a total 27.6 million – a 38% increase since 2007. And combined gross receipts of minority-owned firms increased 35% between 2007 and 2012.

However, average receipts for each of these firms fell 2% during the same period and 11% of minority-owned firms have paid employees, compared to 22% for non-minority firms.

An economic impact study conducted by researchers at the University of Washington Consulting and Business Development Center at the Foster School of Business recently looked into the direct impact of supplier diversity and the economic benefits the practice creates for communities where corporations operate – in creating jobs, boosting wages and increasing tax revenues.

BDR member-companies account collectively for $75 billion in audited Tier 1 supplier diversity spend and $22 billion in Tier 2 spend, according to BDR. The average annual member-company spend is $2.9 billion, and member-companies spend an average of 10.9 percent of their overall procurement dollars with diverse suppliers.

An economic input-output model examining the impact of the supplier diversity spend of three BDR member companies – Bank of America, Verizon and Honda North America. The three firms’ collective $9 billion in Tier I and Tier II supplier diversity spend generated an economic value of $18.6 billion in the communities in which they operate – accounting for $5.4 billion in wages, 120,340 jobs and $10 billion in gross domestic product, he said.

And these four measures of economic impact resulted in a value of more than 2-to-1 against the companies’ supplier diversity spend dollars, says BDR. Of course, the benefits can be felt in the local communities. But the companies themselves benefit too as local people plough those dollars back into the same companies to buy goods and services.

So, as this group of companies attest: doing business with enterprises owned by minorities, women and other diverse groups is simply good business. As Apple’s director of supplier diversity Walter Freeman says: “Inclusion and a diverse supply base are critical to our success and our efforts to offer the best products.”

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