We will discuss why supplier diversity is important, what supplier diversity metrics measure, and key takeaways for supplier diversification strategies.
The supplier diversification metric is an attempt to quantify supplier performance about supplier goals and objectives set forth by the company.
These measurements can be made at any level within the supply chain-from suppliers down to product levels if necessary. Suppliers should keep track of their supplier diversity data on an ongoing basis so that it can provide evidence for increasing or decreasing benefits from certain programs or initiatives.
According to Sola Systems’ “A New Paradigm: Putting Diversity Into Supply Chain Management”, there are three categories for assessing supplier quality using these metrics: sustainability, cost efficiency, and talent development.
The first category of supplier assessments determines the supplier’s ability to promote sustainable practices. These include how well the supplier treats its employees and environment; as well as whether or not it participates in industry certification programs such as Responsible Care® or Green-e® Energy Certified.
The second assesses what percentage of a company’s total spending is spent with diverse suppliers on an annual basis. This includes procurement costs but also production costs when applicable–the goal being that over time this number should increase proportionately with supplier diversity.
The third assesses the supplier’s success in meeting talent development goals, both short-term and long-term; for instance, developing relationships with diverse supplier networks to build future pipelines of qualified candidates.
Supplier diversity metrics are important because they provide companies with an objective way to gauge supplier performance.
To ensure that supplier diversity does not stop at the gates of a company’s headquarters, suppliers should set measurable goals for increasing their supplier base and educating employees about supplier equity. Companies can also use these metrics as benchmarks to assess how well supplier relationships are meeting corporate sourcing objectives.
For example, if four out of five diverse suppliers have been successfully contracted but only one or two have completed development plans related to talent acquisition, it would be clear where improvement is needed for future procurement decisions to go smoothly while maintaining supplier accountability.
Finally, from both a business and sustainability standpoint, there is evidence that responding positively–and more importantly proactively–to supplier diversity metrics is a sound strategy.
The supplier’s performance (e.g., delivery time) should be consistent as well, with no significant deviations from agreed-upon standards or timelines that could result in delays for your company’s deliveries. Supplier quality control metrics may also vary widely between those who primarily work on a contract basis versus those who have been recruited by a headhunting firm specifically for your organization; where there are differences in supplier type, make sure they’re accounted for when aggregating supplier diversity metrics.
Supplier diversity metrics are a key component of supplier risk management, in that by measuring supplier performance against customer needs and priorities you can identify suppliers who may pose potential risks to the organization.
Supplier diversity is also an important metric for maintaining brand integrity–if your company’s products are being delivered late consistently or with defects, it could be because they’re coming from unreliable sources, which will negatively affect public perception of both your organization and its product lines.
Supplier quality control measures include examining whether suppliers conform to standards such as ISO certification; this helps ensure that what producers provide meets customers’ expectations when it comes to the price point.
Sustainability is an important component of supplier assessments because it benefits both suppliers themselves and their employees; that there are many different types of metrics on which to base supplier evaluations, such as diversity data or cost efficiency measures; and finally that while workforce diversity has traditionally been seen primarily in terms of race/ethnicity, we must also consider the diversity of supplier organizations in terms of the types and number of employees.
Supplier metrics should be evaluated based on multiple factors, including turnover rates, supplier sustainability rates (including supply chain responsiveness), supplier performance ratings; supplier evaluations should also take into account workforce diversity data or cost-efficiency measures.
When assessing suppliers for their ability to meet talent development goals over time we must consider building diverse networks both now and for future pipelines.
“Supplier diversity programs are evolving to encompass more metrics that assess the broader impacts of diversity programs on diverse suppliers, employees, and communities, such as making a difference in economic empowerment.” Supplier Diversity: Metrics, Certification, and Program Best Practices – MIT Center for Transportation and Logistics, March 2021)”.