While supplier diversity programs have gained more traction in recent years, their history reaches back to the civil rights movement when companies such as General Motors and IBM launched programs that encourage the inclusion of small businesses with economic and social disadvantages in Federal contracts.
Today, a growing number of companies are investing in supplier diversity programs as a part of their Environmental, Social, and Governance (ESG) targets. According to supplier.io’s annual State of Supplier Diversity Report, from 2021-2022, supplier diversity programs saw double-digit growth. And with the influx of available data, leaders can more easily identify and prioritize spend to diverse suppliers.
- Tier 1 spend covers awards to the diverse suppliers an organization partners with directly.
- Tier 2 spend covers awards to the diverse suppliers an organization partners with indirectly through a third party.
How do you know a supplier is considered diverse?
Suppliers are generally considered diverse if the business is at least 51% owned and operated by someone (or a group) in one of the following underrepresented groups:
- Veteran-owned businesses (VOSBs)
- Service-disabled veteran-owned businesses (SDVOSBs)
- Women-owned businesses (WBEs)
- Small business enterprises (SBEs)
- LGBTQ owned businesses (LGBTBEs)
- Disability-owned businesses (DOBEs)
- Minority-owned businesses (MBEs)
Commercial Benefits of Supplier Diversity Programs
According to supplier.io’s 2023 State of Supplier Diversity report: “Companies may initially buy into supplier diversity because they want to live their values, but it’s clear that it has a positive impact on the business.” 66% of their survey respondents said that supplier diversity programs improve their supply chain competitiveness, while 53% said they enhance their brand image. 61% of respondents reported that their senior business leaders were engaged with the company’s supplier diversity initiatives.
As shippers’ supplier diversity programs mature, there’s often more executive engagement, meaning more supplier diversity leaders are regularly meeting with their CEOs and presenting the status of their programs and how their diverse spend has impacted and improved the lives of their communities by measuring the jobs that were created, as well as the wages earned and taxes generated.
Supplier Diversity – and Better Procurement Tools – Improve Resilience of Carrier Networks
Investment in supplier diversity also allows shippers to nurture carrier relationships and network resilience for times of volatility. In the transportation industry, a procurement model that is just looking for the lowest-priced provider, and ignoring other factors, may not provide the shipper with the best long-term result.
“Initiatives like supplier diversity provides access to a wider net of smaller carriers,” said Transfix Senior Director of Freight Market Intelligence, Paul Poziumschi. “As a result, shippers will likely face far fewer fluctuations in capacity, since different types of carriers face unique impacts at each point in the economic cycle. This strategy creates more pricing predictability.”
As more data and tech flood the industry, procurement processes are also shifting to level the playing field. Transfix is building a procurement tool that allows shippers to manage their procurement cycles for the longer term, considering various inputs, as opposed to simply focusing on the lowest price on a day-to-day basis.
Begin Tracking Your Diverse Supplier Spend
Through our reporting partnership with supplier.io, Transfix offers all shippers the ability to track their Tier 2 Diverse Supplier Spend allocation to businesses owned and operated by underrepresented groups, such as women, people of color, and veterans.
Read about Transfix’s partnership with GRD Trucking, a certified diverse carrier.