Supplier diversity is the proactive business process of sourcing products and services from previously under-used suppliers. This process helps to sustainably and progressively transform a corporation`s supply chain to reflect the demographics of the society in which it operates.
The Business Case
Embracing supplier diversity South African companies can gain several competitive advantages such as:
- Increased supply chain competitiveness
- Product innovation through interaction with new suppliers
- Improved brand image with community, shareholders and government
- Better market intelligence through closer supplier relations
- Increased market share and loyalty
- Access to public/private sector business through BEE compliance
No company arrives at the top alone, rather, each company relies on a network of business relationships in order to succeed. A lack of flexibility can place a company’s supply chain at risk for poor health and poor performance. Small businesses are more flexible than large businesses thus a healthy supply chain needs to include and develop small businesses entities that help it react to changing market conditions.
An International Movement
In an international context, Supplier Diversity is a business processes that aims to use previously under-used minority-owned vendors as suppliers. South Africa is the most recent addition of six Global Link Partners modelled after the US-based National Minority Supplier Development Council (NMSDC) established in 1972. The initiative links counterpart organizations in Australia, Canada, China, the UK and the US - countries with a history of economic marginalization of significant segments of their citizens and indigenous peoples. These councils are affiliated in a Global Link partnership to share the best practice knowledge, experiences and methodologies for creating opportunities for corporate members and certified suppliers to engage in a local to global network, providing linkages between historically excluded businesses and corporate buyers.
While a globally proven business strategy for several decades, supplier diversity is still gaining traction in South Africa.
Supplier Diversity in South Africa
In the local context, supplier diversity involves integrating under-used competitive black suppliers into corporate supply chains. The SASDC works closely with corporate members to reform targeted procurement strategies parallel to the implementation of supplier capacity building interventions to achieve this.
Why Supplier Diversity in SA
The need for supplier diversity in South Africa stems from inequalities and economic marginalization facing Blacks in South Africa, accounting for a majority of the country’s population, as a result of Apartheid. What is unique to South Africa is its robust political legislation supporting Black economic advancement by way of the Broad-Based Black Economic Empowerment (B-BBEE) laws; creating a national business environment most relative and most conducive for the successful implementation of supplier diversity in corporate procurement practices. However, this policy framework also creates a challenge because supplier diversity is viewed as a compliance mandate rather than a business imperative. In other words short-term wins of compliance-driven behaviour detracts from recognising real value of a long-term investment in supplier diversity as a strategy that increases global supply chain competitiveness.