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Introducing supplier diversity in logistics to build a resilient supply chain

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Ever since the outbreak of the pandemic in 2020, sustainable supply chains have been making a case for companies to revisit their efforts, and commit to supplier diversity efforts more seriously. Diversity, equity, and inclusion programs within organizations proved to have definite commercial and social benefits, forcing organizations globally to prioritize supplier diversity and ramp up efforts to work with minority and women-owned businesses. Owing to this growing shift towards building a resilient supply chain on the back of a diverse pool of suppliers, we explore the concept and weigh the advantages and challenges of adopting supplier diversity in a supply chain.

The year 2020 change, not only in the way of living but also in the ways of working. As the world moves towards taking a more has brought a wave of diverse shape, the predominantly hesitant businesses of India also embrace supplier diversity in their supply chains. Largely put under the spotlight since 2020, India has always put the entire responsibility onto the central public sector enterprises, with few to none private companies showing a meaningful approach towards supplier diversity. Whereas multinational organizations in the US, like Ford, GM, Nestle, IBM, Walmart, and Apple, swear by supplier diversity to flourish.

WHAT IS SUPPLIER DIVERSITY?

A diverse supplier is a business that is at least 51% owned and operated by an individual
or group that is part of a traditionally underrepresented or underserved group. Small business enterprises (SBEs), minority-owned enterprises (MBEs), and woman-owned enterprises (WBEs) are some of its common classifications. In current times, the definition of diversity has also expanded to businesses owned by other minority groups such as LGBQT, veterans, and proprietors with
disabilities.

To put it in a sentence, supplier diversity is all about embracing disadvantaged business
enterprises into company supply chains. While it is without question that a diverse supplier base is good for society, but many executives confirm that it also improves business performance. It is said better relationships and supplier diversity in logistics leads to wealthier and more profitable
opportunities.

IMPORTANCE & BENEFITS

Supplier diversity can be the part of a company’s efforts to maintain high moral and ethical standards, but it can also bring in many benefits for the supply chain of a company. Representing an enormous pool of opportunity to drive profits through proactive, diverse logistics of a company, supplier diversity is vital to the logistics of a company because it allows for more of everything.

“When we invest in supplier diversity, it helps us to increase the pool of possible suppliers and promote healthy competition, leading to better product quality, more innovation, and cost savings.” Carlos Guzman, Managing Director – Supplier Diversity and Sustainability at Cigna.

A diverse pool of suppliers yields benefits for the business community at large by giving
a competitive advantage and promoting innovation in products, services, and offerings, as suppliers try to differentiate to compete.

Ajit Shenoy, Senior General Manager – Procurement Services, Hindustan Construction Company Ltd., while explaining the advantages of investing in a diverse pool of suppliers says, “By diversifying the pool of suppliers we get into new networks too, giving a distinct advantage of a new perspective on product applications, new technologies, raw material, and cost dynamics. We can push for customization too through these new suppliers who would agree in their eagerness to get an entry as well as trying to give a distinct advantage to us.”

“By subscribing to bring in diversity in the supplier base, the company is seen as committed to fair business ethics, and creates economic opportunities for new businesses start-ups and disadvantaged communities in our ecosystem as well,” he adds.

It helps in reducing lead time, ensures continuity of supplies, and spreads out the liability servicing (i.e., outstandings – payable). It also tends to drive down prices and drive up the competition.

“Diverse suppliers can provide the best combination of the total cost, quality, and service, and this leads to healthy competition and a level playing field for all potential and existing suppliers – which proves vital when the supply chain is strained or disrupted,” says Anil Kumar Mishra National Logistics Head India (South Asia), Pladis Global

AN AID TO THE STRAINED SUPPLY CHAIN

Diverse and sustainable are the qualities of a resilient supply chain. One that can mitigate and secure itself for the long term by limiting the impact of disruptions- which are usually in form of unexpected competition, sudden changes in market trends, trade and geopolitical changes, meteorological, health, or economic shocks, or even changing consumer behavior and expectations.


This is an abridged version of the original story which was published in the October edition of the Logistics Insider magazine. To read the complete interview, click here.

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