If your company works with diverse suppliers — generally defined as vendors that are owned by a member of a diverse group such as people of color, women, LGBTQ, or veterans — you may already be aware of the value that diverse vendors can bring to your business. Advantages of working with these types of suppliers include diversity-driven innovation, opportunities to tap emerging customer bases, and increased brand awareness and loyalty.
Implementing a supplier development program can help you maximize those advantages — and when it’s done right, both you and your suppliers benefit.
Why you should invest in supplier development
Supplier development is the “process of working with certain suppliers on a one-to-one basis to improve their performance for the benefit of the buying organisation,” according to the Chartered Institute of Procurement & Supply (CIPS).
This kind of collaboration with suppliers is a strategy that can realize long-term gains for your company. Companies that collaborate with suppliers have double the EBIT growth rates of those that don’t, according to a McKinsey survey of more than 100 large global companies.
One of the most important benefits of supplier development is that you can guide your supplier to grow in a specific way that helps you achieve your strategic objectives. These can range from minor adjustments to major initiatives that can help you:
· Reduce costs
· Improve supplier performance
· Resolve efficiency issues
· Develop new products or services
· Build business alignment between you and your supplier
· Create competitive advantages
· Enter new markets
· Increase transparency
· Improve customer satisfaction
To choose and prioritize the goals of your supplier development program, assess your company’s needs and identify areas where your diverse suppliers have the potential to meet them. Building your objectives using SMART (Specific, Measurable, Achievable, Realistic, and Timely) principles increases the chance of achieving your goals.
How to help your diverse vendors help you
Once you know your supplier development goals, you have a number of options for implementing a development program. Your efforts may range from simply offering more tailored and intensive direction to providing formal training or instituting on-site assistance. Specific activities include:
· Formal mentoring programs
· Access to knowledge and training resources
· Introducing suppliers to prospective customers and including them in networking events
· Teaching techniques and processes
· Sharing information and providing visibility into processes
· Posting a company representative at the vendor’s workplace to enable close collaboration
You should tailor any vendor development program to your specific goals as well as the unique needs and capabilities of your supplier. However, for any program, it’s important to clearly define objectives and specify how progress will be measured, including identifying KPIs, methods for gathering performance data, and your assessment approach. You should also put a plan in place for monitoring that progress, including regular reviews and reports.
Tools for diverse supplier development
Software programs designed for general vendor management can also help you manage supplier development, keeping everything in one place and providing a dedicated communication channel. Look for supplier management software specifically designed for working with diverse vendors and that offers assistance in supplier training.
Reaping rewards
Many companies view suppliers first and foremost in terms of cost. But this is short-term thinking. Companies with a larger outlook approach supplier development the same way they do investing in technology or talent — as a long-term strategy. Developing a successful diverse supplier development program takes careful planning and the right tools, but the potential rewards are worth it.
Hire Ground provides a simple and secure way to source, manage, and communicate with suppliers. The platform uses smart technology to match companies with diverse vendors and also offers expertise in supplier training and development.