The benefits of supplier diversity are well-documented and widely known. From improved brand reputation and customer loyalty to top-line growth and bottom-line savings, businesses that embrace supplier diversity reap rewards on many fronts.
Yet, while the advantages of implementing a program are clear, actually measuring the success of such initiative can be less straightforward. In this blog post, we’ll look at five key performance indicators (KPIs) that can help you gauge the effectiveness of your supplier diversity program. By monitoring these KPIs, you can ensure that your program is delivering desired results and making a positive impact on your business.
The benefits of supplier diversity
Supplier diversity is an invaluable initiative which brings many benefits to organizations. Studies show that by diversifying the supply chain, organizations are able to reduce their costs, gain access to more specialized services and products, and actively promote social justice through increased equity among suppliers. Supplier diversity is also beneficial for cultivating business relationships with wider networks of potential buyers that would otherwise be unavailable.
On a larger scale, incorporating supplier diversity into an organization’s operations has been proven to strengthen economic participation across communities. Overall, it’s a smart move for any organization looking to thrive in today’s global economy.
Why your supplier diversity program needs KPIs
Setting clear Key Performance indicators (KPIs) is an important part of supplier relationship management (SRM). KPIs provide focus, measure internal and external performance relative to your objectives, and as such are absolutely critical for assessing the effectiveness of your practices.
With the right KPIs, you can make sure your supplier relationships are effectively managed according to your values and standards. It’s great for transparency and it sets a strong foundation for long term supplier relationships. Therefore, ensuring you select the right KPIs for supplier relationship management should be a priority for any organization looking to maximize the impact of a supplier diversity program.
Critical KPIs for a successful supplier diversity program
An ideal KPI will measure the success of initiatives within an organization, provides a clear assessment of current state, and identifies areas for improvement. In our experience working with customers, the five most impactful KPIs for measuring the success of your supplier diversity program are:
- % of spend with diverse suppliers: Self-explanatory and perhaps obvious, but most organizations struggle to answer the basic question “how much are we spending with diverse suppliers today?”
- % of RFX that include N diverse suppliers: Typically N will be 1-2, and will often vary by category
- Number diverse suppliers onboarded per month/quarter/year: An important part of driving more spend to diverse suppliers is building a larger set of diverse suppliers to buy from
- Savings allocatable to diverse suppliers: Don’t make the mistake of assuming you won’t be able to measure a direct bottom-line impact from your diversity program!
- Internal stakeholder satisfaction: An important measure in general, and a good way of measuring how your organization thinks the supplier diversity program is going
Through tracking these KPIs, organizations can identify where there are gaps related to supplier diversity and areas for improvement. Ultimately, this provides a clear picture of how well the organization is doing in achieving its supplier diversity goals.
How to measure your KPIs
Once you’ve you’ve defined a set of KPIs for your supplier diversity and broader supplier relationship management (SRM) programs, actually measuring those KPIs is essential for staying on track in achieving desired results.
Anyone who has tried to track business KPIs by hand knows how challenging it is. Having a software solution to help you track and monitor these performance indicators can be a great asset to your business. It allows you to analyze performance across departments and maintain high standards in supplier diversity and supplier management. With software tools, you will have the ability to build detailed reports, establish key performance measures, assess risks, and receive complete visibility of how your team is performing.
Automating the process not only saves companies time but also ensures accuracy. An ideal software solution brings together suppliers, customers and stakeholders into a single platform providing reporting and accountability to help identify areas of opportunity or any potential gaps in performance.
Tips for optimizing your supplier diversity program
Having a supplier diversity program is better than not having one. Once you have one, measuring its performance is better than not measuring it. And once you’re measuring, the next step is to start optimizing.
Implementing strategies such as actively recruiting and engaging diverse suppliers, providing support for these suppliers through educational programs that help build capacity, and developing supplier opportunities using innovative materials can all have a positive impact on your organization’s success.
Clear lines of communication between key stakeholders and the diverse suppliers is also important to ensure positive partnerships are maintained and goals are achieved. Companies should also utilize analytics to review progress, assess current programs, and determine where improvements need to be made in order to maximize success in their diversity initiatives. With a comprehensive approach like this, companies can benefit from being able to leverage a wider range of resources that result from optimizing their supplier diversity program.
Getting started
Achieving your supplier diversity goals requires careful planning and execution. By understanding KPIs and setting specific, achievable objectives, you can create a successful supplier diversity program.
Measuring your progress is essential to ensure that you are on track to meet your targets. Regularly evaluating your performance against critical KPIs will help you make necessary adjustments along the way. Additionally, be sure to keep an eye on trends in the marketplace and learn from other organizations’ successes (and failures). Finally, don’t forget to give yourself credit where credit is due—celebrate your accomplishments!
If you need assistance achieving your goals, Vendorful is here to help. Our team of experts can provide guidance and support every step of the way. Schedule a conversation with one of our specialists today to get started.