What is Supplier Diversity?
Supplier diversity is a business tactic centered around the idea that a businesses should use suppliers and vendors that represent the diversity in the communities they serve. Through supplier diversity initiatives, corporations and government entities look to include minority-, women- and veteran-owned businesses as part of their supply chain and company operations. Supplier diversity ensures that corporations diversify their supply chains and offer products and services sourced by companies owned by these groups, leading to better products and inclusion throughout their supply chain.
Some entities will establish supplier diversity spending goals or set asides as part of a project to ensure diverse businesses are involved. Some municipal projects and contracts are open to bids from local firms, including diverse businesses. The bidding process helps to break down barriers and prevent supplier monopolies to ensure a fair marketplace for all suppliers.
With supplier diversity, all participants, from the corporation to the consumer, benefit from a superior product and competitive pricing through the bidding process. Consumers benefit from increased competition among contracts. Corporations gain superior products. Minority- and women-owned businesses benefit from increased business opportunities.
Why Is Supplier Diversity Important?
Women- and minority-owned businesses are among the fastest growing sectors of the American economy and a key force behind job growth and creation in the economic recovery. Minority-owned businesses generate over $500 billion in sales each year, while women-owned businesses generated $1.3 trillion in 2011 alone.
According to the latest data from the United States Census Bureau, minority-owned businesses account for 21.3% of all non-farm businesses in the country, 5% of total employment, and these numbers are expected to increase significantly in coming years. There are 8.3 million women-owned businesses in the United States, employing 7,697,000 people.
More statistics about minority- and women-owned businesses are available through the US Census Bureau Survey of Business Owners report and American Express Open.
What’s an M/WBE?
A minority- or woman-owned business enterprise (M/WBE) is any business that is at least 51% owned and operated by an ethnic minority, or woman, respectively. Regardless of size, these for-profit companies can become certified as a diverse business through several organizations and even state or local entities.
Ethnic minorities include African-Americans, Hispanic Americans, Native Americans, Asian Americans, Pacific Islanders, and Asian Indian Americans. Information about the certification process is available through the certification entity, as it can vary among organizations.
Tiers of Supplier Diversity
Different levels of service are often referred to as tiers in the world of supplier diversity. First Tier (Tier 1) programs indicate that a supplier invoices the customer for goods and services rendered directly by that supplier. Second Tier (or Tier 2) programs includes suppliers that invoice the first-tier supplier for goods and services rendered. Second Tier sourcing programs allow smaller diverse businesses to grow and prosper at different levels of the economic food chain while maintaining scalability and sustainability.
MBEConnect and Supplier Diversity
MBEConnect is a diverse supplier and vendor network, bringing diversity to business supplier chains large and small. MBEConnect advances supplier diversity initiatives by offering M/WBEs a place to showcase their businesses in a central location. It is not a certification agency.
