Secure Your Business with Vendor Diversity Programs as a Supplier Risk Management

In the current, tricky economic environment, businesses have to focus on supplier risk management. One cannot count on a business to be always successful and in operation, and it is, therefore, best to be cautious and to create a diverse portfolio of suppliers at all times. While focusing on supplier risk management may seem like a way to be too cautious and conservative, it actually can have exactly the opposite effect. A common tactic that is far from conservative is focusing on vendor diversity programs. Even extremely large and successful corporations who are at little risk of financial failure, such as Wal Mart, are utilizing vendor diversity programs as a form of supplier risk management.

Vendor diversity programs encourage businesses to look for suppliers that have been underutilized and brushed aside in the business world. In the past, business was rampant with discrimination. This is falling away as we become a more liberal and global society, and as all groups of people are learning to work with those of other nationalities, genders, races, and classes. This assures you a larger group of suppliers to choose from and makes it more likely that your vendor will weather any coming economic storms.

These programs encourage the use of vendors that are women owned, minority owned, veteran owned, LGBT owned, or SBA defined as a small business. Far from being overly conservative and limiting, this opens up your business to new products, ideas, and customers bases that you may have never considered before. When you work with people who have been underrepresented, you will find yourself exposed to new ideas, products and services that have been underutilized in the marketplace itself. This will encourage customers that you have never attracted before to consider your business or service. It also offers you fantastic social marketing, which is terribly important in this golden age of social media. You can tie your business in with charities and grassroots organizations, which help to foster an image of your business as caring, concerned part of the community.

A choice like this can breed customer loyalty and trust, which is hard to come by in this area of bitter, cynical, and economically hard-pressed consumers. While you help keep your business’s supply chain healthy and safe, you can also give back to the community, expand your product base, and attract more customers than you have ever dreamed of having before. This is a win for society and your business.

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Avoid Finding a Difficult Compliance Management Solution by Focusing on Supplier Diversity

Many issues facing modern businesses require finding a difficult compliance management solution, and creating complicated solutions to regulatory problems. With the current climate of mistrust and lack of faith in big businesses, a compliance management solution seems to be required for nearly everything you do as more and more regulations are put in place, either by the government, by self-regulating boards and committees, by watchdog organizations, or by your corporate office itself. Not all current problems are so difficult and complicated, however. Even some of the biggest, most taxing problems can be easily solved by implementing supplier diversity.

Every business and economic expert agrees that the current financial climate is a terribly dangerous one for small businesses, suppliers, vendors, and even some of the larger, more financially sound chains. A great way to assure that your business is able to withstand the coming trials of the current economy is to practice supplier diversity. This helps assure that you are constantly working with a wider variety of suppliers and vendors than previously possible, increasing the odds that more of your business partners will stay in business for the long term. If you are not risking all of your business on one set demographic or area to get your supplies and products from, you instantly increase your chances of having a reliable source that can weather unforeseen problems in the business market.

This is a remarkably simple practice to implement, and requires very little in the ways of solution searching and planning. All a business does in this case is expanding the sort of vendors they order from. Such programs generally focus on using suppliers that are owned by women, by minorities, by veterans, by disabled veterans, by LGBT members, or by certified small businesses. Many of these business owners come from demographics that have long been marginalized and under used. This is a fantastic market to tap into as it allows you a wealth of new ideas, products, services, opinions, and customers that you previously may not have considered.

This creates several large benefits for your business. In addition to making your business more strong and healthy, you also are doing a social good. This increase the positive image customers will have of your business, and will assure you have a more loyal customer base. This is vital in trying times when customers are more cautious with how they spend their limited dollars.

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Is it Necessary to Manage Risk when it comes to Supply Networks?

Risk management is fundamental to running a successful business regardless of the nature of the business that you operate. It has come into sharp question if it is genuinely necessary to invest in systems to manage the risk that is occasioned by the use of external suppliers or not. While everyone is in agreement about the necessity of these systems within the context of business, the question is whether supplier diversity programs are essential. There are those who are of the opinion that these systems add nothing more to the company than an aspect of diversity and affirmative action. Understanding the basics of these programs is essential in order to understand these programs’ importance and relevance to modern business operations.

 

Supplier diversity programs

These are programs that are used to infuse some diversity in the nature of the suppliers with whom the company operates. It assists the company to increase the overall equality of the different demographics that are used in their supply network. Companies are, therefore, able to create a supply network that closely represents the demographics of the society in which they operate. It is, hence, clear that these programs provide the much needed infusion of equality into the business world. Many people are, therefore, unable to see why what comes across as a project stemming from affirmative action philosophy is able to help a company manage its risk factors. Here is how increasing the diversity of suppliers in a company lowers their exposure to risks caused by external factors.

Homogeneity in suppliers increasing specific risk profiles

Having a highly homogenous group of suppliers increases the company’s exposure to specific risk profiles. This is because the similar the suppliers are the likelier it is that they are exposed to specific risks as a group. This means that even where the company seeks to protect itself from these risks by using the appropriate supplier performance management systems, they will be unable to reduce their overall exposure. The program provides value to the business as a whole and enable them to be operational in adverse socio-economic conditions affecting certain segments of the society too.

Compliance risk factors

Modern business is subject to a number of regulatory and oversight mechanisms that are meant to ensure that the company operates within the law. It is, therefore, necessary for the company to use supplier diversity to ensure that they are able to meet the regulations that have been instituted. This is especially valid as far as economic equality and fair opportunity regulations are concerned.

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How to Create a Functional Supplier Diversity Program for your Business

A supplier diversity program is a means to ensure that the supply network a company uses takes into account the needs of marginalized and minority groups. This is important in ensuring that a company is a resource to the community within which it operates. The marginalized groups are women, youth, and special interest groups such as the disabled, and people who have been otherwise marginalized out of economic activity for one reason or another.
 

Why do you need a functional supplier diversity program for your business?
 

It has been recently discovered that marginalization of some parts of the population has caused a significant loss in economic growth and empowerment. This is because these groups lack the power to participate in economic activity under current conditions. As a result, these groups are a lost resource for the economic growth and development of a country. Supplier diversity is intended to ensure that these groups are integrated into gainful economic activity just as the rest of society. This not only creates economic empowerment and employment chances, but it also fosters a sense of community in society. Furthermore, supplier diversity empowers people to undertake gainful economic activity in a positive way and, therefore, reduced illegal and criminal activity.
 

How to integrate supplier diversity into your business
 

The first step involves taking stock of the entire business supply network, making a point of noting all the groups that are represented in the network. This will help the business to understand which segments of the community have been underutilized. The most effective way to do this is through the use of a data locator. This is a tool that is used to monitor the flow of data and locate data within a company. It can assist the company to track how supplies are sourced and what suppliers are used.
 

Once the data locator has finished the process of cataloguing a business’s entire supply network, the business can now embark on supplier diversification. In order to do this, they need to create a list of prequalified and vetted suppliers from underutilized population segments. They can use these groups to create a stable and reliable supply network that is able to meet all of their needs as a company. An added advantage to supplier diversification is that the business is able to reduce the risk that its supply network faces from external factors. This allows the business to perform effectively.

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Effective Supplier Management System

Supplier management system is the process of defining the structure of relationships between supplier and consumers. It includes how this relationship will be maintained and developed. It involves setting up standards and making sure these standards are certainly met from time to time. These days, more and more sophisticated and easy-to-use tools for building, executing, expanding and automating supplier management system are available that enhance the entire business system. Supply management is generally regarded as a systematic business process that includes more functions than traditional selling, like managing inventory, coordinating the inbound material, and matching it to the internal production logistics. It is vital that these functions are monitored to ensure business remains in a good interest.

Supply management system primarily deals with the oversight of materials, services and inputs, management of suppliers who provide input in the form of goods and material in the market. Usually the performance of the supply management system is commonly measured in terms of the amount of money saved for the firm or company.

A new term that has come up due to increased globalization is the supply chain compliance. As the business grows, it needs to produce more, and in turn need more raw materials and indirect goods. This may mean increasing the number of suppliers that the business has. This increases the exposure of the business to a number of supplier related risks like material risk, quality risk, ethical risk, social risk etc. Failure of the supply chain means failure for business since it can lead to reputational damage, which no organization can withstand in this viral age. Hence, there arises a need for an effective compliance management software system to be put in place that will assess all the suppliers to your business on the safety parameters and secure the business.

Key benefits of a compliance tool for supplier management are:

• It protects the reputation and brand value of your business.
• Helps to identify loops in the supply chain management and minimize the damage they can cause.
• Monitors the activity of suppliers to ensure they adhere to the objectives set out by the compliance department.
• Ensure that risks are adequately handled and resolved in a cost effective manner.
• Improve the performance. Performance targets need to be based firmly and should trend upwards accordingly. If you have a proper supplier management system in place, the business is more likely to perform better.

Compliance risk management plays an important role in the smooth working of the supplier management system because it supports the confirmation of the rule, like specification policy, law or standard. Corporations work hard to ensure that their employees are aware of the relevant laws and regulations and make the effort to comply to them on a regular basis.

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Important Aspects of a Supplier Diversity Program

Supplier diversity programs are solutions that encourage the use of suppliers from diverse backgrounds. The idea behind this business philosophy is to encourage the use of suppliers from marginalized backgrounds. The marginalization can be the result of ethnic, religious, gender, sexual orientation, age, or such other factors. This field of business intends to achieve two goals through the use of these programs. The first goal is to increase the inclusivity of the business environment on a national level. The second goal is to provide tools to empower those people economically that have been previously marginalized. There are certain salient aspects that must be covered in any program that is used to achieve diversity in supply networks. 

Use of a diversity database 

A diversity database is a database of suppliers who come from marginalized groups. These groups can be women, youth, or races that have been marginalized. The database acts as a centralized location of all of the information that pertains to particular sections of the supply network. The database needs to be quite comprehensive and must be kept updated. The information that is contained in this database is what companies will use to increase the diversity of their supply chains. 

Pre-qualification 

For a supplier diversity program to be efficient and successful at its intended use, it must have useful information on the suppliers contained. This means that the suppliers need to be prequalified. Pre-qualification means that these suppliers have been vetted on their ability to meet the needs of their clients. If the suppliers are not vetted, there is the possibility of poor suppliers getting into the information matrix. This will reduce the effectiveness of the supply chain and will reduce the trust that companies using the database place in it. Pre-qualification builds faith and trust in the database and will, therefore, increase the usage of the database. 

Geo-location based information 

An effective supplier diversity program is one that is region based. This is because the location of the supplier is an important factor that every business will take into account. This means that when cataloguing suppliers from marginalized groups the information must be sorted into regions. This way the companies using the database are able to determine the effectiveness of the suppliers that they choose to work with. Diversity in supply chains is not just about community social responsibility through affirmative action. It is a tool that enables a company to increase their positive impact on economic empowerment.

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Why Supplier Diversity is Enhanced by the Use of Data Enrichment Tools

Supplier diversity program is a tool that businesses use to ensure that they have a strong and functional supplier network. They are also able to ensure that the supplier chains that make their supply network are as strong as they possibly can be. This makes the business secured in terms of the ability of its supplier to meet its needs at any point in their operations. That these programs can be bettered is without a question. One of the least appreciated tools that can make a real difference is the use of data enrichment tools in the process.
 

What are data enrichment tools?
 

These are tools that are used to analyze the data that a company produces and derive any actionable intelligence from the same. They enable the company to take raw data derived from its operations and turn it into a useful asset for the company. The first task that these tools perform is cleaning up the data that the company has accumulated. This means that any duplicate entries are deleted, extra information is added if it available, and damaged data is removed or restored if that is possible. The data, once it has been cleaned, is run through a number of processes that seek to identify trends and patterns that can be usefully interpreted to provide value to the company.
 

The process is at the core of business analytics, but it is only recently that businesses have discerned that they could use it for supplier programs. This allows them to identify any weaknesses and inefficiencies in the way that they source supplies and suppliers. They are, therefore, able to take any necessary corrective action to rectify the situation before it becomes a problem to their operations.
 

How does this impact supplier diversity programs?
 

First, it boosts the knowledge base that is used to undertake the process of supplier diversification. The processing of data allows the company to identify trends and patterns that may be too subtle for normal manual methods. Second, it enables the company to identify suppliers who are within its supply network that are not meeting their expectations or those that can bear greater responsibility. This enables the business to optimize the performance of its supply networks. Lastly, it enables the business to automate the process of supplier diversification. This results in time saving and cost saving that improves the supplier diversity performance of the business as a whole.

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