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Supplier diversity will help businesses large and small recover from pandemic

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After ensuring Americans’ health, economic recovery will be next on the to-do list. Access to financing will play a huge role but so, too, will access to customers and vendors. Having customers who spend billions on goods and services such as the Fortune 1000 companies increases your chances for high growth.

It is a mutually beneficial relationship between small and big businesses. Large corporations buy the goods and services from 1.1 million small supplier businesses, many owned by minorities, women, LGBTQ+, individuals with disabilities and veterans.

These diverse businesses are what Hello Alice calls the “New Majority.” Alice is a predictive technology platform that helps you find the answers, resources and support you need. It has a COVID-19 Business Resource Center and provides emergency $10,000 grants to businesses with fewer than 50 employees.

Mutual benefits

Diverse small businesses can benefit the Fortune 1000 in many ways:

  • Produce innovative products and services for them to use or sell.
  • Increase competition, resulting in better prices and service levels.
  • Enable them to serve emerging and untapped markets.
  • Purchase their products and services.
  • Acquisition candidates.
  • Highlight their commitment to diversity and inclusion and a shared and durable prosperity.
  • Help with flexibility, agility and resiliency.

Many large corporations have supplier programs. Importantly, these programs could play an even greater role in the recovery of the U.S. economy. Until recently, to document the impact of these programs, supplier diversity departments relied on counting the awards they received and how much their spend increased.

Some even tracked the positive impact these programs had on small and diverse businesses. Others used economic impact studies, which measure changes in business revenue and jobs creation of supplier diversity programs.

“Many large corporations have supplier programs. Importantly, these programs could play an even greater role in the recovery of the economy.”

Tracking UPS’s results

Last year, Stefanie Francis, founder of Hootology, developed a tracking survey so corporations could measure the impact of their programs on the corporate bottom line. Hootology is a research company that helps its clients develop actionable tactics based on its research. It recently released results to its clients for the second Supplier Diversity Impact Indicator (SDII).

Conducted among 3,000 U.S. consumers, the survey balances for income, age, race and ethnicity. Business-to-consumer and business-to-business companies can segment the data to see results by the personal or business demographics important to them.

“We’re now able to show how awareness of supplier diversity lifts the perception of a brand valuing diversity,” said Francis. “On average, it lifts scores for different metrics by between 25 percent and 70 percent.”

Among those who are aware of UPS’s supplier diversity initiatives, they are 86 percent more likely to use UPS’s services than those who are not aware. Right now, awareness of supplier diversity programs is low.”

Francis estimates that only about 4 percent of the general public is aware of supplier diversity programs. However, for every one percentage point increase, 2.5 million more people will consider a corporation's brand in a favorable light.

“Awareness of supplier diversity lifts scores for different metrics by between 25 percent and 70 percent.”

“It is not something we do just because it sounds good or feels good,” said Kris Oswold, Director of Supplier Diversity at UPS. “It is good for our business. Data can help us confirm whether our approach is working.”

This is the first time UPS has participated in the research. They have anecdotal evidence about the impact its program was making.

“SDII fills the gap, providing a more complete picture to assess the return on investment our supplier diversity program is making,” Oswold said.

A top priority

Diversity and inclusion are top business priorities for UPS. The company spent $2.6 billion with small and diverse suppliers in 2018. It buys goods and services across many categories but its spend is greatest on capital projects, construction, fuel, automotive and aircraft parts and repairs, transportation and security guards.

“It is very gratifying to me that UPS came out on the top of the list [UPS was No. 1 for being perceived as a brand that values diversity],” Oswold said.

“Local suppliers add to the stability of the UPS supply chain, and the company has dedicated resources to help diverse suppliers prepare for and find opportunities.”

UPS will use the SDII to make the business case that supplier diversity is good for the bottom line. The report showed just how strongly UPS customers value diversity and inclusion — a core value of UPS. It is reaffirming to know that UPS’s supplier diversity program — one of four pillars of UPS’s diversity and inclusion — will influence customers’ and prospects' intention to do business with us.”

The data will help UPS make informed decisions about how to allocate resources and dollars. UPS is accustomed to dealing with market shifts and other economic forces, as well as disasters and crises. But COVID-19 requires an entirely new playbook, according to Oswold.

“Local suppliers add to the stability of our supply chain. We have dedicated resources to help diverse suppliers prepare for and find opportunities,” she said of the UPS approach to the pandemic.

Given the reception SDII is receiving from its current clients, Hootology is planning to do another wave using this year's data. This will enable additional brands to get the data.

Republished with permission, this article first appeared on Forbes. 

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