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Debunking the Myths of Supplier Diversity: Myth #2: Small, Diverse Suppliers Can't Handle Our Volume

a graph with lines going up and down with the title: Can Small Diverse Businesses Scale for Volume?

On last week's blog, we started to look at the most common myths we hear around the topic of supplier diversity, Myth #1: There Aren't Enough Diverse Suppliers. This week we will take a look at Myth #2: Small, Diverse Suppliers Can’t Handle Our Volume.

In today’s dynamic business landscape, supplier diversity has become an important part of an organization's commitment to fostering diversity, equity, and inclusion throughout every aspect of their business. Recognizing the value of a diverse supplier base, many companies are actively seeking to engage with small, diverse businesses. However, one of the barriers and misconceptions that gets in the way is that smaller, diverse suppliers can’t possibly handle the volume of product or service the larger company needs to purchase.

Perhaps a small, diverse supplier can’t handle a million-widget order or be a multi-location service provider yet, but given the right opportunity, many diverse suppliers are currently ready and willing to support the needs of larger businesses or government organizations or are prepared to scale up to meet those same needs. You see, a small diverse-owned business operates differently from corporate businesses in terms of risk. They will scale up quickly AFTER the opportunity arises as opposed to putting their company at risk by scaling up too soon without signed contracts. We know this and live it every day as a small, certified women business entity.

When Lesley, Jill, and I were at the Indiana Department of Administration, we saw this very scenario play out. The state was looking for a pest control supplier that could administer services at all state-owned properties throughout Indiana -- that’s a big job! The state had responses from many well-known pest control companies, but the supplier who put together a winning proposal for statewide coverage was a small, diverse business.

After the award, the supplier ramped up their operations by hiring additional service staff and procuring more service vehicles and equipment to handle the larger demand. This made for an easy transition for the state from the previous vendor to the new vendor. The supplier even earned additional business that was outside of the original contract scope because of the great service they provided. This is a classic example of an organization’s investment in supplier diversity paying off for both parties.

Get Curious, Not Judgmental

Here are five key questions to ask when small, diverse suppliers respond to a bid or answer a request for proposal and there is concern about how they will handle the volume.

1. Strategic Partnerships

Is the supplier collaborating with other small vendors to form strategic

partnerships that allows for shared resources, knowledge, and capabilities? Joint ventures can enable companies to collectively meet the volume demands of larger contracts.

2. Investment in Technology

Is the supplier embracing technology to improve operational efficiency and increase production and/or service capacity? In other words, what can be automated/ digitized that would allow the supplier to scale and is the supplier willing to invest in that technology, if awarded the contract?

3. Access to Capital

Is the supplier able to secure financing if necessary to scale their operations?

4. Capacity Planning

Does the supplier have a capacity plan to forecast their demand? This proactive approach will ensure that the supplier can meet the volume requirements without compromising quality.

5. Employee Training and Development

Is the supplier investing in training programs to cross-train employees? This ensures that the workforce is equipped to handle increased production volumes. An adaptable workforce is essential for successful scaling.

But what if the supplier indicates they can’t handle the volume? One option is to bring them in as a Tier 2 supplier for that product or service. This helps the small, diverse supplier gain experience in servicing a large customer, which could then lead to capacity to provide direct services in the future.

Interested in learning more about supplier diversity and how it integrates with diversity, equity, and inclusion? Take our freely-offered, one-hour on-demand course, Supplier Diversity: The Missing Piece of DEI Strategy. And if you're a licensed attorney in Indiana, you can earn one hour of ethics CLE!

Do you still have questions about supplier diversity? We'd love to help your organization diversify your spend. Schedule a discovery call to learn more.

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