Balancing Cost Savings and Supplier Diversity

Cost savings are constantly on the top of mind for procurement specialists. However, according to a survey by the National Association of Education Procurement (NAEP), over 58% of procurement offices are also responsible for supplier diversity¹. A diverse supplier is a business that is at least 51% owned and operated by a member of an underrepresented group, such as a racial or ethnic group, a veteran, or a member of the LGBTQ+ community.

Supplier diversity creates opportunities for organizations to positively impact their community and create supply chain resilience while obtaining the goods and services they need. But many supply chain experts view this as a threat to cost savings. According to Geraint John, former Vice President Analyst with the Gartner supply chain practice, “60% [of supply chain executives] admit that their supply chains have not been designed for resilience, but cost-efficiency. The challenge will be to create an operating model for supply chains that combines the best of both worlds.²”

How can you effectively balance these two priorities? Finding diverse suppliers doesn’t mean having to sacrifice your budget. Here are three ways the two can work in tandem: 

Benefits of a supplier diversity program

1. Increases the number of potential suppliers.

According to the 2021 Annual Business Survey (ABS), approximately 20% of employer businesses were minority-owned; 5.6% were veteran-owned; and around 21% were owned by women³. Collectively, diverse-owned companies represent a large swath of American businesses, meaning you’ll have a broader number of suppliers to choose from. A broad pool of suppliers promotes competition, which can in turn drive down costs, leading to a more resilient supply chain.

2. Generates value.

Responsible purchasing programs can help your school realize greater cost savings through risk reduction, improved reputation internally and externally, and new value creation opportunities. According to a World Economic Forum report, organizations that implemented responsible purchasing achieved a 9-16% reduction in supply chain cost and a 15-31% increase in brand value⁴. With Amazon Business Analytics, you can gain visibility into your organization’s purchases and help quantify the impact of your supplier diversity program.

3. Strategically contributes to your organization’s goals.

According to a report by the IBM Center for the Business of Government, approximately 20% of total operating budgets at universities are spent on procurement⁵. By delivering increased business value and aligning with the organization’s broader social responsibility goals, procurement can move beyond supplies and redefine itself to play a more strategic role across the organization. 

By focusing on the benefits of a supplier diversity program, you can better align your school’s social responsibility goals with its cost savings efforts. Balancing the two doesn’t have to be a challenge: Amazon Business combines procurement expertise with curated solutions to help organizations define, meet, and measure their social responsibility goals. Visit the Amazon Business Social Responsibility page to learn more.

1. naepnet.org, 2021
2. Gartner supply chain survey, 2021
3. Census.gov, 2021
4. World Economic Forum, Beyond Supply Chains: Empowering Responsible Value Chains, 2015
5. IBM Center for the Business of Government, Benchmarking Procurement Practices in Higher Education, 2007