Corporate Spending On Diverse Suppliers Rose An Average Of 54% In Recent Years, According To New Research From Bain & Company And Coupa
NEW YORK, April 28, 2021 /PRNewswire/ -- The wave of national protests against systemic racism in 2020 prompted leadership teams across the country to increase their engagement with businesses owned by Black people, women and other underrepresented groups. Now, close to one year after the wave of protests began, a growing number of executives are confirming that not only is diversifying their supplier base a good move for society, it is a good move for improving business performance as well.
A new report from Bain & Company, with data provided by Coupa, a provider of Business Spend Management solutions and capabilities, analyzes procurement spend of more than 350 companies across global industries. The analysis shows that spending on diverse suppliers rose an average of 54% between 2017 and 2020. Additionally, companies that are in the top quartile of spending on diverse suppliers see an average of 0.7 percentage points more savings off total procurement expenditures, compared to their peer group.
"This data confirms our long-held hypothesis about the business value of diverse supply chains," said David Schannon, who co-leads Bain's Procurement practice in the Americas. "When companies stop thinking of diversifying their supply base as a standalone initiative and start to recognize the benefits of investing in underrepresented groups, we see meaningful business improvements."
UPS, Target, Pacific Gas and Electric, and other leaders have been building more diverse supplier pools for decades, a move that benefits their bottom lines. The report points to some tangible advantages of diverse supply chains, including a higher annual retention rate—to a tune of 20+ percentage points.
Additionally, leaders in supplier diversity tend to have more efficient procurement processes overall. The top quartile of companies engaging with diverse suppliers have higher rates of preapproved spending (+10%), greater use of electronic purchase orders +52%), faster requisition to order processing times (+18%) and faster invoice approvals (+46%) than their peers.
"It's high time we put to bed the myth that diversifying a company's supply chain means sacrificing business results," said Radhika Batra, an expert partner in Bain's Performance Improvement practice. "The data conveys quite the opposite. A well-managed ecosystem of diverse suppliers, including businesses owned by women and people of color, can be a strategic differentiator for companies, generating meaningful returns."
Bain's report identifies four key obstacles that companies need to overcome in order to boost spend with diverse suppliers and retain competitive advantage.
"In the past, decisions related to diversity, equity and inclusion were happening in silos, making it difficult for organizations to realize their full impact," said Donna Wilczek, senior vice president of Product Strategy and Innovation at Coupa. "The data in this report reinforces just how important it is for companies to embed supply base diversification practices right within the spend process in order to maximize business and societal impact in concert."
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