3 Ways Leading Retailers Are Diversifying Supply Chains for Long-Term Success

Is your enterprise committed to environmental, social and governance (ESG) initiatives? Here’s how to diversify supply chain investments.

According to a 2022 Gartner survey, supply chain organisations are showing a greater commitment than ever to prioritising diversity, equity and inclusion (DEI). In 2022, supplier diversity ranked as one of the top six DEI investment priorities for supply chain organisations across Europe, the United States and Canada. Some major global retailers are leading the way with their supplier diversity strategies, realising long-term benefits such as:

• Unlocking new markets and demographics. This increases supplier competition, resulting in innovation, higher quality of goods and lower procurement costs.

• Building a more flexible, resilient supply chain that can adapt to changing markets and economic uncertainty.

• Supporting the growth of diverse businesses, which fosters a more inclusive marketplace and has positive socioeconomic impacts on underrepresented business communities.

• Enhancing trust and inspiring loyalty from consumers and employees who are prioritising social and environmental values in the companies they purchase from and serve. This can also give companies a larger and more diverse talent pool to hire from.

• Meeting increasingly critical investor and stakeholder expectations surrounding environmental, social and governance (ESG) practices.

European countries are making big strides when it comes to facilitating supplier diversity. In April 2022, Minority Supplier Development UK (MSDUK) launched the European Supplier Diversity Project (ESDP). The project, which 12 corporate firms fund, points to a shift in global and European supply chain management with increased supplier diversity in corporate supply chains.

As a global retailer, you may already be invested in ESG initiatives and looking for ways to diversify your supply chain further. Here’s how some of the world’s leading retailers are supporting supplier diversity to optimise their value chains and improve margins.

1. Create or grow a comprehensive supplier diversity program

Successful retailers aren’t just upping their diverse spend — they are building comprehensive supplier diversity programs that are central to business strategy and culture. For example, Unilever, a multinational consumer goods company based in England, is strengthening its value chain by:

• Setting diverse spend goals. The company aims to spend €2 billion worldwide with diverse businesses by 2025.

• Partnering with existing suppliers to promote diversity. In addition to procuring new diverse suppliers, the company is working with current suppliers through its Partner with Purpose strategy to help them develop more diverse tier-two supplier networks.

• Investing in programs that give diverse suppliers the resources they need to enter corporate supply chains and meet diverse procurement requirements. Unilever has partnered with various organisations, such as the Thailand Office of SME Promotion Board (OSMEP) and MSDUK, to give diverse businesses the training, skills, networks and financial assistance needed to grow. It’s also one of the companies funding the ESDP to support supplier diversity across Belgium, France, Germany, Ireland, the Netherlands and Sweden.

• Measuring the progress of its supplier diversity program through reliable supplier data. Unilever even has an official Supplier Diversity Privacy Notice to enforce supplier data rights while using supplier information to evaluate and improve its supplier diversity program.

Establishing an extensive program is crucial for retailers that aim to put supplier diversity at the forefront of their growth and sustainability strategies and realise its long-term benefits.

2. Leverage procurement technology for supplier diversification

Retailers such as Unilever are successfully procuring more diverse suppliers and supporting the diversification of tier-two suppliers. But qualification and procurement processes are often performed manually. Gathering information about suppliers’ diversity — such as their workforce demographics and ESG initiatives — is cumbersome and time-consuming, if reliable data even exists. Finding and qualifying new diverse suppliers can be equally resource-intensive.

Progressive companies are starting to adopt sophisticated spend management and procurement platforms to make faster data-informed decisions when diversifying their supply chains. These solutions combine your business data with external supplier data for more accurate procurement decisions. More specifically, procurement technologies can enable your company to:

• Improve business spend visibility and illuminate opportunities for supplier diversification.

• Benchmark ESG and diversity targets, allowing your business to set unique supplier diversity goals against which to measure progress.

• Efficiently access reliable, comprehensive diversity insights about suppliers — both current and prospective. Some solutions even use sophisticated AI technology to match your business data and diversification goals against a database of diverse suppliers.

• Track the progress of your supplier diversification strategy in real time.

One example of this type of solution is Arkestro. This “predictive procurement orchestration platform” integrates data and functionality with a company’s existing technology stack. It has been used by companies for their supplier diversity strategies, improving visibility into existing supplier diversity metrics and facilitating ESG reporting. The result has been an increase in diverse spend of up to 24% for some companies.

Similar solutions, such as Coupa and TealBook, are helping retailers gather accurate supplier data and make more informed and efficient diverse procurement decisions.

3. Incentivise diverse suppliers with better access to working capital

To meet the demands of leading retailers, diverse suppliers need access to the working capital required for growth and innovation. Early payment programs — which give buyers a small discount in exchange for early invoice payments — are a reliable and cost-effective way for small, women- and minority-owned businesses to improve cash flow. These solutions not only help diverse businesses grow but also establish win-win buyer-supplier relationships and build stronger, more diverse and resilient supply chains.

This is the guiding principle behind C2FO’s Early Payment program, which gives small and diverse suppliers around the world easier access to working capital. A variety of global enterprises, including 99 of the Fortune 100 companies, implement C2FO to engage with and fund diverse suppliers through accelerated payments. This includes Walmart, which often tops the list of global companies supporting diverse business growth through its supply chain strategy.

“Thoughtful and bold practices are essential to Albertsons Companies’ diversity efforts. With our dedicated early payment marketplace from C2FO, we help suppliers enhance their cash flow and expand our ability to support diverse businesses.”
— Jonathan O. Mayes, SVP and Chief Diversity and Inclusion Officer, Albertsons Companies

C2FO’s focus on ESG and supplier diversity has also prompted the development of opportunity marketplaces, taking early payments one step further. Using C2FO’s platform, opportunity marketplaces allow large enterprises to segment diverse suppliers. Within the marketplace, these suppliers can request early payments at more competitive discount rates than are available through C2FO’s regular Early Payment program. Opportunity marketplaces have been successfully implemented by enterprise companies, including retailers such as Albertsons Companies.

This gives treasury teams another tool to level up their supplier diversification strategy and provides suppliers with a lucrative financial incentive for qualifying as a diverse business.

The bottom line

As ESG becomes a key priority for global enterprises, retailers are finding innovative ways to enhance their supply chain diversity. By developing comprehensive supplier diversity programs and leveraging new technologies for diverse procurement, retailers can support diverse suppliers and their communities. At the same time, they can improve margins and develop a healthier and more sustainable value chain.

Access to capital remains one of the biggest growth barriers faced by minority- and women-owned businesses around the world. Giving diverse suppliers easier access to working capital is one of the most effective ways that large enterprises can level the playing field and facilitate more diverse supply chains. Many leading retailers have successfully diversified their supply chains by using C2FO’s Early Payment program — and opportunity marketplaces — to help diverse businesses grow and provide an incentive for diverse and ESG-focused suppliers.

Interested in learning how early payments can help you diversify your retail supply chain? Here’s how it worked for Costco.