“Supplier Diversity” What? Why?

Find out how creating diversity within your organization and among your suppliers can help achieve your business goals. The ISM Annual Supply Chain Diversity Summit features prominent speakers from different backgrounds and perspectives who will share valuable insights about how to make your organization more successful. Join us for a full schedule of featured speakers, highly-interactive roundtables and extensive networking.

The above statement was copied from the introduction to the Supplier Diversity Summit planned by the Institute For Supply Management for their Supply Management members (used to be called Purchasing Management).  Since roughly the 1960’s, Diversity has been a really big deal in our society.  Almost unquestioned is the assertion that a “diverse” population is a positive benefit anywhere and everywhere in America.  Since the 1970’s, the federal government has mandated that companies doing business with the government have in place policies and procedures to increase the “diversity” of their supply base (companies who supply them with products and services).  Each of a company’s suppliers MUST be rated as to its size (small, medium, large), sex of the owners (females preferred), ethnic origin of its owners (Native American, African-American preferred), and economic condition of owners (disadvantaged preferred).  These government mandates are so ingrained in the business dealings of American businesses that no one ever gives any thought at all to why they exist or if they have fulfilled their purpose.  Call it “Affirmative Action for Business”.

Companies who are owned by minorities or women are give an extra leg up in the race for government supply contracts, and this has sometimes led to interesting outcomes.  Just recently in Seattle, a conviction was announced for a minority contractor, caught embezzling funds from the district, in a “Minority Business Initiative” program.  An entire industry has sprung up, of consultants purporting to teach companies how to diversify their supply chains.

My thoughts are:  What difference should it make to a business owner, of the color of the skin of his suppliers?  When a business chooses vendors, the most operative conditions are ability to supply the product or service, cost of the items purchased, stability of the company, financial condition of the company, and quantity of the product.  Every time a company takes into account the skin color, sex, or ethnic origin of a supplier, one of the previous conditions can be violated.  Just because the government says you have to have a “diverse” supply base, does not mean that this is good for your company.  In fact, the cost of compliance with the government mandates can be a negative factor for your company.  If you are forced to take on less-qualified suppliers simply because they happen to have a minority owner, your business can suffer.  And every time the government mandates the companies have a “diverse” work force or supply base, that diminishes a company’s freedom of association, which is enshrined in the First Amendment to the Constitution of the United States.  A company can be sued by an unchosen supplier, who can assert that the only reason the supplier was not chosen for a contract was the color of the skin of the owner.  If minority business owners wish to succeed in business, they should do it the old-fashioned way, by hard work, patience, making a superior product, and selling it on its own merits in the marketplace.  No business owner should succeed solely on his “protected class” status, or due to a government mandate on his customers.

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