Supplier diversity has emerged as one of the important initiatives in both public- and private-sector procurement. It seeks to promote equitable procurement by diversifying and including suppliers owned by underserved people or located in distressed communities. As a result, it may provide economic opportunities to disadvantaged groups and contribute to addressing the racial wealth gap and local economic depression issues (HBR, 2020).
Considering the importance of supplier diversity, some organizations have formulated and implemented relevant policy requirements or voluntary agreements. U.S. Small Business Administration’s 8(a) program is one example, and the Billion Dollar Roundtable is another example. However, assessing the progress has been challenging, primarily due to the lack of data and a monitoring system. This is particularly true for higher education procurement.
In this context, Supplier.io’s Supplier Diversity Benchmarking Report has offered useful insights into the status of supplier diversity, particularly in the private sector. Drawing on the 2023 report, this article attempts to shed light on some of the key findings, interpret them in a higher education context, and inform procurement decision-makers in higher education institutions.
- Key finding 1: Average companies spend 3.6% of their budget with certified diverse suppliers while best-in-class performers do 9.1%. While higher education institutions’ diverse spend is not usually published, some data is available in a few articles and shows that supplier diversity performance in higher education falls short of people’s expectations. In the New England region, for instance, the University of Massachusetts spends only 2% with minority-owned suppliers while even the University of Connecticut, which is regarded as a supplier diversity leader, does 6% (GBH, 2020).
- Key finding 2: Diverse spending is concentrated on a couple of diverse suppliers, with the top 10 diverse suppliers receiving 17% of all diverse spend. A long-tail issue, where a majority of spend is concentrated in specific vendors, is also pervasive in higher education. According to the National Association of Educational Procurement report (2012) that analyzed the spend data of 42 institutions, more than 90% of spend was made to the top 20% of suppliers. As more and more higher education institutions move toward cooperative purchasing, the long-tail issue may be exacerbated while negatively impacting supplier diversity.
- Key finding 3: Construction, administration and support services, and educational services demonstrate the highest spend on specific products and services with diverse suppliers. The industrial composition of private-sector procurement is similar to that of higher education procurement. According to Deltek report (2024), the most common industry for higher education is construction, followed by operations and maintenance, and technology and telecom. More specifically, Virginia Commonwealth University’s Diversity Spend Dashboard shows that services and facilities are the top 2 industries for diverse suppliers.
The 2023 Supplier Diversity Benchmarking Report debunks the myth about supplier diversity. While various entities are interested in the idea of supplier diversity, it seems that the implementation part is still at an embryonic stage. Furthermore, there are significant disparities and variations in diverse spending across different sectors and industries. The concentration of diverse spending among a few suppliers raises concerns about inclusivity and equal opportunities.