Over the past six months, the Northeastern Lab for Inclusive Entrepreneurship has conducted research to gain a better understanding of the state of supplier diversity in higher education from the perspective of procurement professionals. We wanted answers to these questions:
- What percentage of institutions have formal supplier diversity programs?
- What is the perceived level of top leadership commitment to supplier diversity?
- What challenges do procurement professionals face in promoting supplier diversity?
- What additional training do they want to help them be more effective?
- And what practices and approaches are working?
Based on the responses of 101 procurement professionals, we will be publishing a detailed report of findings at the beginning of 2024. To add context to the results, we benchmarked some of the survey questions with Supplier.io’s 2022 State of Supplier Diversity Report, which reflects responses from over 200 companies of different sizes and industries.
Here are some preliminary findings.
What percentage of institutions have formal supplier diversity programs?
Figure 1 shows the breakdown of universities/colleges that either have formal supplier diversity programs, or they plan to implement a program, or track diverse spend informally.
As illustrated by the Supplier.io survey, the private sector has had a head start in promoting supplier diversity, with 34% of the companies in the sample reporting formal supplier diversity programs for at least ten years, compared with only 4% in 2017.
In 2022, 45% of the ‘all sector’ companies had formal supplier diversity programs, compared with only 31% of the higher education institutions (HEIs). A promising sign is that 31% of the HEI’s reported plans to implement formal programs, compared with only 12% of the Supplier.io sample. If these plans are realized, 62% of HEI’s will have formal programs to increase the participation of diverse small businesses.
Why is this important?
A recent study sponsored by the National Minority Supplier Development Council finds that “companies with diverse supplier bases show 133% greater return on procurement investments” (NMSDC, 2023). The available evidence strongly indicates that the creation of a structured program is essential for ingraining a supplier diversity mindset within an organization’s cultural fabric and operational practices. Drexel University’s Executive Director of Economic Impact & Workforce Inclusion, Allen Riddick, underscores the importance of a formal program: “The Supplier Inclusion Program is one of several ways Drexel works to include moral and ethical standards as it relates to fiscal responsibility. Our program aims to keep local and diverse businesses actively engaged in Drexel’s purchasing activity.”
What challenges do procurement professionals face in promoting supplier diversity?
Figure 2 indicates that respondents in both surveys face very similar challenges in expanding their supplier pools.
At the top of the list for both groups was a perceived difficulty in locating diverse suppliers (69% for HEIs, 73% the Supplier.io sample). This is perhaps surprising, since the Lab’s survey of diverse small businesses (click here to download the report) showed that, while many of them would like to do business with HEIs, most of them find the barriers too insuperable. There is clearly a disconnect!
Here are some of the other top challenges:
- The survey results revealed that a significant majority, comprising 77% of our sampled participants and 68% of respondents from HEI Supplier.io, identified the challenges associated with staffing and budget allocation as ranging from somewhat to extremely difficult. This highlights a noteworthy disparity, indicating that procurement staff in Higher Education Institutions (HEIs) face more pronounced constraints than their counterparts in private sector companies, whose challenges were comparatively lower.
- Among two-thirds of respondents from both sampled groups, deliberately seeking out diverse suppliers was recognized as a major organizational and cultural challenge. Making the business case for greater supplier diversity was perceived by respondents as less of a challenge, though still a significant 43% of HEI respondents reported the need for additional support in increasing the number of minority small businesses.
The growing body of evidence that local and diverse businesses frequently deliver higher-quality products and services with enhanced innovation at competitive costs implies that procurement teams can now strongly advocate for supplier diversity.
Beyond the ethical and social considerations, a diverse supplier base brings a wealth of perspectives, skills, and experiences, injecting a fresh vitality into the procurement process. This infusion of diversity sparks innovation as different backgrounds and viewpoints converge to create unique solutions to challenges, ultimately driving a company’s competitive edge.
Figure 2
In the next blog post, we’ll share what procurement professionals identify as practices that are moving the needle to increase supplier diversity in higher education.