Inclusive Procurement/Supplier Diversity – Why Do We Need It?

Some might say our world of social tensions, of huge discrepancy between the advantaged and the less-advantaged, and divergence between the employed and the un-employed, has a main differentiator at its root – economic empowerment (rather lack of it). Imagine having the power, the ability to make decisions that could narrow those gaps. You could make a massive contribution to the greater good of society.

That is the aim of the MSDUK, and according to this membership network, you, the procurement practitioner, can do exactly that. Set up specifically to drive and encourage uptake of inclusive procurement – procurement that gives new, small, innovative suppliers a chance – it focuses mainly on the ethnic-minority-owned businesses, but through its work, helps change the lives of the wider body of marginalised or non-mainstream businesses, and the communities they affect.

How can the procurement practitioner make such a difference?

In order to answer that, let us tell you a story …

In 2000, Mayank Shah came to London from India. He had been an entrepreneur all his life, running a range of small businesses in Delhi involving in part the procurement of raw material for leading OEMs. He came to the UK to complete an MBA, and that led him to undertake a PhD on how immigrant ethnic-minority business entrepreneurs can be helped to grow by engaging in corporate supply chains (the process known as supplier diversity). He admits: “Most of the time a doctoral research can be very academic and boring – but I was addressing real challenges and real issues.” These ‘issues’ are the same for every immigrant: when moving away from your roots, to a new land, where no one knows you, you have to work twice as hard to be successful.

“Minority-owned businesses,” he says, “are mostly led by people who have a greater desire and are hungrier to succeed.”

Mayank was excited at the prospect of giving these businesses a helping hand. In 2006, after a period of intensive research, he launched MSDUK (Minority Supplier Development UK Ltd), which has rapidly become a network of more than 40 purchasing organisations, 500-plus buyers and an extended community of over 3000 ethnic-minority-owned businesses, generating over £70 million worth of business transactions over the past 10 years. They work together to share knowledge and build relationships to help them achieve growth. “My driving force,” he says, “was not to make money, but make an impact for the greater good.”

The biggest challenge he finds, is what he calls economic empowerment. We see social tensions and inequalities all around, because economic benefits of growth are not equally and fairly distributed. Economic empowerment of all is critical to a stable, fairer and peaceful society. An "Inclusive Procurement" approach can be a catalyst when it comes to creating jobs, supporting SMEs, engaging the underrepresented business communities and reducing socio-economic inequalities.

So his message to procurement professionals is “You are the change agents, you may have to face constant challenge of supply chain consolidation, finding savings, but as budget holders, decision makers, you can also bring innovative ideas by working with SMEs and diverse businesses, helping create new jobs, sustain communities and create wealth. By doing so, you are also helping your company be a good corporate citizen.”

The fundamental role of any procurement organisation is to make its supply chain more competitive. It should be looking for new suppliers, including from different backgrounds and cultures. Innovation, flexibility and nimbleness don’t come from the big players, but from smaller and more diverse firms, like minority-owned ones.

Increasingly, the customers of the big players expect them to behave in a more socially conscious and conscientious way. You have to now demonstrate social value when bidding for many government contracts for example. As Mayank says: “in a recent (2012) study we found that more than 70% of businesses on our network were from areas with lower-than-average unemployment, but created a higher-than-average number of jobs. If we help the small, marginalised businesses, we will create more wealth in the communities that really need it.”

“In the US, where Supplier Diversity sits high within overall corporate strategy and is mandated in many areas of government supply chain, focus is more on measuring spend with minority-owned businesses. However, measuring spend should not be the only criteria to measure success, as in many cases that leads to bad procurement behaviour. Measuring the number of new businesses introduced to the supply chain and the socio-economic impact it makes in communities should be the new benchmark for measuring success of supplier diversity.”

Of course you need corporate buy-in and leadership support to drive inclusive procurement, but it needs passionate individuals to deliver results too. In his 10 years of managing MSDUK, Mayank has found that for companies to excel in this area are those that had a top down, bottom-up approach. Procurement professionals cannot do it on their own; but can drive the programme, push to get senior management support and buy-in, and then actually make things happen.

If you are passionate about this subject, or interested in understanding more, MSDUK is hosting an event 21st-22nd September in London. The programme and details are here and it looks like it will be an enjoyable and interesting two days with presentations, interactive panels and workshops. We will be there, so if you can’t make it, do look out for our coverage.

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