Rethinking Supplier Diversity Programs at Universities

This is an AArete Higher Education insight

The notion that DEI initiatives, including supplier diversity programs, and economic value are contradictory is unfounded, at least for organizations that adopt long-term, data-driven strategies.

Higher education institutions have a unique role as agents of change — developing the next generation of leaders, conducting groundbreaking research that advances our understanding of the world, and leading sociopolitical conversations and movements. These lofty missions inherently exist on the cutting-edge, yet higher education organizations often exhibit a disconnect between academic endeavors and their business activities.

Higher education is where the leading minds of industries develop. It seems only fitting, then, that they should also be at the forefront of ushering in a new way of thinking about supply chain management. However, that is not commonly the case, and a tenuous economic outlook makes a more innovative approach all the more necessary.

For procurement leaders, strategic decision-making exists in an environment with complex external and internal considerations, and it’s paramount to balance social values with cost-effective approaches to building supply chain partners.

Internally, students increasingly view themselves as conscientious consumers who demand investments in goods and services that reflect diversity, inclusivity, and sustainability commitments. Externally, failing to build diverse supply programs could lead to the loss of donations, loyalty within the community and mutually beneficial partnerships.

The benefits of building a network of diverse suppliers extend beyond moral and ethical reasons. In a 2022 McKinsey survey of procurement leaders, minority- and women-owned businesses provided corporate partners with year-over-year cost savings of 8.5 percent. DEI initiatives can succeed in tandem with the financial bottom line, but a reactionary approach to forming diverse partnerships undermines potential long-term gains.

Higher education leaders must think outside the box and make bold changes to their institution’s supply chain protocol.

Reframe Your Mindset

Procurement has long been viewed as an administrative, by-the-numbers piece of the puzzle in the sourcing goods and services. More recently, these departments have been reevaluated as strategic players, not only for building beneficial relationships but also upholding and furthering broader goals. As the role of procurement evolves, so do the outcomes and expectations that once constituted a job well done.

Regarding DEI initiatives, cost-cutting measures that may have worked in the past are no longer appropriate. In October, the MIT Sloan Management Reviews asked panelists whether monetary investments in DEI should be expected to generate an ROI. The varied responses are indicative of a question without a straightforward answer.

For the 30 percent of panelists that affirmed these investments would generate an ROI, a common thread in their explanations was that although short-term returns may fall, these investments hold long-term value for stakeholders. Meanwhile, the 47 percent who disagreed still echoed the idea that assessing value based solely on short-term returns undermines how diverse partners will benefit stakeholders down the road.

Tried and true strategies may have worked for a long time, but the transformed role of procurement calls for leaders to redefine the meaning of value and rethink their decision-making processes.

Build a Supply Chain That Furthers Your Specific Mission

An effective supplier diversity strategy hinges on an organization’s ability to target strategic and commodity-based partnerships that reflect its unique goals.

While some institutions may focus on building and deepening relationships with local suppliers, other strategies center around critical yet potentially underrepresented demographics: women- and black-owned businesses, suppliers that aid sustainability initiatives, and so on.

Mission statements are often perceived as an inspirational yet superficial reference point — words and phrases to adorn a webpage or presentation slideshow with little impact on everyday tasks or long-term strategy. However, when it comes to forming and achieving supplier DEI goals, these serve as an integral component that impacts each step in the process.

Your mission statement must be more than just a feel-good sentiment; it needs to be reflected in strategic decisions and inform your approach to building partnerships.

Act Proactively, Not Reactively

Predictive approaches to supply chain management can help you identify trends and make better-informed decisions. Develop a strategy now, and you’ll yield greater harvests later. Your sights should be set at least one year or, better yet, three years down the line.

Attempts to retrofit suppliers into diversity goals will be in vain but identifying and securing diverse suppliers early on and planning far in advance — rather than in the moment — will yield significant benefits. Developing the leaders of tomorrow requires foresight and a proactive strategy, but procurement often acts too late to make any meaningful partnerships.

Staying in tune with emerging businesses and shifts in overall university strategic plans is a part of a continuous process. Another key piece of the puzzle is conducting consistent gap analyses to identify opportunity areas and track progress in reaching DEI goals.

Get ahead of the curve, stay current on what’s driving conversations on campus, and identify needs early. Finally, harness this knowledge to develop a roadmap oriented around future needs and goals.

Key Takeaways

Supplier diversity and financial decision-making are often thought of as contradictory forces. This is a misconception.

When organizations adopt new approaches, DEI initiatives can not only coexist with financial strategy, but they can also prove to be a mutually beneficial relationship.

Responding to external and internal interests offers many unique challenges, especially as procurement officials take on new responsibilities. But retooling your approach to building partnerships to focus on minority- and women-owned businesses has value far beyond cutting costs.

These groups have long been undervalued, and their potential for positive scalable growth is largely untapped. Prioritize creating a game plan for the coming years that centers around identifying diverse supplier opportunities, and the positive impact will extend to your organization, suppliers, students, community, and beyond.

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About the Author

About the Author

John has over 30+ years of cross–industry consulting and operations improvement experience. He continues to provide profit improvement services to a range of companies including higher education, healthcare providers, healthcare payers, technology, retail, and other. His work includes strategic profitability improvement, revenue cycle improvements, gross margin improvements, process redesign, and technology implementation services. John has a particular focus on organizational change management supporting his clients in developing strategies for advancing their business to meet new business and regulatory challenges. He is a known innovator and driver of change that produces results by communicating to all levels of the organization. John has a Bachelor of Business Administration degree in Management Information Systems from Pace University, is a member of HFMA and is a published author in Managed Healthcare Executive, CFO and Financial Executives.