Supplier Diversity: Confronting Inequity for Greater Shared Prosperity

Woman inside of a shop holding up an 'OPEN' sign

For nearly 20 years I have had the privilege to work in the field of supplier diversity—proactively encouraging organizations to engage with small, local, women- and minority-owned businesses.

When diverse suppliers thrive, everyone benefits. More jobs are created. More dollars circulate. More tax revenues go back into communities. According to the Western Regional Minority Supplier Development Council (WRMSDC), the 921 WRMSDC-certified minority-owned businesses created more than $12.5 billion (more than $34 million per day) of economic output in 2020 and more than 63,000 jobs.

That economic output will keep increasing as organizations place more focus on their supplier diversity efforts. I am pleased we are making greater strides toward diversity and equity—through supplier diversity programs and beyond—at the San Francisco Fed and in the business world at large.

Important progress has been made since I started my career in the field helping public agencies assess whether they were adequately engaging minority- and women-owned suppliers in their communities and drafting policies to help them do a better job of this. It was immensely rewarding work. It showed me how diversity efforts can help businesses, individuals, and communities.

In 2012, members of the procurement team at the San Francisco Fed, whom I’d gotten to know through my work, encouraged me to apply for a job posting: the Bank’s first dedicated supplier diversity program manager. I knew then that this opportunity—to build a supplier diversity program from the ground up—was an extraordinary one, so I jumped at it.

What I didn’t know when I applied is that, nearly ten years into the job, I would still be feeling challenged, rewarded, and energized in this role, especially as my colleagues and I continue to expand the Bank’s supplier diversity efforts.

My team is well-positioned to contribute to the Bank’s Framework for Change, our commitment to taking action that will result in greater racial and ethnic equity in our organization and the communities we serve. The Framework recognizes that small, uncoordinated actions will not be enough to effect the change we need. Instead, we are taking broad, coordinated action in four key areas—evidence, practice, dialogue, and advocacy—setting and measuring ourselves against audacious goals.

Our supplier diversity efforts touch on all four of these areas, but I believe we can make the greatest impact through practice—implementing policies and practices that advance equity goals and guard against the influence of potential individual biases. Here is what we are aiming for:

  • Since 2012, the Bank has more than quadrupled spending on minority- and women-owned suppliers, from just $5 million in 2012 to $22 million in 2020.
  • We have set a new target of $30 million annual spend to diverse suppliers within the next five calendar years. This represents a 36% increase over last year.

How will we meet this target?

We’ve identified three main areas of focus to get us there.

  1. Strengthen our procurement practices. While our efforts to engage diverse suppliers are strong, we will make them stronger by ensuring diverse supplier participation in all areas. We’re identifying categories and services where we believe diverse suppliers can make up the majority of the vendor pool such as promotional items, select office supplies, and services supporting our facilities.

    Words matter. Recognizing the power of language as the foundation for action, we altered our procurement goals from “making an effort” to include diverse suppliers to saying that we “will include” diverse suppliers.

  2. Introduce our leadership team to diverse suppliers. We are sitting down with our colleagues across business areas to help them set their own supplier participation and spend targets. We are also introducing diverse suppliers in our community to our business leaders so they can meet and discuss their respective needs. While we have access to databases that identify diverse suppliers, we know that numbers on a screen are no substitute for meeting the owner or CEO of a business, having a conversation, and building a relationship.
  3. Invest in diverse suppliers’ success. When diverse suppliers don’t submit bids or proposals on Fed projects, we want to understand why. To that end, we are reaching out to suppliers, asking them why they haven’t submitted bids, and are also reviewing requirements in our requests for proposals (RFPs), evaluation criteria, and contract language to make sure we are not accidentally precluding certain companies from submitting a bid. Once we understand what prevents these companies from competing for our business, we are in a better position to help.

    We are also working with business areas across the Bank to understand why diverse suppliers are not selected for a contract. This helps us address the barriers impacting the engagement and selection of diverse suppliers for procurement opportunities.

    Creating a feedback loop. When diverse suppliers bid for but don’t win projects with us, we want them to know why they were not selected. We’re creating a debriefing process to give them tangible feedback that can help them become more competitive and successful in the future.

We’re also developing a formal supplier development program in partnership with diverse business advocacy groups. Through this effort, we can help diverse suppliers in our community navigate everything from proposal development to procurement and marketing. We can also help guide them on a variety of issues from technology and financial literacy to gaining access to capital.

The San Francisco Fed is committed to creating an economy that works for everyone. By being transparent about our $30 million diverse supplier target and how we’re working to achieve it, we hope to inspire other organizations in both the public and private sectors to emulate our practices. That’s the only way we can continue to move the needle on supplier diversity.

Lynn Reddrick is the assistant vice president of supplier diversity and business partners at the Federal Reserve Bank of San Francisco.

This essay first appeared on the San Francisco Fed’s Medium channel.
Photo credit: Aleksei Morozov via iStock

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The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.