Why it’s critical and how to get started.
February 2023 – The Journal of Healthcare Contracting
Since the pandemic, supply chain strategies have become top-of-mind for executives across business functions. A recent survey by HealthTrust Performance GroupSM showed that an overwhelming 85% of respondents, who are owners and operators of healthcare systems across the U.S., are now taking a more proactive approach to ensure stable supply chains for their organizations.
One key proactive supply chain strategy is supplier diversity – The use of minority, woman and service-disabled veteran enterprises (MWSDVEs) to provide goods and services to hospitals and non-acute healthcare settings. For providers, supplier diversity has clear operational and supply chain benefits.
Strengthening business operations
An increasing number of organizations are embracing diversity, equity and inclusion (DEI) as critical and integral components of their corporate culture. Taking steps to diversify the supplier base can help hospitals and healthcare providers meet these broader goals.
Diverse suppliers, which are often smaller companies, can also become more ingrained in the businesses they serve. They grow to know their clients’ organizations as if they were their own. As a result, over time, these suppliers can both identify opportunities for innovation and/or business efficiencies and help implement these changes. This might include finding new ways to use everyday products, upgrading technology, or automating processes. These recommendations can strengthen business operations and set new standards for reliable service.
Diversifying the supplier base can also provide other benefits. MWSDVEs are generally more responsive, provide higher quality of service, and nurture more personalized connections. Overall, these practices foster and strengthen ties across local communities. Particularly for healthcare organizations serving local regions, growing community connection points foster trust and improve the quality of care they are able to provide to patients.
Healthcare organizations that have diversity programs in place and relationships with diverse suppliers, tend to be more profitable. Companies in the bottom quartile for gender, ethnic, and cultural diversity were less likely to achieve above-average profitability, according to a study of diversity in the workplace by McKinsey & Company. Similarly, The National Minority Supplier Diversity Council reports that certified minority business enterprises generate $400 billion in economic output, leading to the creation or preservation of 2.2 million jobs and $49 billion in annual revenue for local, state and federal tax authorities. These numbers are steadily increasing.
How to get started
While supplier diversity is a clear business catalyst, healthcare leaders may be averse to changing their current operations; or they may overestimate the difficulty of diversifying their supply base. The good news is that the process to get started is easy. Leading partner organizations provide toolkits to assist in starting and enhancing diversity spending initiatives. Overall, healthcare companies looking to diversity their suppliers should follow these steps:
- Take stock of current relationships. Hospitals and health systems generally have identified spend targets around MWSDVE businesses. As a result, most will typically have diverse suppliers on their roster. So, to start, it is important to dive into the data and understand current contracts and relationships.
- Confirm executive support. Diversity goals cannot be accomplished without prioritization and clear communication from the top. It takes focus, collaboration and intent. Before going any further, it is critical to confirm the business’ key decision-makers are aligned and willing to champion related efforts.
- Establish clear goals. Set concrete, finite and realistic objectives. For example, increase diversity spend by a certain percent over the next 12 months, or establish a diversity spend threshold for a given project. Then talk about the goals, not just with employees and others within the company, but with prospects, clients and your supplier base. Make it clear that the organization as a whole is serious about finding the right companies to partner with and infuse this focus on diversity across all of your contracted products and services.
- Build slowly and steadily. Once goals are established, work to build toward them in small but meaningful ways. This might include consolidating language interpretation services or cleaning products distributors from many into one diverse service provider. Every choice will move you closer to your goals.
Looking beyond supply chain
Enhancing supplier diversity works best when it is part of larger DEI initiatives across an organization. Businesses looking to establish an organizational focus on diversity should think holistically about where overall impact could be made. This should foster broader discussions around DEI related to business operations, talent acquisition and retention and governance structures. Leaders must set clear paths for their overall diversity strategies and then promote the imperatives throughout their divisions.
By increasing the focus on organizational diversity, hospitals and other healthcare facilities can make a meaningful impact on both their corporate culture and the communities they serve.