Vendor Diversification: Less Risk, More Reward

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What happens when your reliable supplier becomes less reliable? When your supply chain experiences natural disasters, economic issues, or political strife, you’re stuck with no stock and a horde of customers expecting their products to come in. Supply chain diversification reduces the risk of your company suffering along with your supplier.

It’s not just a good idea to mitigate your risk either– There are a lot of rewards that come from diversifying your supply chain. Companies that switch it up often and commit to supplier diversity can reap up to 133% greater return on investment than those who stick with the same vendors year in and year out.

In a recent article from Diversity Best Practices, Member Research Analyst Lindsey Clark said, “On average supplier diversity programs add $3.6 million to the bottom line for every $1 million in procurement operation costs. The high return on investment is undeniable… A positive ROI that boosts socially conscious reputation should push supplier diversity to the forefront of business strategy.”

As if that wasn’t reason enough, here are three more reasons that diversifying your vendors is a necessary and smart move for your business:

It’s cost effective

Oftentimes, vendor diversification can even save you money! When you put the word out that you’re searching for suppliers to diversify your vendor list, you’re going to get incredible offers from businesses looking for networking and sales opportunities. While true that the research and interviewing phase of the process will cost your company time, the dividends it pays in the future more than make up for it.

It helps other small businesses

If you’re a small business owner, you understand how difficult it can be to compete with big box, bulk sale stores. America was built on entrepreneurs just like you, and giving back to that community supports the American dream. Making a commitment to diversify your supply chain shows small businesses in your community (and around the world) that you’re supporting their efforts. In turn, other businesses may soon seek you out as a partner and networking connection.

Product innovation is passed on to your customers

When competition is the key to getting sales, innovation blossoms. Monopolistic companies know that the bulk of buyers are going to continue purchasing their products because it’s easy, cheap, and convenient. What it lacks, though, is the quality and uniqueness of small business talents. Finding the right balance between easy and innovative means that you are able to pass those benefits on to your customers.

Vendor diversification gives you and your customers the chance to sample what the industry has to offer. The current investment in research and development of the perfect vendor list is going to pay off with increased ROI and the knowledge that you are pouring some love back into the small business world.

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