By: Sydney Lazarus
Procurement functions can play a big role in supporting women-owned businesses, argues a new report produced by UN Women. The report points out that corporations are in a powerful position to help close the gender gap through their procurement and sourcing departments. Even though corporate spend accounts for trillions of dollars every year, only 1% of that sum goes to women-owned businesses. (In comparison, for U.S. federal contracts, the figure is 4.7%)
The benefits of sourcing from more women-owned businesses go beyond the women themselves. The World Economic Forum has found that gender equality is positively correlated with the country’s gross domestic product and level of competitiveness. Similarly, the World Bank has reported that “underused or misallocated” female labor leads to economic losses.
But what do corporations themselves stand to gain? First, and perhaps most important to the c-suite, there are benefits to the bottom line. The report cites the case of AT&T, which “attributed about $4 billion of revenue to the engagement of women suppliers in 2014.” Studies done by the Hackett Group and Cargill have found companies that emphasize supplier diversity programs generate a greater return on investment.
While in recent years companies have tended to prefer large suppliers that would allow them to streamline supply chain operations, this also makes risk more concentrated. A larger and more diversified supplier base allows companies to spread their risk and minimize chances of supply disruption, as well as promote more competition among suppliers. Of course, companies also stand to improve their reputations when they source from women-owned businesses.
There are a number of reasons why women-owned businesses tend to be left out of corporate supply chains, despite the fact that as of 2013, women own more than a third of companies worldwide. The report explains that, compared with men, female business owners tend to have less financial capital and less managerial experience.
Cultural factors also come into play, with women in many, if not most, countries expected to take charge of childcare and housework, leaving less time for developing and growing their businesses.
Becoming a corporate supplier can have a huge effect on a small business’s revenue, growth, and survival. The UN Women report has a number of recommendations for corporations interested in sourcing more from women-owned businesses:
- Simplify the supplier application process. A number of companies take part in Supplier Connection, a standardized application that allows suppliers to apply to multiple companies in one go.
- Limit bundled contracts. Not only does this decrease the risk of supply disruptions, limiting the size of contracts also allows newer, smaller businesses to enter the corporate supply chain.
- Provide post-award feedback. Information on why a tender was not selected can help a business bid more successfully in the future.
- When deciding among bidders, opt for best value over lowest price. The former approach also considers factors such as quality, cost effectiveness, and after-sales service.