"One misconception about vendor diversity programs is that they only cater to the interests of the vendors. In reality, a diverse supplier base not only offers direct benefits to healthcare organizations including reliability and resiliency along the supply chain but also contributes to the long-term growth of local communities, further supporting the development of MVWBEs and small businesses along the way."
A diverse supply chain is critical. First, sourcing products from a number of suppliers allows for flexibility, particularly in emergency situations. Whether that is securing enough personal protective equipment to combat communicable disease outbreaks or enough fuel to power generators following a severe storm, relying on “sole source” providers limits a healthcare system or individual facility’s ability to react to events and adapt to change.
Secondly, but no less important, is diversity as it pertains to equity and inclusion efforts. A 2023 report benchmarking supplier diversity shared that only 2% of the average healthcare organization’s supply chain spend goes to diverse suppliers like minority-, veteran-, and women-owned business enterprises (MVWBEs). Contracting with small vendors and MVWBEs encourages economic empowerment, innovation, and competition, contributes to long-term growth, and secures a flexible supply chain.
Establishing vendor relationships with minority-owned suppliers also demonstrates an organization’s commitment to promoting diversity and acting out core values through mission-driven work. As consumers grow increasingly aware of where goods are sourced, organizations must be more purposeful in their sourcing strategy. The following elements help build meaningful relationships with vendors to support a successful vendor diversity program.
Organizations looking to grow their diverse supplier base should first assess their existing vendors to establish a baseline before setting goals. This starts by collecting data on vendors who are Tier 1 diverse suppliers and those who are Tier 2 diverse suppliers:
Company ownership and partnerships often change over time. It is good practice to check in with vendors annually to accurately keep track of Tier 1 and Tier 2 diverse vendor spend.
This data sets a baseline to create realistic and actionable goals. In the goal-setting stage, health systems will need to determine their overall vendor diversity strategy and either set a company-wide goal or tailor goals to each hospital or market. Specific areas of the supply chain, such as purchased services, may offer key opportunities to work with diverse suppliers.
The central goal of sourcing from diverse suppliers is to encourage competition and innovation to facilitate growth within businesses and communities. This requires healthcare organizations to implement targeted strategies to find and assess potential vendors. Active listening within the community and within facilities is a crucial aspect of identifying diverse vendors. Within each market, health systems can work with local advocacy groups to facilitate supplier diversity networking opportunities to connect these diverse suppliers with local businesses in need.
Vendor diversity programs are not meant to check boxes, but an effort to develop mutually beneficial relationships. Just as they would for other suppliers, supply chain teams need to carefully assess potential vendor capabilities, footprint, and pricing during the procurement process to determine how the vendor will integrate into the overall contracting strategy. Value analysis should take into consideration analytics that measure total life-cycle cost, time to market, response times, ability to innovate, and quality of programs. During the qualification process, smaller businesses may need additional guidance or support to meet requirements.
Building Relationships & Fostering Growth
Programs with diverse vendors establish loyalty and encourage mutual growth, which can lead to opportunities for standardizing services, reducing costs, improving outcomes, and identifying innovative solutions to common problems. These strong relationships can also help mitigate supplier risk and support long-term supply chain resiliency. Keep in mind the process may require additional time to allow smaller suppliers to grow capabilities to drive powerful, sustainable results.
One of the suppliers Medxcel works with is True Technical Services, a service-disabled veteran-owned small business that provides standardized electrical testing and services. Over time, consolidating spend with True Tech and partnering with them on Medxcel’s Total Electrical Maintenance Program & Overhaul has resulted in tremendous cost savings and standardized reporting to meet compliance requirements for supported facilities.
As with any other implemented program or initiative, health systems will need to consistently assess vendor diversity goals and measure progress. Reporting on diverse vendor spend will illustrate the organization’s commitment and invite continuous growth and improvement. Medxcel measures diverse vendor spend against the spend averages for healthcare organizations (2%), all organizations (3.6%), and organizations with best-in-class diversity programs (9.1%). Through our targeted efforts, we achieved 14.2% Tier 1 diverse vendor spend in 2022.
One misconception about vendor diversity programs is that they only cater to the interests of the vendors. In reality, a diverse supplier base not only offers direct benefits to healthcare organizations including reliability and resiliency along the supply chain but also contributes to the long-term growth of local communities, further supporting the development of MVWBEs and small businesses along the way.
If your organization is interested in diversifying its supply chain but you don’t know where to start, contact us. Medxcel has a dedicated focus on our people and customers, as well as providing tools, processes, support resources, data analytics, and insource strategies that drive results.