Supplier Diversity Programs in Pharma: Best Practice Guide

Supplier Diversity Programs have become increasingly important for businesses looking to enhance their supply chain operations to be more diverse and inclusive.

Supplier Diversity Programs aim to provide opportunities for diverse businesses, including those owned by women, minorities, veterans, and LGBT+ individuals, to participate in procurement activities.

A 2020 report by the Healthcare Supplier Diversity Alliance found that diverse suppliers in the healthcare industry have a significant impact on the economy, generating over $1.8 trillion in economic output and creating over 12 million jobs.

A report by Pharmaceutical Commerce found that, in 2019, the top 10 pharmaceutical companies in the world spent a total of $23 billion on diverse suppliers.

In this article, we will discuss what Supplier Diversity Programs are, why they are important in the Pharma Industry, how they can be implemented, and the benefits and challenges of such programs.

What is a Supplier Diversity Program
Benefits of Supplier Diversity Program in Pharma
Supplier Diversity Certification Examples
How to Implement a Supplier Diversity Program in the Pharma Industry
Results of Supplier Diversity Programs in the Pharma Industry
Challenges around Supplier Diversity Programs in the Pharma Industry

“A diverse supply chain is vital to creating a vibrant and successful business. At Bristol Myers Squibb, we’re committed to advancing diversity and inclusion in our supply chain as part of our broader mission to drive transformational change in health care.”
Giovanni Caforio, Chairman and CEO of Bristol Myers Squibb.

What is a Supplier Diversity Program?

A Supplier Diversity Program is a proactive business initiative that seeks to ensure that diverse suppliers have equal opportunities to participate in the procurement activities of a company. These programs aim to increase the number of diverse suppliers in a company’s supply chain, which can help create economic benefits for underrepresented communities and improve the company’s reputation.

Diversity in the supply chain is important because it promotes a culture of inclusivity and creates a more level playing field for businesses owned by women, minorities, veterans, and LGBT+ individuals. Supplier Diversity Programs help to eliminate barriers to entry for these businesses, which may have historically faced challenges when attempting to secure contracts with larger companies.

The five different types of diversity in suppliers are:

• Minority-owned businesses: This refers to businesses that are at least 51% owned and controlled by members of a racial or ethnic minority group.
• Women-owned businesses: This refers to businesses that are at least 51% owned and controlled by women.
• LGBTQ-owned businesses: This refers to businesses that are at least 51% owned and controlled by members of the LGBTQ community.
• Disabled-owned businesses: This refers to businesses that are at least 51% owned and controlled by individuals with a disability.
• Veteran-owned businesses: This refers to businesses that are at least 51% owned and controlled by veterans of the U.S. Armed Forces.

Other categories of diversity in suppliers include:

• Small businesses: This category typically refers to businesses with fewer than 500 employees.
• Disadvantaged business enterprises: This refers to businesses that are owned and operated by socially and economically disadvantaged individuals, as defined by the U.S. Small Business Administration.
• Historically Underutilised Business Zone (HUBZone) businesses: This refers to businesses that are located in economically distressed areas and are owned and controlled by U.S. citizens, and at least 35% of the business’s employees must also reside in a HUBZone.
• Foreign-owned businesses: This refers to businesses that are owned and controlled by individuals or entities located outside of the United States.

Benefits of Supplier Diversity Program in the Pharma Industry

There are many benefits to implementing a Supplier Diversity Program in the Pharma Industry. Here are some of the key benefits:

1. Economic benefits

Supplier Diversity Programs can help to create economic opportunities for underrepresented communities, including women, minorities, and veterans. By increasing the number of diverse suppliers in a company’s supply chain, these businesses can gain access to new markets and customers, which can lead to increased revenues and job creation.

• According to a report by the Hackett Group, companies with diverse supplier programs achieve an average of 133% greater return on supplier diversity investments than those without such programs.
• A study by the National Minority Supplier Development Council found that supplier diversity can result in increased market share, reduced supply chain risk, and enhanced innovation.
• The National LGBT Chamber of Commerce reports that the estimated buying power of the LGBTQ community in the U.S. is $3.7 trillion, highlighting the potential economic benefits of supplier diversity programs that include LGBTQ-owned businesses.

2. Enhancing innovation and creativity
Diverse suppliers bring a unique perspective and new ideas to the table. This can help to enhance innovation
and creativity within a company’s supply chain, leading to new products, services, and approaches that might not have been possible without the input of diverse suppliers.

“Our supplier diversity program is not just about meeting a quota, it’s about creating opportunities and fostering innovation. By partnering with diverse suppliers, we’re able to tap into new ideas and perspectives that help us better serve our patients.” – Ken Frazier, Chairman and CEO of Merck & Co.

“We believe that our supplier diversity program has helped us to become a stronger, more innovative company, better positioned to meet the needs of our customers and patients.” – Alex Gorsky, Chairman and CEO of Johnson & Johnson.

3. Increasing market share and competitiveness

By including diverse suppliers in the supply chain, a company can tap into new markets and customer segments, which can help to increase market share and competitiveness. This can also improve the company’s brand reputation and image, as it demonstrates a commitment to diversity and inclusion.

4. Building strong relationships with diverse communities:

Supplier Diversity Programs can help to build strong relationships between a company and diverse communities. By working with diverse suppliers, a company can gain a better understanding of the needs and perspectives of underrepresented communities, which can help to inform business decisions and strategies.

Overall, implementing a Supplier Diversity Program in the Pharma Industry can have many positive impacts, both for the company and for underrepresented communities.

“Supplier diversity is not just a business imperative, it’s a moral imperative. We have a responsibility to create a more inclusive and equitable supply chain that reflects the diversity of the communities we serve.” – Albert Bourla, Chairman and CEO of Pfizer.

Supplier Certification Examples

While certification isn’t always required to be recognised as diverse, there are several certifications available for suppliers to be recognized as diverse, depending on the specific category of diversity they represent, and vary from region to region. These certifications help validate a supplier’s diverse status and can increase their visibility and opportunities for procurement with companies that have supplier diversity programs.
Here are examples of some common certifications for diverse suppliers:

• Minority Business Enterprise (MBE) Certification: This certification is provided by the National Minority Supplier Development Council (NMSDC) and recognizes businesses that are at least 51% owned, controlled, and operated by members of a racial or ethnic minority group.
• Women’s Business Enterprise (WBE) Certification: This certification is provided by the Women’s Business Enterprise National Council (WBENC) and recognizes businesses that are at least 51% owned, controlled, and operated by women.
• LGBT Business Enterprise (LGBTBE) Certification: This certification is provided by the National LGBT Chamber of Commerce (NGLCC) and recognizes businesses that are at least 51% owned, controlled, and operated by LGBT individuals.
• Disability-Owned Business Enterprise (DOBE) Certification: This certification is provided by Disability:IN and recognizes businesses that are at least 51% owned, controlled, and operated by individuals with a disability.
• Veteran-Owned Business Certification: This certification is provided by the National Veteran Business Development Council (NVBDC) and recognizes businesses that are at least 51% owned, controlled, and operated by veterans of the U.S. Armed Forces.
• Small Business Certification: This certification is provided by the U.S. Small Business Administration (SBA) and recognizes businesses that meet certain size and ownership requirements.

How to Implement a Supplier Diversity Program in the Pharma Industry

Implementing a Supplier Diversity Program in the Pharma Industry requires a structured approach.
Here are some steps that companies can take to establish a successful program:

1. Establish goals and metrics
The first step in implementing a Supplier Diversity Program is to establish clear goals and metrics. Companies should set specific targets for the number of diverse suppliers they want to work with, and track their progress over time. This can help to ensure that the program is effective and delivering results.

2. Identifying potential diverse suppliers
Companies should actively seek out potential diverse suppliers through outreach programs, networking events, and other channels. It is important to cast a wide net and consider suppliers from a range of industries and locations.

3. Evaluating potential suppliers
Once potential diverse suppliers have been identified, companies should evaluate them based on their qualifications, experience, and track record. It is important to ensure that potential suppliers meet quality and compliance standards.

4. Creating a Supplier Diversity Program strategy
Companies should create a Supplier Diversity Program strategy that outlines the company’s commitment to diversity and inclusion, as well as the steps it will take to achieve its goals. This strategy should be communicated to all stakeholders, including suppliers, employees, and customers.

5. Tracking and reporting on Supplier Diversity Program progress
Companies should regularly track and report on the progress of their Supplier Diversity Program. This can help to identify areas for improvement and ensure that the program is meeting its goals.

Implementing a successful Supplier Diversity Program in the Pharma Industry requires a long-term commitment and a willingness to actively seek out and work with diverse suppliers.

Metrics to track the impact of Supplier Diversity Programs

Implementing a successful Supplier Diversity Program in the Pharma Industry can have many positive impacts, including economic benefits, enhancing innovation and creativity, increasing market share and competitiveness, and building strong relationships with diverse communities.

By establishing clear goals and metrics, actively seeking out diverse suppliers, and regularly tracking and reporting on progress, companies can create a more inclusive and diverse supply chain. These can include:

• Supplier diversity spend: This metric tracks the amount of money spent on diverse suppliers in a company’s supply chain.
• Supplier diversity percentage: This metric tracks the percentage of diverse suppliers in a company’s supply chain.
• Economic impact: This metric tracks the economic impact of Supplier Diversity Programs, including job creation and revenue generation.
• Innovation impact: This metric tracks the impact of Supplier Diversity Programs on innovation and creativity within a company’s supply chain.

Here are some of the real-world examples of successful Supplier Diversity Programs:

• Johnson & Johnson’s Supplier Diversity Program has been recognized as one of the best in the industry. Founder in 1998, the program has resulted in a significant increase in the number of diverse suppliers in their supply chain, and has helped to enhance innovation and creativity within the company. As part of Johnson & Johnson’s Health for Humanity 2025 Goals, they committed to achieve a Global Impact Spend of $4.5 billion by 2025 – a goal they exceeded in 2021

• Eli Lilly has been recognised by the U.S. Small Business Administration has recognized as “outstanding” in our efforts to promote and maintain supplier diversity. In 2016, they spent more than $599.6 million with 600-plus suppliers classified as diverse, woman- and/or LGBTQ-owned businesses, as well as more than $558.4 million with 1,500-plus suppliers classified as small businesses.

• Bristol Myers-Squib reported $899M in spending with diverse businesses in 2021 vs. $695M in 2020, with a 45% growth in supplier diversity spending between 2019 and 2021. BMS also issued $7.9 million of health equity grants to 24 U.S. nonprofit organizations aimed at improving access and quality care to medically underserved patients and communities.

• Merck’s Supplier Diversity Program has been in place for over 35 years and has resulted in a significant increase in the number of diverse suppliers in their supply chain. The program has helped to create economic opportunities for underrepresented communities and has improved Merck’s brand reputation.

• Pfizer’s Supplier Diversity Program has been in place for over 15 years and has resulted in a significant increase in the number of diverse suppliers in their supply chain. The program has helped to create economic opportunities for underrepresented communities and has improved Pfizer’s brand reputation.

• Gilead Sciences was named a best place to work for LGTBQ+ equality by the Human Rights Campaign Foundation.

Challenges and Limitations of Supplier Diversity Programs in the Pharma Industry

While Supplier Diversity Programs can have many benefits, there are also challenges and limitations that companies need to consider. Here are some of the main challenges and limitations:

• Limited pool of diverse suppliers: One of the biggest challenges of Supplier Diversity Programs is the limited pool of diverse suppliers. This can make it difficult for companies to find and work with diverse suppliers that meet their quality and compliance standards, which cannot be compromised in pharma.
• Resistance from existing suppliers: Some existing suppliers may feel threatened by the inclusion of new diverse suppliers in a company’s supply chain. This can lead to resistance or pushback from these suppliers, which can make it difficult to implement a Supplier Diversity Program.
• Cost and resource constraints: Implementing a Supplier Diversity Program can be expensive and resource-intensive. Companies may need to invest in new systems, processes, and personnel to effectively implement and manage the program.
• Compliance and quality issues: Companies need to ensure that diverse suppliers meet their compliance and quality standards. This can be challenging, as some diverse suppliers may not have the same level of experience or resources as other suppliers.
• Lack of internal buy-in: Supplier Diversity Programs require a commitment from all levels of the organization. If there is a lack of internal buy-in or support, the program may not be effective.

To overcome these challenges, companies need to be proactive in seeking out diverse suppliers, and need to invest in resources to effectively manage and monitor the program. They also need to communicate the benefits of Supplier Diversity Programs to all stakeholders, and ensure that there is buy-in and support from all levels of the organization.

Overall, while there are challenges and limitations to Supplier Diversity Programs, the potential benefits make it worthwhile for companies in the Pharma Industry to invest in creating a more inclusive and diverse supply chain.

By actively seeking out diverse suppliers, companies can create a more inclusive and diverse supply chain, which can lead to economic benefits, enhanced innovation and creativity, increased market share and competitiveness, and improved brand reputation.

However, companies also need to be aware of the challenges and limitations of implementing a Supplier Diversity Program, and need to invest in resources and processes to effectively manage and monitor the program.