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NovoPraxis

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Jul 30th
Home arrow Opinion arrow Situating supplier diversity
Situating supplier diversity PDF Print E-mail
Written by Kemal Ahson   
Friday, 27 July 2007
Supplier diversity (SD) is not new in the UK. Local authorities, for instance, have looked to promote the use of local suppliers and labour through enforcing S106 agreements for a while now. What is perhaps new, however, is how SD has entered the general lexicon of economic development. SD is suggested as a means of encouraging innovation and increasing value and improving efficiency for businesses. Despite its ambiguity, it can be understood as simply promoting the provision of goods and services by a wider range of businesses and entrepreneurs – for example, Black, Asian and minority ethnic (BAME) and women-owned small and medium sized enterprises (SMEs) increasingly have the skills and experience to provide goods and services to large purchasing organisations in both the public and private sectors.

Understandably, this growing recognition of SD needs to be situated in wider trends in public policy and economic development. Take, for instance, the drive to encourage supply chain efficiencies by Business Link and the DTI. Understanding supply chains is now a priority of business support, and many policy measures and support schemes aimed at improving supply chain potential of businesses and enhancing efficiencies through better supply chain management have been implemented or are under preparation. Although much of the interest around supply chain development remains with large corporate manufacturing concerns, the relevance for SMEs is increasingly recognised. Crucially, however, these initiatives have wider impacts: supply chain development can help maximise efficiency and influence the nature, scale and participation of target businesses in economic activity – a clear aim of SD.

Or take the Local Enterprise Growth Initiative (LEGI). Announced by the Chancellor in his 2005 Budget, it aims to release the economic and productivity potential of the most deprived local areas across the country through enterprise and investment. Through three national-level outcomes - increasing total entrepreneurial activity, supporting sustainable growth and reducing the failure rate of locally-owned business, and attracting investment and franchising into deprived areas - the LEGI programme resonates with the wider aim of ensuring that businesses, especially from economically under-represented groups, are able to access and maximise public and private investment channelled into creating and sustaining employment and enterprise.

Evidently, the relevance of SD is not limited to supply chain efficiency projects or the LEGI: workforce development initiatives, promoted by the Learning and Skills Council, can help under-represented businesses situate themselves in wider supply or value networks; City Growth strategies, which encourage business-led regeneration, provide an opportunity to ensure that SD is an organisational theme for public intervention when promoting community renewal; the New Deal for Communities programme can help facilitate local SMEs, especially BAME- and women-owned companies, access contracting opportunities in the re-development of places; and spatially focused programmes and actors such as Business Improvement Districts (BIDs) and Urban Regeneration Companies (URCs), offer the chance to identify and assess how cross-cutting concerns – crime and sustainability, for instance – can be linked to diversifying local economies.

The context within which SD is being promoted, however, is characterised by a number of tensions. For example, the latest Budget highlights the value of SD. And yet it also points to an additional £200 billion in Public Finance Initiatives (PFIs) which may reduce the use of SMEs and sub-contactors in delivery. There also remain some demand-side barriers: some public purchasers maintain that the European Procurement Directive and wider EC competition policy do not easily accommodate SD or that there are insufficiently diverse businesses to deliver goods and services of the necessary quality and standard to meet ‘Best Value’. And in a global economy there are often parallel and competing drivers and policies in process - Ford champions SD through various initiatives across the world and yet its closing of a car manufacturing concern in the Midlands last year had severe implications for under-represented businesses in the region.

In many respects, the promotion of SD in the UK is still at an early stage. Nevertheless, as a policy and practical tool for enhancing economic development it offers enormous potential. Naturally, the test will be in applying further the ‘theory’ of SD in practice. But if stronger links with current initiatives to promote employment, enterprise and community renewal are forged, SD will have a lasting impact.

Dr Kemal Ahson is the Managing Consultant of Lifeworld Ltd.

For further information about economic development, supplier diversity and procurement he can be contacted on 020 7937 0919 or This e-mail address is being protected from spam bots, you need JavaScript enabled to view it


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