Supply chain is at the core of the life sciences industry, representing a substantial portion of the workforce across diverse continents and cultures. However, the function lags significantly behind others in the sophistication and maturity of enterprise-wide diversity, equity and inclusion (DEI) initiatives.

Traditional measures often focus internally, overlooking the crucial role of external suppliers and manufacturers. While challenges in global material sourcing, tracking and testing are well-documented in the media, DEI remains an often overlooked but vital part of the pharmaceutical supply chain.

The life sciences sector is in a constant state of flux, navigating the journey from research and development to commercialisation. Essential to meeting the intricate demands of the global market is adaptability in pharmaceutical supply chains. While the industry traditionally focused on cultivating internal DEI, an emerging trend emphasises integrating values throughout the entire network, including external entities like suppliers. A recent Harvard Business Review article argues for valuing a company’s diversity focus as much as innovation, resilience or agility. According to Vynamic’s own research, organisations with a purposeful focus on diversity achieve 28% higher revenue, 30% higher profit margins and double net income.

While these outcomes look at the employment of individuals with diverse abilities, similar benefits may arise when DEI is incorporated into the broader company ecosystem, specifically within its supply chain. This intersection of DEI with a company’s supply chain enables all-encompassing organisational diversity. Supplier diversity, a strategic approach intertwining supply chain management and DEI, involves deliberately creating a diverse supplier base for procurement. Organisations must actively engage with diverse suppliers, defined as businesses owned by traditionally underserved or underrepresented groups. Specifically, a diverse supplier is at least 51% owned, operated and controlled by a person who identifies as part of a minority group. When determining if a supplier is diverse, this is the only qualifying metric and it does not include the percentage of a diverse workforce.

Diversity in pharmaceutical supply chains varies based on factors such as geographic location, regulatory frameworks and market dynamics. However, the industry has faced criticism for lacking diversity in its supply chains. According to a 2023 Benchmarking Report by supplier.io, companies across all industries spend an average of 3.6% with certified diverse suppliers. This lack of diversity is a significant issue, limiting innovation, competitiveness and creating barriers for underrepresented groups. To address this, calls have been made for the industry to enhance its commitment to supplier diversity, setting measurable goals and tracking progress. While large pharmaceutical companies, including Pfizer and J&J, have pledged to increase supplier diversity, achieving ubiquitous diversity, equity and inclusion in the industry remains a challenge.

Supplier diversity is essential for corporate social responsibility, enabling organisations to positively impact their operating communities. Moreover, it contributes to driving innovation by introducing new products, services and solutions not readily available through traditional suppliers, fuelled by diverse mindsets, perspectives and ideas. It supports economic growth among diverse businesses and suppliers, overcoming growth barriers that challenge their start-up and sustainability efforts. Supplier diversity also enhances competition in pricing and service levels between a company’s existing and new vendors, leading to improved product quality and cost reduction in the supply base. It opens additional channels for procuring raw materials, products, services and solutions, fostering agility and resilience within supply chains. Furthermore, it facilitates the building of relationships with diverse communities, promoting a more inclusive workplace and attracting and retaining diverse employees.

While supplier diversity is gaining importance, organisations, particularly in life sciences, struggle to make progress without disrupting the delicate balance of cost, quality and agility in their supply chain. Targeting and measuring supplier diversity in the selection process is becoming more prevalent, enhancing supply chain performance. Diverse workforces in the end-to-end supply chain (from supplier to patient) help to improve long-term decisionmaking and finding the right trade-off balance. When engaging with traditional suppliers, it is difficult for organisations to perfectly balance agility, cost and quality of service and there are often trade-offs. For example, pursuing cost efficiency may involve sourcing low-cost suppliers, but this could compromise product quality. On the other hand, prioritising quality may lead to higher costs. Contrarily, diverse suppliers can bring different perspectives, innovation and competitive pricing, potentially reducing costs while fostering agility through varied sourcing options.

Although this is challenging to measure precisely, striking a balance between agility, cost and quality is a key pillar of an organisation’s supply chain and critical to gaining a competitive advantage. Opting for a ‘classified’ diverse supplier might involve a higher initial cost, yet this choice can enhance the benefits previously outlined, offering value beyond the immediate financial expenditure. Concerted efforts to procure from diverse suppliers will, in the long run, help organisations balance the relationship between cost, quality and speed/flexibility, ensuring more stability.

As life sciences companies are forced to become more resilient and agile in today’s everchanging and demanding climate, DEI remains an utmost priority both amongst a workforce and more increasingly, in their supplier base.

Vynamic is a leading health industry management consulting company that partners with health and life sciences clients to develop and execute tailor-made supplier DEI strategies.

Carolyn Riegel is a Senior Manager at Vynamic