Share this post

Looking at the demographic trends in the United States, American automotive companies are not only marketing more to women, African-Americans, Hispanics and other people of color, they are buying more from companies owned by minorities. For them, the connection between the two is straightforward: When those companies develop minority-owned suppliers, they are also cultivating minority customers.

Companies that sell to the federal government also are familiar with contract requirements featuring minority supplier clauses. Supplier diversity also has become an issue that ethnic or cultural-based organizations are monitoring closely, in the same way that environmental groups have created and publicized scorecards for carbon footprints or waste management practices. Like other examples of corporate social responsibility, supplier diversity programs at companies vary from excellent to fraudulent. Recognizing the need for common practices and standards, the Institute for Supply Management (ISM), a global professional association, recently launched a certification program for supplier diversity, the Certified Professional of Supplier Diversity (CPSD).

The ISM certification also recognizes that creating and managing a successful supplier diversity program takes substantial effort and expertise. Minority-owned companies may be smaller, younger and undercapitalized compared to their competitors. Buyers often have legitimate questions about the ability of those kinds of companies, regardless of the ethnicity of the owners and executives, such as:

• Will the supplier be able to absorb the new business and maintain quality? 
• Can it find working capital to expand capacity? 
• Does it have the depth of management experience to deal with an unexpected crisis? 
• Will its smaller size result in higher prices?
• Are its capabilities narrow, so its value as an eventual strategic partner limited?

On the other side of the equation, developing relationships with alternative, smaller suppliers can keep your current vendors sharp. Smaller companies are more flexible and may give you better service because they are more focused on your purchases. Suppliers from different cultural or ethnic experiences also provide new perspectives that can bring with them new approaches to problems or new product innovations. A successful supplier diversity initiative is one that responds to the potential weaknesses and strengths of new suppliers so the company can maximize the benefits from those relationships.

The place to start a successful initiative is from the top. Once company owners and top management buy in, it sets up an expectation of results. That leaves the second step as identifying how you will measure results. Some choices to consider are percentage of spend, number of contracts, tier depth, quality measures, cost comparisons and the cost of managing the initiative.

Third on the list is identifying an individual who will have primary responsibility for creating those results. Finally, create a company-wide supplier diversity council. Those stakeholders can work with everyone who buys. If their focus is diversity, it’s more likely to happen.

The diversity program manager and council should work through the specifics of implementing an initiative and managing it. Identify categories of spend that are good targets. Indirect purchases are often a good start because young companies don’t have high capital requirements to provide building management or IT services, for example.

To find possible minority-led vendors you might start by contacting one of these business associations, or others like them:

• Asian Pacific Chamber of Commerce
• National Black Chamber of Commerce
• U.S. Hispanic Chamber of Commerce
• National Gay and Lesbian Chamber of Commerce

When evaluating minority vendors, look first for minority certification. That’s a sign a company is looking for recognition and willing to have at least a cursory external assessment to get it. The National Minority Supplier Development Council (NMSDC) is one certifying organization. It also has regional councils and an entire database of over 15,000 certified minority business enterprises (MBEs). The Women’s Business Enterprise National Council (WBENC) is another certifying organization.

Certification is a start, but don’t stop there. Visit facilities and interview managers. Look beyond the company’s chief executive for depth of management and beyond the supplier to its own suppliers. Weaker companies may have weaker vendors. The outcome of this process should be two-fold: First, finding the strongest potential suppliers; second, identifying specific ways to address their vulnerabilities. For instance, consider using your own size to leverage a minority supplier’s buying power.

Some companies ask established suppliers to mentor new ones, but forcing a partnership between two suppliers of the same product or service is asking for trouble. A better model is to bring new suppliers as subcontractors to an established vendor, providing a specific, niche part or service that complements instead of competes with the master contractor.

In any case, stay away from the practice of “churning” minority suppliers with policies that bring them on, then do nothing until they succeed or fail. That’s a strategy that is easy to administer but will never generate the benefits that a well-supported supplier diversity program can bring.

In the end, the success of a diversity program will be measured by how well it helps the company create and manage supply chains that bring real value – cost efficiencies, lower risks, innovations and a positive market image. These are attributes for success that any company might want, and a supplier diversity initiative can be an important contributor.