Supplier Diversity

On Aug. 20, President Obama proclaimed Aug. 23?29 ?Minority Enterprise Develop-ment Week, paying tribute to the 4 million or so minority-owned firms in the country that ?create jobs, develop new products and services and promote community and economic development.? While just 630,000 of these firms are employers, the president said in the ?Proclamation? he signed on Aug. 20, they provide jobs for 4.7 million workers.??? The growth and expansion of minority enterprises ?is an increasingly critical part of our economic recovery and long-term prosperity,? he said.

To that end, the president has designated $25 billion in stimulus funds.

The growth and expansion of minority-owned companies depend, in part, on the number, size and frequency of contracts these companies obtain to supply goods and services to large corporate, nonprofit and government entities. In the government sector, minority suppliers and their advocates are counting on a U.S. Justice Department move in July to strengthen the enforcement of Title VI of the Civil Rights Act to help them
win their fair share of contracts for federal-agency work.?Title VI stipulates that entities that receive federal funding or are under federal regulation cannot discriminate on the grounds of race or gender.

That means, says Harry C. Alford, president of the National Black Chamber of Commerce, ?your airport, state highway department, bus company, school systems, hospitals, cities, counties, state procurement offices cannot discriminate.?

Writing to chamber members in an Aug. 21 eBlast, he said that California, with its Proposition 209 ? a 1996 ballot proposition that became a law prohibiting public institutions from considering race, sex or ethnicity ? is not in compliance with Title VI as their state and municipal programs all have federal funding in them and/or are regulated by the federal government. ?When the city of San Diego does not let a single contract to a Black, Hispanic or woman-owned business in three years it is indeed discrimination. We will begin filing Title VI complaints as our members bring their cases to us,? Alford warned. ?

In the private sector, the Billion Dollar Roundtable, a nonprofit made up exclusively of corporations that spend at least $1 billion annually with minority and woman-owned suppliers, concedes that minority business enterprises are not getting their fair share of business. Supplier diversity, it suggests, is still a promise to keep.

The group, which was formed in 2001, presses its members to grow their supplier diversity programs by increasing commitment and spending levels each year. At its annual summit in May, it debated the future of supplier diversity against the backdrop of a difficult economic environment and a new administration still taking shape in Washington. ?Engaging diverse suppliers is critical for corporations operating today in global markets. The summit will help lead our efforts at the Billion Dollar Roundtable to chart a vigorous course for future approaches to supplier diversity,? BDR chairman William Moon said at the time. Moon retired from UPS in 2007 as vice president of Global Sourcing and Supplier Diversity.

Titled ?An Integrated Approach to Fostering the Inclusion of Diverse Businesses,? the May summit examined a range of supplier diversity-related topics, including the capacity of diverse firms, relevance of the practice of supplier diversity, certification procedures, government programs and globalization. ?Our theme for the 2009 summit was to address global market challenges facing corporations and diverse suppliers. From the summit, we hope to strengthen buying relationships between corporations and diverse suppliers and synchronize the supplier-diversity strategies of corporations, government and organizations to drive meaningful results and change,? said Sharon Patterson, BDR president and CEO. ?We convened the summit in the nation?s capital? this year to put ideas directly before decision makers.?

As The Network Journal went to press, the summit?s proceedings were scheduled to be published in a BDR policy paper this October. Roundtable members are AT&T Corp., Avis Budget Group, Boeing Co., Chrysler LLC, Dell Inc., Ford Motor Corp., General Motors Corp., Honda, IBM Corp., Johnson Controls Inc., The Kroger Co., Lockheed Martin Corp., Procter & Gamble Co., Toyota Motor North America Inc., Verizon Communications Inc. and Wal-Mart Stores Inc. Dell, Honda and Avis were inducted at the May summit.

According to a report published just days after BDR?s May summit ended, continuing economic instability and global markets will challenge supplier diversity managers to create real value and rethink the scope of their programs. In the report, titled ?The Hackett Group 2008 Supplier Diversity Study Results: Insights into Program Performance and Practices,? study participants identified temporary staffing, facilities management, construction services, contract manufacturing and IT consulting were identified by participants as the categories with the highest opportunity for diverse suppliers. It found that nearly three-quarters of diverse suppliers have less than $100,000 in annual spending with any single participant in the study and these same suppliers account for less than 6 percent of the total reported amount spent with diverse suppliers overall. It also found that global sourcing is ?critical? or ?very important? for more than two-thirds of the participants and more than half believe such sourcing will have a negative impact on supplier diversity programs.

The report focused on supplier diversity performance in the United States and sought to better understand the objectives of organizations related to their supplier diversity programs; the measurements that organizations use to gauge success against these objectives; factors that drive and hinder supplier diversity success; and the impact of globalization on supplier diversity programs. Participants represented a wide range of industries, with an even split between services and manufacturing, average annual U.S. expenditures of $4.9 billion, annual U.S. revenues of $17.7 billion and average annual global revenues of $22.6 billion.

The report foresees a ?turbulent time? for supplier diversity. ?Economic instability will continue and supplier diversity managers will need to insure alignment with changing corporate objectives and that performance reflects the real value created,? it says. As globalization expands, organizations will focus on policies and practices to support their domestic diverse suppliers while rethinking how they define diversity, taking into account the broader notion of ?responsible supply? and such factors as localization, the report says.

Among diverse suppliers, meanwhile, financial problems will continue, ?driving the need for robust supplier management and development programs identifying diverse sources of supply, and nurturing diverse supplier growth and financial stability.? Supplier diversity mangers will be asked to do more with less in the year ahead as organizations focus on efficiency. ???