Taking Creative License - increasing business for minority suppliers

Black Enterprise, June, 2000

Here's how Minority Suppliers are Flourishing Despite Obstacles

it's been a tough fight. But it's one that minority-owned business enterprises (MBEs) seem to be winning. This business segment is growing faster than ever--despite corporate downsizing, the reduction of the supplier base known as "strategic sourcing", and fewer and fewer government set-asides.

The volume of goods and services purchased by large U.S. corporations from MBEs has grown dramatically over the past year. The National Minority Supplier Development Council (NMSDC) reports that minority purchasing reached almost $50 billion in 1999, a 18% increase over $41.0 billion in 1998, the latest year for which data is complete.

What's happening here? How can MBEs be flourishing, when many are too small to be national suppliers and only an elite number are Tier I or Tier II suppliers?

It seems to be a combination of factors: More aggressive corporate minority purchasing programs; the growth of Tier II supplier initiatives; partnerships between "primes" and MBEs; and joint ventures between MBEs themselves. It all comes down to a strong economy, supplier excellence and, above all-"creativity."

"Creativity" is Key

According to purchasing experts everywhere--from the NMSDC to J.C. Penney and Equiva Services L.L.C., part of a U.S. alliance of Shell, Texaco and Saudi Aramco--creativity is what is enabling companies to expand their minority supplier base, and it is also what is enabling MBEs to grow their businesses.

Examples of such creativity include revamped purchasing programs; more stringent guidelines for purchasing from minority and women business enterprises; partnering; and expanding existing relationships.

The commitment of a company like Equiva says Reg T. Weber, Jr., manager of minority purchasing, can be seen in its policies: "In all bids, we have one minority or women-owned business enterprise," he says. That rule holds true whether the contract is subject to open bidding or negotiation only.

Companies like Equiva are also trying to cultivate existing suppliers to help them expand and move to another level. Pala Interstate, for instance, is a minority-owned construction company that has handled road work in Louisiana. Now Equiva plans to "grow the relationship" by hiring Pala Interstate for projects outside of that state.

Joint Ventures Can Work

Joint ventures are another major trend. Many corporations today are taking the initiative to put minority suppliers together to form a larger critical mass. "It takes a lot of creativity, time and effort to pair up MBEs," says Equiva's Weber. "But when it works, they can form a joint venture strong enough to compete effectively with a national `prime.'"

Suppliers may also gain an advantage through special expertise or niche marketing. Art Avila, manager of supplier diversity at J.C. Penney, says that in retailing the primary suppliers may get so involved in providing all the basic products to the company that "the fashion side of the house tends to be ignored." This may open the door for an MBE with special fashion products.

What can minority companies do to improve their chances of selling to the largest, most established companies? Here are a few tips from experts in this field.

Key Success Tips

* Certification. Make sure your company has certification as a minority-owned business (51% minority-owned) on as many levels as possible--state; city; Small Business Administration; regional and national minority supplier councils.

* "Commercial Business Report." Check to find out whether your Commercial Business Report is accurate. Call the regional office of Dun & Bradstreet (D&B). Large corporations frequently access D&B's database of minority or women-owned business enterprises, the largest of its kind in the country, when looking for minority suppliers.

* Company database. Companies are beginning to encourage electronic registration of minority suppliers. This can save you time and money.

* Electronic RFPs. Soon, companies will be posting their Requests for Proposal (RFPs) on their websites. Downloading the RFP can give you a head-start.

* Explore joint ventures. Let companies know you are willing to partner to win larger contracts.

FEDERATED

For more than a decade we have successfully operated our Minority Vendor Development Program, providing opportunities for minority-owned and women-owned businesses to supply goods and services to Federated Department Stores Inc. In 1999 alone, we procured $186.9 million from certified minority-owned businesses and $116.5 million from certified women-owned businesses, and the program continues to grow.

The mission of our Vendor Development Program is: "To foster a system of purchasing that allows the corporation to meet its needs and goals and create an effective, fair and considerate arena of competition which includes all possible sources." Our program seeks qualified minority-owned and women-owned vendors and suppliers to become potential business partners with Federated to deliver the products and services that will aid us in achieving our corporate objectives. At the same time, it is our hope that this relationship will foster the growth and development of our business partners, as well as the communities we serve.