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Corporate
Partners in the New Economy
Increasingly corporate America is turning to minority-owned businesses to supply a wide range of products and services.
Some people think they know a thing or two about minority businesses. They think of these companies as marginal, struggling enterprises—lucky to win a tiny order or two from Uncle Sam or from a federal contractor taking instructions from the government. They think that minority enterprises are insubstantial at best, mere shadows of mainstream enterprises that usually have longer track records, more capital, and more ties to old-boy networks.
But if you think those things, you aren't up to date with what's really happening in the marketplace, where the "invisible hand" of capitalism, in Adam Smith's phrase, still reigns. America's largest companies spent an estimated $80 billion last year on goodsand services from America's minority-owned companies. Most of that spending had nothing to do with government mandates. It went to suppliers that proved they could meet—and often, exceed—the most exacting standards of corporate America. The big, mainstream companies and the small, minority companies were all looking after their own interests, of course—but somehow the invisible hand was at work, fostering a stronger economy for all.
The $80 billion in spending—at a time when many big companies are in a very tough purchasing environment—is a testament to the dynamic relationship between America's big companies and its minority-owned enterprises, most of which are small but are powerhouses nonetheless. America is changing—it is more diverse than ever before—and large companies increasingly are seeing to it that their supplier base is more diverse too. This is one way to ensure getting the very best suppliers—many of which are now found among the growing ranks of minority companies.
"As global competition leads corporations to focus on the contribution of purchasing to corporate strategy and value creation, more Asian, Black, Hispanic, and Native American businesses have had a chance to earn contracts and perform well," says Harriet R. Michel, president of the National Minority Supplier Development Council, which oversees a network for matching corporate buyers with minority suppliers. "Minority businesses can be a true strategic resource within the supply chain."
It's not surprising that minority enterprises are becoming more numerous. Minorities represent 30% of the nation's population today—a figure expected to reach 38% by the year 2020. Moreover, entrepreneurship is extremely important to minorities, for it is often their best avenue to advancement in American society. (Black adults—both men and women—are twice as likely as whites to try to start a business, according to a recent study done for the Ewing Marion Kauffman Foundation.) Founders of minority businesses work hard to deliver value to their customers—no doubt extra hard, given that opportunities to enter the mainstream often are still wanting.
For big companies, the advantages of the minority supplier are too great to ignore. In industries from automobiles to financial services, minority suppliers are often among the most coveted. Indeed, in an economy in which consolidation in the mainstream has reduced the availability of many niche products and services, new minority suppliers are often stepping into the picture and providing new alternatives. Thus they are bringing a new dynamism and spirit to sectors that were thinning or being sent abroad.
Many of those suppliers are being amply rewarded. Sales were growing 34% annually for minority firms, three times the overall rate, a report for the Milken Institute, an economics think tank in Santa Monica, Calif., found in 2000.
Of course, the success of this world of minority entrepreneurship would be impossible without corporate America's involvement. As large companies evolve and rationalize their businesses, often shedding noncore assets, they are relying on suppliers to fill the gaps. Working with minority suppliers has become a rigorous management practice, as serious as any other in corporate organizations.
There are many business motives for this activity, explains Debra Jennings-Johnson, director of supplier diversity at oil giant BP. Supplier diversity aids revenue and market share, enhances supplier performance, and helps build a favorable corporate reputation. Revenue and market share can benefit in part because ties to minority suppliers help increase a marketer's ties to minorities in general. Employees of the suppliers often become customers, as do their families and other people they know. As more companies seek to sell globally, they find that in many cases their suppliers are the people with key contacts in foreign locales where people of color are a majority—not a minority—of the population.
Back home, meanwhile, minorities account for an ever-larger share of the population. Increasingly, minority suppliers at home will be giving big companies a leg up in the growing minority communities. While some big companies' own workforces don't yet fully reflect the nation's demographic changes, these companies can rely on the suppliers for market knowledge and perspectives.
Corporate customers are working with all suppliers, including minority enterprises, to build in more flexibility and efficiencies—up and down the supply chain.
But development of minority suppliers has become an art in itself, as big companies seek to ensure that these valuable suppliers will be able to handle increased orders in the future. Companies are trying to widen bid opportunities for minority firms, in part by getting their ongoing, first-tier suppliers to do more business with minority firms as well.
Big companies would often rather work with large suppliers than small ones, other factors being equal, for it's easier to deal with fewer suppliers. This factor long helped make it hard for small firms to get a foothold at big companies. But now that many minority firms have proven their worth, the big companies would like nothing more than for these new partners to become big.
It's never been easier for big corporations to find and use promising new minority businesses. Membership is booming at the National Minority Supplier Development Council, the leading corporate membership organization in the field. Members rely on the council to help them find minority suppliers.
Members are enrolling not just because it's the "right thing to do" (though it is). Rather, many members have expressed a genuine commitment to increasing procurement from minority firms as a "strategic business asset and enduring competitive advantage," says Michel, the council's president. A pipeline to minority communities is an asset that some companies lack—and an advantage to those that have it.
As for the future, demographic trends suggest that
the move to embrace minority businesses will only keep getting bigger. "Diversity is a major thrust at many corporations, and minority supplier development is seen increasingly as part of that goal," Michel says. "Diversity pays big dividends. Healthy minority businesses generate many more jobs in the minority community, an increased tax base, and more potential customers for corporate products."
The Billion Dollar Club
Indeed, what's good for minority companies is also good for the whole economy, and that includes the largest and highest-quality enterprises therein. No wonder that the top supporters of minority enterprises spend more than $80 billion a year, in the aggregate, on goods and services from such suppliers.
In its fiscal year 1993, when Johnson Controls began a supplier-diversity initiative, it spent $2 million with 17 minority suppliers. That was a small first step—but what a start it was. Ever since then, the company has been increasing its purchases from minority business enterprises while also mentoring some MBEs in strategic partnerships and joint ventures.
The efforts have been so successful that last year Johnson Controls won a place in the Billion Dollar Roundtable, an elite club of companies that spend more than $1 billion a year with minority- and women-owned businesses.
"This achievement reflects our success in unifying, strengthening, and expanding a companywide strategy based on supplier-diversity best practices," says Reginald Layton, director of diversity business development for Johnson Controls, based in Milwaukee. "A diverse business strategy expands our business and strengthens our supplier base."
To make it into the club, Johnson Controls spent $1.02 billion with minority enterprises in the fiscal year ended Sept. 30, 2002, on its way to spending even more ($1.07 billion) in fiscal 2003. "What we have managed to do is create a corporate culture that not only thinks supplier-diversity best practices but is continuously designing strategies that will make supplier diversity work," says Layton. And at a time when many small and medium-sized businesses face adversity, Johnson Controls works closely with them to develop strategies for survival and growth.
To underscore the importance of supplier diversity, Johnson Controls requires results of diversity efforts to be reported directly to John M. Barth, chairman, president, and chief executive officer.
Johnson Controls is not simply a customer of minority enterprises; it also has entered into joint ventures with some such businesses. It has partnered with Epsilon LLC to form Bridgewater Interiors to manufacture automotive seating systems. And it has joined with Plastech, a supplier of plastic parts, to form TrimQuest LLC to supply integrated vehicle overhead systems and headliners to Ford.
Partnering with minority suppliers is a competitive edge, says Layton. "Minority companies are more sophisticated than ever. They are helping solve many internal challenges in addition to creating a more competitive supplier environment. Helping them is strengthening yourself."
Reaching Out to Minorities
Naturally, lots of companies want to strengthen themselves, so they are reaching out to minority suppliers. Hold out a welcoming hand, and small companies will embrace it—especially when lots of money is involved.
In 2003 Southern Company boosted its spending with minority-owned and women-owned businesses to $217 million, more than double the $100 million the utility spent in 1998.
During the past three years in particular, "we have put a lot more emphasis on outreach," says Jacki Lowe, vice president of Southern Company's supply-chain management organization, which oversees supplier diversity. Southern Company, based in Atlanta, is reaching out to various supplier groups, working with the National Minority Supplier Development Council, chambers of commerce, and other minority business groups.
As a leading U.S. producer of electricity with four million customers and electric utilities in four states, Southern Company wants to bring more minority suppliers into its fold. However, it isn't enough to find just any minority supplier. "We need to know if they can operate within the constraints of a utility environment," says Lowe.
To get suppliers utility-ready, Southern Company has established an intensive mentoring program. It matches potential suppliers with business units that may eventually place an order. Says Lowe: "We work with them to help them understand how we operate and how best they can help meet our needs. They then have to decide whether it's worth it to do business with us."
Of course, there are areas where minority suppliers have been difficult to find. In such situations Southern Company pushes its first-tier suppliers to get minority suppliers involved as second-tier suppliers—that is, as suppliers to the suppliers.
The result of the expanded outreach, both for Southern Company and for its first-tier suppliers, is an increase in minority-owned and women-owned suppliers in nontraditional areas. The new suppliers include a leasing service provider for IT hardware and a freight company.
For Southern Company, supplier diversity is part of the company's diversity strategy. Within Southern Company 's service territory of Georgia, northwest Florida, Alabama, and southeast Mississippi, the company has an increasingly diverse customer base that includes African Americans, Hispanics, and Asian Americans. "We need to make sure that our supplier population reflects our diverse customer base," says Lowe.
Reaching out to suppliers whose demographics are closer to those of the customer base doesn't mean any loss in quality—quite the contrary, as many big companies are finding.
Toyota is known for reliable cars and trucks—and increasingly, partnerships with reliable minority suppliers help make them that way.
In 2003 Toyota Motor Manufacturing North America spent some $650 million on goods and services from minority businesses. Its first-tier suppliers spent another $200 million with MBEs. These suppliers provided wheel assemblies, seats and mirrors, plastics, chemicals, adhesives, transportation services, and much more.
The spending reflects a continuing commitment to supplier diversity, says T. Williams, manager of supplier diversity for Toyota in Erlanger, Ky. "Diversity is a top-ten business initiative at Toyota. As demographics change rapidly, we need to develop a supplier base that reflects the customer base," she says.
Last year, Toyota set a tougher target—7.5%—which it aims to reach next year. In addition, Toyota challenges its first-tier suppliers to share the responsibility of increasing the utilization of minority suppliers. Achieving the goals set will translate into a billion dollars in MBE purchases by 2005. As a global manufacturer, Toyota recognizes issues raised by globalization—which creates price pressure and raises bars across the supply chain. So while it creates opportunities for suppliers, Toyota also has high expectations. "We want our minority suppliers to be in a position to develop innovative ideas, take charge, and remain cost competitive," Williams says.
For minority suppliers that can handle more business, Toyota offers help finding new customers. Its Opportunity Exchange, an annual trade show, aims to match Toyota's first-tier suppliers and minority suppliers. From its beginning in 1990, when it attracted 100 participants, this one-day event has grown into a huge success that attracted 1,600 people in 2003. To date, over $75 million of contracts have been generated.
One beneficiary of last year's Opportunity Exchange was MagRabbit, an Austin-based provider of logistics software. MagRabbit, founded by Vietnamese-born Tommy Hodinh, had supplied software to computer companies but never to automotive companies. After attending last year's show and demonstrating that his software could be used in automotive design, Hodinh came away with several contracts in the millions.
Inroads Into All Sectors
He wasn't alone, of course. Minority suppliers are making inroads into new markets, and increasingly they are competing for business in nearly every niche across the economy. It is a trend that big companies such as Progress Energy are encouraging.
Progress Energy is applying much energy to its supplier-diversity program and is making great progress.
Progress Energy is applying much energy to its supplier-diversity program and is making great progress.
"It is not enough to have minorities in the more traditional areas; you have to bring them in to some of the newer areas," says Thomas Stith, manager of supplier diversity and business development for Raleigh-based Progress.
Minority-owned Progressive Business Solutions, also of Raleigh, is a major supplier of forms and printing supplies. Southeast Fuels, of Greensboro, N.C., sells coal to Progress, a diversified electricity provider with interests in rail service and broadband capacity.
"The decision to expand the pool of minority suppliers is a good business decision," says Stith. "Not only do you enhance the economic vitality of the communities they are operating out of, you also get cost-effective, cost-competitive goods and services. The company gets a more competitive market."
But Progress also has recognized that many minority suppliers have a difficult time operating within the confines of a regulated utility. Also, as many minority companies are still small, much larger Progress (with some $9 billion in annual revenue) wants to help them increase their capacity to handle bigger contracts. As Progress already serves some 2.8 million customers in parts of the Carolinas and Florida, and those states are growing, its need for goods and services is getting larger
It has been working with the North Carolina Institute for Minority Economic Development, a nonprofit organization in Durham, N.C., to provide technical support to vendors. The institute helps clients increase their capacity so that they can step up and bid for bigger contracts and remain competitive.
Meanwhile, Progress is emphasizing the importance of supplier diversity throughout its own operations. "You have to institutionalize the program. You can't have a successful supplier-diversity program without working it into the corporation," notes Stith. All decision-makers are held accountable on supplier-diversity activities, and each business unit sets goals and operating procedures. As Stith says, "You have to make supplier diversity part of the operating practice of the entire company."
The same is true at Chrysler Group, part of big DaimlerChrysler. Despite a tough economy, Chrysler Group purchased more than $3 billion in goods and services from minority suppliers during 2003. The amount spent represents 11% of the group's total purchasing dollars.
Chrysler has taken a proactive stance towards maintaining a high-level supplier-diversity program, says Jethro Joseph, senior manager of diversity supplier development for DaimlerChrysler. "We want our supplier base to reflect our customer base," he explains. More important, enhancing the supplier base also creates a healthier customer base; employees of minority enterprises become customers for Chrysler cars and other vehicles.
In addition to aggressively increasing its own purchasing from minority suppliers, Chrysler is getting its first-tier suppliers to increase their purchasing from minority suppliers. Chrysler's "Matchmaker" program, which pairs minority suppliers with first-tier suppliers, attracted record participation in 2003. More than 200 minority suppliers and over 1,500 nonminority suppliers came together in business segments such as electronics, professional services, and injection molding. In the six months since the event, more than $80 million in business opportunities have been generated for minority suppliers.
Chrysler is also bringing suppliers together with buyers and mentoring suppliers in their growth and expansion plans. A multidisciplinary team consisting of bankers, industry consultants, and Chrysler executives assesses about 40 suppliers to determine whether they are competitive in the bidding process. The team also judges suppliers' strengths and helps the suppliers go after bids that are within reach. "We want our suppliers to grow, because that enables them to be more efficient and price competitive," Joseph says.
Chrysler says it wants to build a larger base of small suppliers and enable them to grow. "We have this middle group of minority suppliers that have to compete with everyone else. But as they reach the ten-year cycle—the point that most small businesses fail to cross—we need to find ways to help them continue and thrive."
Chrysler Group's commitment to minority supplier development began in 1983. At that time, the Company established a department to oversee diversity supplier development and placed $25 million in business with minority suppliers. Since then, Chrysler Group, based in Auburn Hills, Mich., has spent nearly $24 billion with minority business enterprises. Currently, more than 275 suppliers in Chrysler Group's supply base are minority companies.
Tweaking Programs
Far from being set in stone, even successful supplier-diversity programs undergo change. Tweaking them, big companies continue to get better results. Consider Gillette.
Gillette is a proven innovator—from launching the next-generation shaving system to achieving sharp advances in supplier diversity.
Supplier diversity has always been important to Gillette, a Boston consumer-products company, but until three years ago, each business unit oversaw its own diversity program. In 2001 the company decided to coordinate and centralize its supplier-diversity initiatives.
The results have been spectacular, says Tim Dolan, manager of supplier diversity. Not only has the company's spending with MBEs risen sharply, but its pool of minority suppliers has grown as well.
"Our focus at Gillette is to drive growth by achieving the best performance at the best cost," says Uldis Sipols, vice president, global procurement and administration. "I believe we must strive for this excellence by also focusing on another top priority—opportunities for minority- and women-owned businesses within our supplier base."
In consolidating its supplier-diversity activity, Gillette took a hard look at its programs. With appropriate benchmarking and peer-practice review, it established a program that involves senior management as well as key purchasing executives.
"For the program to succeed, the entire organization needed to understand its advantages," Dolan says.
In addition, the company established a committee of suppliers to respond to supplier concerns and shape procedures accordingly.
The company's ability to bring together a vast body of minority suppliers in a short period of time has been instrumental in creating a program with impact, notes Dolan.
In 2003, Gillette was named Corporation of the Year by the New England Minority Supplier Development Council.
"Gillette has been a driving force in helping to build the capacity of minority businesses," the council said. "Our region is fortunate to be home to a world-class company that recognizes the value of developing and using a diverse supply base."
"Gillette sees the need for minority suppliers in both its direct materials and indirect materials purchasing," says Sonia Myles, director of indirect materials. "And it works closely with potential suppliers to explain how they can work with Gillette. Indeed, the goods and services provided by minority suppliers range from technology to logistics and professional services."
Supplier diversity is one more area where it's clear: FedEx delivers.
FedEx, the premier transportation and logistics company based in Memphis, purchased millions of dollars in goods and services from minority businesses in 2003. "Supplier diversity is an important competitive advantage for FedEx," says Dennis Taylor, program management advisor. "Whenever our sales people go looking for new business, one of the first questions we are asked is about supplier diversity."
Like many corporations that now focus on supplier diversity as a business objective, FedEx sees changing demographics as a key determinant of its practice. "We are looking at rapidly diversifying populations all across the country. It is important that we respond," says Taylor.
The FedEx supplier-diversity program, in place since 1992, was managed and operated in a traditional fashion. But as FedEx expanded, suppliers found it increasingly difficult to reach the appropriate buyers within the organization.
So three years ago the company created an Internet presence that would provide potential suppliers with an overview of FedEx's supplier relations, elaborate on the general purchasing guidelines, and publicize the company's current needs.
In addition, the website allows minority suppliers to register and be considered for projects. The site has been successful in attracting suppliers and in the management and coordination of the supplier-diversity program, says Taylor. It has greatly expanded the supplier pool and increased access to buyers. The company also is going through an elaborate internal training program that explains to senior management and buyers the overall advantages of supplier diversity.
Taylor says that not only has the supplier-diversity program at FedEx helped optimize prices, but also the cost-competitiveness brought by traditionally smaller and leaner minority businesses has helped the company reduce purchasing expenses in a number of areas.
FedEx is aggressively seeking minority suppliers. It participates in both regional and national matchmaker programs and works closely with many of its suppliers to help them participate in its sourcing plans. Moreover, as the company expands geographically and in its businesses, it sees a greater need for logistical and technological support.
Extraordinary Opportunities
But far from just being a cost-saving strategy, working with minority firms advances numerous agendas. As a consequence, many big companies are taking care to include minorities in all their activities, including the most prestigious and costly ones
The recent construction of the Time Warner Center, which houses Time Warner's new headquarters at Columbus Circle in Manhattan, was a high-profile project that created extraordinary opportunities for minority- and women-owned businesses.
"The opportunities were wide-ranging," says Greta Davis, national director of supplier diversity for Time Warner, the world's leading media and entertainment company.
One of the greatest beneficiaries was New England Construction, which received a $20 million contract. Another was Liberty Marble Inc., which developed and installed the ornamental stone in the center's lobby. In total, the goods and services purchased from enterprises owned by minorities or women topped 35% of the $1.7 billion cost of the Time Warner Center.
Says Davis: "We recognize that minority- and women-owned businesses play a critical role in the economy, and one of our goals is to develop a supplier base that reflects the diversity of our customer base."
The momentum being generated around supplier diversity at Time Warner starts at the top, with the support and involvement of its senior management team—from chairman and CEO Dick Parsons to CFO Wayne Pace to the chairmen of its Entertainment and Networks Group, Jeff Bewkes, and its Media and Communications Group, Don Logan. All major divisions of the company now report their spending with MWBE suppliers.
The supplier-diversity team is committed to continuing to build on what it has achieved thus far by working more closely with the company's enterprise-wide procurement council. The team plans to analyze specific expenditure areas in the company in order to determine the feasibility of incorporating diversity suppliers; finding sources for new diversity suppliers while expanding the capacity of existing suppliers; leveraging technology for continuous process and program improvement; and expanding awareness, participation, and involvement of senior management.
Time Warner has also taken its training and education sessions on the road to its business units in various regions. One goal is to explore the barriers to the advancement of minority enterprises. Supported by internal resources such as the web-based database and an expanding supplier-diversity team, Time Warner expects to use 2003 as the baseline for bolstering its supplier-diversity efforts this year and beyond.
Concludes Davis: "There are numerous opportunities for enterprises owned by minorities and women in an organization as dynamic and diverse as ours."
That attitude, in fact, is shared by many big companies that now consistently support minority vendors.
BMW Group has tripled its business with minority suppliers in the U.S. in the past five years. And the German automaker, formally named Bayerische Motoren Werke, is aggressively looking for ways to increase purchasing opportunities with minority suppliers.
The company seeks to maximize value and quality in its purchasing. Thus, its purchasing managers are committed to increasing the diversity of its supplier base while maintaining high standards for quality, value, and customer service, says Martha McKinley, business communications manager for BMW.
There have been separate BMW supplier-diversity programs in Spartanburg, S.C., where the automaker has a manufacturing facility, and Woodcliff Lake, N.J., home to sales and marketing staffs. But BMW now coordinates the two programs for maximum leverage, while also extending the effort to financial operations in Dublin, Ohio. The company is working with an automotive-industry group for better access to industry suppliers and for improved networking. To expand its pool of minority suppliers, the automaker also has been participating in business expositions and fairs attended by minority enterprises.
Such suppliers now provide BMW with automotive products and professional services. The company expects to expand the minority-supplier base to fulfill needs in such areas as marketing, information-technology consulting, printing, media production, translation services, consulting, and temporary help.
Industry Champions
Such commitments are found today in nearly every big industry. One case in point is found in office equipment: Xerox has long been a proactive and progressive supporter of supplier diversity.
In 2003, Xerox purchased $256 million of goods and services from minority- and women-owned businesses in the U.S.—nearly one-third more than it had targeted. Its total spending with minority- and women-owned enterprises represented nearly a third of Xerox's qualified purchases. Close to 1,000 suppliers benefited from these acquisitions.
Since the inception of the program in 1985, the Stamford, Conn.Ðbased company—a $15.7 billion document-technology and services enterprise—has purchased more than $4.4 billion in products, supplies, and services from qualified enterprises owned by minorities, women, or service-disabled veterans.
"The Xerox supplier-diversity purchasing program represents an opportunity for Xerox and our customers, who benefit by being offered high quality at the best price and value," says Dan Robinson, manager of global purchasing and market access at Xerox.
Xerox says its minority- and women-owned suppliers have outperformed its general supplier population on quality, cost, and delivery criteria in each of the past six years. For production parts and assemblies, minority and women suppliers delivered annual double-digit cost savings and combined for only 116 defects per million parts delivered. Some 88% of minority and women suppliers met their benchmark delivery schedules.
Xerox continues to involve its minority and women business-team members during its contract bidding with major-account customers in both the public and private sectors. And Xerox continues to encourage minority- and women-owned businesses to bid, in response to customer requests for more involvement by such suppliers.
This strategy has led to the inclusion of more minority- and women-owned suppliers in Xerox's overall global purchasing, marketing, and sales. "We have partnered with minority- and women-owned businesses to provide our customers with more diversity solutions to enable increased revenue for everyone," says Robinson.
"Xerox has moved more production purchases offshore and is utilizing electronic sourcing and reverse-auction bidding tools, but it continues to ensure that minority suppliers receive their fair share of opportunities" says Robert G. Greenslade, vice president of Xerox Global Purchasing. It expects to achieve that in part by insisting that minority businesses be provided with opportunities to participate in all requests for quotations, bids, and reverse auctions.
In pushing the frontier of diversity programs, leading companies such as Ford Motor are blazing a trail that others will certainly follow.
Long a pioneer, Ford Motor gave the world the moving assembly line. Now it's setting another kind of example—in supplier diversity. In 2003 Ford purchased $3.2 billion of goods and services from minority suppliers and more than $600 million from women-owned businesses. Ford is a member of the Billion Dollar Roundtable and one of twelve corporations nationwide that spend more than $1 billion with minority-owned and women-owned businesses.
During the recession of the past several years, the Detroit automaker's primary concern was to maintain the diverse supply base, says Stephen K. Larson, manager of supplier diversity development for Ford. The nation's economic recovery and the new models being introduced by Ford will result in expanded opportunities and greater spending with minority- and women-owned businesses.
In 1993 Ford expanded its supplier-diversity program by requesting its first-tier suppliers to establish programs similar to Ford's. Since 1996, Ford's first-tier suppliers have been required to report their purchases from minority suppliers to Ford. Accordingly, supplier diversity is now one of the key criteria that Ford uses to evaluate its suppliers' performance. Ford expects its first-tier suppliers to report $1.4 billion spent with 5,000 minority-owned companies attributable to Ford business last year.
Senior management at Ford continues to place a high priority on the supplier-diversity program. Tony Brown, vice president of global purchasing, has been named the chairperson of the Michigan Minority Business Development Council. In this position, Mr. Brown has the responsibility of increasing diversity purchases by Michigan-based corporations and creating more opportunities for minority-owned businesses.
Ford's internal supplier-development programs continue to help diverse suppliers increase their capabilities. An example of these programs is Lean Training, in which Ford works with suppliers to reduce waste in the manufacturing process.
Ford continues to use its technical assistance program to provide help in problem solving and process improvement by using the expertise of automotive retirees and consultants. The projects are timed with specific deliverables and funded 75% by Ford, which has provided a total of $7 million in such assistance since the program was launched in 1997.
The company also has created an engineering mentoring program in which diverse suppliers shadow Ford engineers to gain an understanding of engineering expectations and build cross-functional relationships. It also hosts one-day intensive networking events that promote both minority-to-corporate and minority-to-minority business opportunities. Designed for 150 companies, these events typically generate approximately $5 million to $10 million of new contracts each time they are held.
That's a nice chunk of change—just one more sign of the big success of diversity efforts. In the late 1960s, when minority purchasing programs were first established, nobody imagined the size they would grow to. But supplier diversity, once a tiny speck on the horizon, now is a vital part of corporate America.
In a world of quickly changing demographics and rapid globalization of manufacturing and the diverse workforce, minority businesses have taken on a life of their own. They are among the fastest-growing enterprises. They are among the largest employers of minorities. And they are a business segment that is efficiently and effectively taking on a plethora of roles, many vacated by bigger and more established players.
While large companies are reaching out to them, moreover, minority suppliers are responding in all the ways necessary to keep the trend going. As Michel says, "Minority businesses have learned to be more aggressive in marketing themselves and demonstrating real value."
—Udayan Gupta
The Bing Group - A FULL-COURT PRESS TO PROFIT
 Once a graceful guard for the Detroit Pistons, Dave Bing is now guarding the fortunes of a growing company.
In the National Basketball Association and at Syracuse University before that, Bing was formidable (he made the pro Hall of Fame in 1990). Today his Bing Group, based in the Motor City, is among the finest industrial suppliers.
Formed in 1980, the company has branched out from stamping parts to providing an array of products for the auto, appliance, and office-furniture industries. It employs more than 1,100 people and has annual sales of nearly $400 million.
One key to the company's success is its focus on quality. "If minority suppliers are going to survive and grow, they have to be competitive," Bing says. That has meant drastically reducing the number of defective parts. In 2003, Bing Group reduced its defective rate to 37 parts per million, far better than the rate of 50 that is considered excellent in the industry.
To keep quality up, the boss is determined to ensure that the company stays in family hands; a succession plan includes two of his daughters. But teamwork is important in the company, just as in basketball, so 15 key managers are also shareholders.
Another goal is faster growth, possibly through acquisitions. "When I look at my competition, I am a blip," Bing says. Indeed, Bing Group's plan calls for achieving $1 billion in annual sales by 2008. Says Bing: "That's when everyone will be taking us seriously."
Pharmed Group - A FORMULA FOR GROWTH
 Jorge de Cespedes has followed a simple prescription: Go into pharmaceuticals, the most profitable industry in the annual FORTUNE 500 list. The advice doesn't work for everybody (it's a crowded field). But de Cespedes, who co-founded Pharmed Group, identified a niche that was uncrowded.
In 1980, de Cespedes and his brother, Carlos, discovered that many drugs and medical supplies, though readily available in the U.S., often weren't sold in the Caribbean and Latin America. Pharmed moved into the vacuum and has built a $600 million (sales) business, mainly by selling prescription and generic drugs to hospital chains in Latin America. As health-related spending has grown, so has demand for Pharmed's drugs. And now Miami-based Pharmed is seeking a big increase in stateside business.
Through a concept it calls the flexible service center, Pharmed enables groups of U.S. hospitals to buy drugs and other medical and surgical supplies through consolidated orders that can be placed online and by other means. Pharmed serves as a one-stop shop that fills the orders efficiently and delivers them to the groups, called integrated delivery networks. The pilot program, begun last year for 16 hospitals in Cleveland, is expected to yield savings totaling more than $3.5 million during the first five years.
In a business dominated by larger players, de Cespedes is confident there is room for Pharmed to grow through acquisition. For a company not complacent with its success to date, it's an additional dose of opportunity.
Creative Human Resources Concepts LLC - CORPORATE AMERICA'S TALENT SCOUT
 As everybody knows, most employers don't have a lot of new positions to fill these days. But existing jobs turn over, and employers still require the services of expert companies to help them fill openings for everything from mail clerk to chief executive officer.
In Arizona, that often means turning to Rosa Cantor's Creative Human Resources Concepts. In 2003, the Mesa, Ariz., staffing company booked record revenues of more than $11 million, up 10% from a year earlier.c
Like bigger rivals, the company provides temporary contract labor, helps fill regular jobs, and even aids with executive searches. "Although we are in a field that is dominated by giants, we can be more flexible and respond faster," Cantor says. Also, she says, the company settles for smaller profit margins.
For seven years, Cantor and two partners have focused on large corporate clients. In contrast, many other small staffing firms go after small fry, which are easier to approach but have less of an upside.
The path hasn't been easy for a Mexican-American," says Cantor. For example, banks have shied away from lending to staffing companies on the grounds that they lack hard assets to use as collateral.
Still, the company is determined to stay its course. As large companies look to staff key niches and fill others with temporary employees, Cantor says, her firm can meet both kinds of demand. She says, "We have taken the time to really understand the client's needs."
SpringBoard Technology Corp. - A LEAP TO INDEPENDENCE
 It was the chance of a lifetime, a springboard to bigger and better things. In 1993, Anthony Dolphin was working as a business manager in the storage-technology unit of Digital Equipment Corp.
DEC, then a standalone company (it's now part of Hewlett-Packard), was facing the need for a broad restructuring. For one measure, it decided to close its Springfield, Mass., plant, which mostly did warranty and repair work for computer makers. This would have meant unemployment for many—including Dolphin.
But sensing his chance to come out better rather than worse, Dolphin quickly arranged financing and completed a leveraged buyout of the plant and its business. Thus began SpringBoard Technology, of which Dolphin is president and CEO.
SpringBoard has evolved into a technology-solutions provider for the likes of IBM, Unisys, NCR, and Eastman Kodak. Last year Hewlett-Packard selected SpringBoard as its North American hub for servicing data-storage devices using optical technology. "We have an excellent performance record," says Dolphin. "The Hewlett-Packard selection is recognition of what we are capable of."
Having acquired more customers, SpringBoard, with some 150 workers, is one of Springfield's largest technology employers; it's a remarkable example of the important business niches that minority-owned businesses are capable of serving. But SpringBoard will not rest on its laurels. It sees offering its service nationally.
Says Dolphin: "We have a great opportunity. And in this business climate of cost cutting and outsourcing, niches such as ours create the value."
Adorno & Yoss, P.A. - MULTICULTURAL LEGAL EAGLE
 Latinos and law add up to a thriving business for Henry Adorno. Back in 1986, Adorno observed that the Latino community in southern Florida was being underserved by many law firms. Moreover, the community was growing and consisted largely of immigrants, including business people who had never been schooled in U.S. taxes, corporation law, bankruptcy proceedings, and the like. "Many simply didn't understand how the laws worked here," Adorno says.
So Adorno started Adorno & Yoss, which initially had three attorneys. "We began with one client and $49,000 in fees," he recalls. Today the Miami-based firm has more than 150 lawyers, including 60 partners, and annual revenue in excess of $55 million. The growth has been internal, as more clients have turned to Adorno for work that requires bilingual and multicultural expertise.
While much of the law firm's practice is in Florida, the firm can tap into a network that it formed with other firms, totaling some 800 lawyers around the Spanish-speaking world
The growth of the Latino population in the U.S., combined with the maturation of the legal process abroad, suggests a bright future for Adorno & Yoss. In the U.S., juries increasingly will include Latinos—so legal teams will want to have Latinos in visible positions, too. Says Adorno: "Whom your lawyers look like and how they behave will play a significant role in helping influence the jury."
Printing Methods Inc. - PERSISTENCE PAYS OFF
 The idea of starting his own printing company first came to Nigeria-born Lanre Olotu in the early 1990s.
He had plenty of experience: He was working for a large company, selling printing services. Before that he had worked at the family printing business in Nigeria and then trained at the London College of Printing and at Rochester Institute of Technology. But none of the 15 banks he visited granted him a startup loan. "They told me to save up $200,000 and then come back," he recalls.
During the next two years, working weekdays and weekends, Olotu saved the $200,000 and arranged a credit line. In 1993 he purchased Printing Methods., a Rochester, N.Y., printer that had operated successfully since 1969. Sales were about $600,000.
Taking over was difficult at first. It is tough to sell high-quality printing services to demanding customers. "Companies don't want to entrust large jobs to newcomers, only to see them mess up," Olotu says. "We had to prove ourselves all the time" by making deadlines and avoiding defects.
Under Olotu, Printing Methods increased sales to $18 million last year, a 50% leap from 2003, as Wall Street firms gave more orders for documents related to financings. Olotu has 152 employees, up from 25 in 1993, and he counts Johnson & Johnson, Morgan Stanley, J.P. Morgan Chase, and Bank of America as clients.
Still, it isn't easy. Getting new business means cold-calling on potential customers nationwide. "I am always traveling," Olotu says. "Last year I made 75 flights, going back and forth."
Rush Trucking Corp. - KEEPING ON TRUCKING
 It was in nursing school in the early 1980s that Andra Rush vowed to be an entrepreneur. Rush, a Mohawk Native American, accumulated savings by working days and weekends as a nurse, and also obtained loans from her father and through credit cards. Eventually she had enough to buy two trucks—to carry herself away from nursing thenceforth. In trucking, she says, "What I observed was that the right strategy could pay big dividends
Started in 1984, Rush Trucking focused on picking up automotive parts from suppliers and delivering them to the users. The field was competitive, of course, but the company focused on deliveries during the wee hours of the morning, when many existing carriers rested. Three years later, the company began helping customers with logistics and route planning as well.
Two decades down the road, Rush Trucking is rolling along nationwide, with a client list led by major automakers and their suppliers. It has a fleet of 1,700 tractor trucks—all tracked by satellite—and 3,400 trailers, and had revenue of $132 million in 2003, about even with the year before.
For an encore, Rush wants go beyond transportation and logistical support. Her company recently entered into a joint venture with a unit of Dakkota Integrated Systems, based in Holt, Mich., to supply part of the interiors to GM's Cadillac and Mitsubishi's Magna vehicles. Says Rush: "How do we diversify from automotive to get to the next level? It will have to be through acquisitions and strategic partnerships
Sterling Financial Group of Companies - A PASSIONATE PREACHER
 Charles Garcia urges people to follow their passions—and he certainly follows his. His newest claim to fame is a briskly selling inspirational book, A Message From Garcia: Yes, You Can Succeed, published last September by John Wiley & Sons.
But Garcia is most impassioned about Sterling Financial Group of Companies, of which he is chairman. The financial services concern, founded in Miami in 1997, serves a large Latino customer base, mainly by providing unbiased research on health-care and technology stocks to securities traders. That's a valuable product at a time when many Wall Street firms get low marks for research—sometimes tainted by conflicts of interest.
Minority investors are Sterling's bread and butter. "When you deal with Hispanics, you become part of the family," Garcia says. "They entrust you with all their assets." In contrast, financial consultants working in the mainstream rarely get more than two-thirds.
Garcia had a lot going for him, as a Columbia law graduate, former Air Force officer, and former White House fellow. Still, he began with just three employees in a cleaned-out utility closet. Garcia's ability to provide leads—as many as 20 a day—helped woo Latino brokers from bigger firms. Sterling now has over 400 employees and annual revenue of more than $32 million. Its services include research, trading, wealth management, and investment banking.
Growth will continue, Garcia says, for "we can provide services that few others can match."
GCI Systems Inc. - A TECHNOLOGY-VENDOR PARTNER
 For Kay Kuba, the road to becoming a major information-technology service provider began in the biochemistry labs of the University of Minnesota.
In 1988, Kuba took a sabbatical from teaching and sought new opportunities. She found one in the computer market, in which users were puzzled by the plethora of products available. An industry was emerging to help customers design systems. So she assembled a team of high-tech professionals and started GCI Systems (originally named Global Computronics).
It was difficult, recalls Kuba, a native of Punjab, India. For one thing, she was bootstrapping her company. And although she was walking the walk, she didn't know how to talk the talk. "People would avoid eye contact and talk only to the male associates," she says. "It was only when I started talking computerese that I began to get respect."
Today the Shoreview, Minn., company has annual revenue of nearly $50 million and helps FORTUNE 500 clients such as General Mills and Hewlett-Packard design and obtain information-technology systems. In a climate where outsourcing is rampant, GCI has won bigger and bigger contracts.
But Kuba is not resting yet. She says, "We plan to grow into a national company."
Somerset Capital Group - LEASING MAVERICK
 The equipment-leasing business mirrors the economic cycle. When the climate is good, there are multiple players. When it's bad, many perish.
Pedro Wasmer's business, now called Somerset Capital Group, got its first lease on life 20 years ago and is still going strong, with annual revenue of some $120 million from a $500 million portfolio. The Bridgeport, Conn., company targets a segment of the market—small deals—that larger players often won't touch, and to which the many smaller players apply less discipline.
Most businesses need new equipment, but many don't want to buy it; that's where leasing comes in. Wasmer focuses on little operating leases—covering just $200,000 in equipment on average. Customers include IBM, General Electric, and Cargill, which are buying equipment needed in manufacturing.
"It's a tough market, and the competition is intense—there are hundreds of competitors," Wasmer says. But he picks deals carefully, accepting $140 million in leases last year but nixing deals that seemed likely to lose money. Somerset buys equipment its customers need, leases it to them (often for payments totaling less than the equipment cost), and aims to profit by selling the equipment at lease-end.
It's a risky thing. "Y2K caused a lot of equipment acquisition, as did the dot-com market," Wasmer recalls. "But then in the ensuing fallout, the equipment business became stymied." However, he adds, as the investment climate recovers, "the prospects for new business are better than ever."
Admerasia Inc. - A VIRTUAL ASIAN MARKETER
 The Internet boom helped Zan Ng create a vibrant marketing and communications company—one that is still going strong, even after the dot-com bubble burst.
Ng, an immigrant who arrived from China in 1975 with only $68, continues to fly high with Admerasia, which helps clients market to Asian communities in the U.S. and elsewhere. To be sure, as many dot-coms that targeted Asians perished, so did a chunk of the billings of Admerasia, at least for a while. "We had invested a lot of time and resources to service the new economy," Ng recalls. "When they went away, we didn't get paid."
But Ng's venture recovered by helping "old economy" companies reach the growing Asian market. In business segments such as automobiles, telecommunications, and financial services, large companies are eager to build relationships with Asian consumers. So Ng has put together a consortium of advertisers and marketers; the consortium is billing clients more than $40 million a year for ads placed (and as agents do, it is keeping a small cut). The clients include E*Trade, Fannie Mae Foundation, and Citibank.
Ng attracts clients through his expertise. Reaching Asians—far from a homogeneous group—is complex. "One message doesn't suit all," he says.
To be sure, many big companies don't yet recognize the huge buying power of Asia and the Asian diaspora. However, Ng says, "The ones that do are willing to commit significant resources to win them over."
Cemetrics Inc. - ENTREPRENEURIAL ENCORE
 As an "intrepreneur" inside GTE, Clifton Miller brought the creativity of entrepreneurs to corporate projects. For example, when the telecom company had a glut of networking engineers in the 1980s, he found outside customers to take up the slack.
Now, Miller is even more entrepreneurial, having left GTE in 2001. For an encore, he started Cemetrics, a consulting business based in Dallas. At GTE, he recalls, "I was spending more time managing budgets than managing people. I decided to take the knowledge, the relationships, and the experience I had to become a full-fledged entrepreneur."
Miller, who has three employees and undisclosed revenue, consults on several fronts. For a U.S. unit of Siemens, he gave business-development advice; for Texas Instruments, he helped with issues related to supplier diversity.
In fact, Miller served a stretch as GTE's expert on supplier diversity, a topic on which he's now thoroughly prepared to give advice. "The key is not just to find minority suppliers," he says. "There needs to be sustainable use of these suppliers built into the supply chain over time." For example, companies may wish to make diversity of suppliers a factor in incentive-based pay for managers.
Miller is eager to help other small minority businesses cut through government red tape and corporate bureaucracies, for example. "Anyone can tell you the difference between Dallas, Denver, and Detroit," Miller says. "Cemetrics defines how to do business there."
About - NMSDC
The mission of the National Minority Supplier Development Council (NMSDC) is to provide a direct link between corporate America and minority-owned business enterprises. The nonprofit organization, now in its 32nd year, has 39 regional councils and matches more than 15,000 MBEs with its more than 3,500 corporate members (including most FORTUNE 500 companies) that want to buy their goods and services.
NMSDC's corporate members have access to the organization's comprehensive database of certified minority-owned and minority-operated businesses, all of which have undergone screening, interviews, and on-site visits in order to be included on the list.
"Minority entrepreneurs have proven they make good partners," says Harriet R. Michel, president of the NMSDC. "The challenge now is to identify and develop those relationships in which mainstream and minority companies can work together productively. Our approach is really two-pronged: We help our corporate members start, expand, and promote minority supplier development programs, and we provide certified MBEs with access and the technical assistance, training, and support they need to grow and market their services to prospective buyers."
NMSDC
1040 Avenue of the Americas, New York, NY 10
212-944-2430; 212-719-9611 (fax)
www.nmsdc.org
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