Pumping Up Supply Chain Diversity

Benefit your business and increase diversity in your industry with strategic supply-chain management.

As part of their efforts to save money, increase efficiencies, and become more socially responsible, organizations are giving their supply chains a more careful examination. Many are exploring the benefits of working with more minority-owned businesses and developing a specific strategy and goals to do so.

Why and how should leaders examine the issue? Associations Now turned to Harriet Michel, longtime president of the National Minority Supplier Development Council, for answers. NMSDC maintains a robust database of nearly 16,000 certified minority-owned suppliers that businesses can tap for proposals and partnerships.

Associations Now: Do you have specific return-on-investment studies you can cite that make the strong business case for this?

Culture opens doors

Is your organization ready to diversify its supply chain? Before you answer "yes," you'd better check your culture.

According to a study in the Journal of Supply Chain Management, the right (or wrong) organizational culture may have a big impact on the success of supply-chain diversity efforts. In their study, researchers Gwendolyn Whitfield and Robert Landeros measured cultural factors in a firm implementing supplier diversity initiatives using the Organizational Culture for Diversity Inventory. Whitfield and Landeros found the highest levels of spending with minority suppliers in organizational subcultures that emphasized sound interpersonal relationships as well as setting and accomplishing individual goals.

Harriet Michel: According to the Census Bureau, by 2020 the minority population will represent 37.4 percent of the total U.S. population. More and more employees, clients, donors, and other stakeholders of nonprofit organizations are Asian, black, Hispanic, and Native Americans. Working with minority businesses is consistent with the missions and objectives of nonprofits—and they get great suppliers of products and services. …

Probably the best ROI we can cite is hundreds of NMSDC members' satisfaction and increasing spend with minority suppliers. Our members include most of the largest publicly owned, privately owned, and foreign-owned corporations, as well as universities, hospitals, and other buying institutions. For example, American Red Cross has been a member for many years. In 2008, our members reported spending of more than $100 billion with Asian, black, Hispanic, and Native American suppliers.

What questions should an association leader ask staff to determine the organization's current involvement with minority suppliers and the business case for developing a strategy in that area?

The chief procurement officer can provide a spend analysis and a list of current suppliers and contracts. For certain commodities and services, opening up the bidding process may result in better total value for the organization [as well as cost savings, customer satisfaction, and so forth]. Minority firms have to compete [with other bidders on an equal basis] and win contracts in order to get the business. They have to perform very well to win a renewed contract. Other parts of the business case would be related to the organization's mission and objectives.

Is there a generally accepted step-by-step system for moving organizations from no organized participation with minority suppliers to a gold-standard, fully integrated level of engagement?

Yes. Generally, the process is no different from how other organizational processes are implemented. It requires the commitment of the CEO, appropriate staff, and other resources and an understanding of the importance of supplier selection and development. If there is an effective, organized purchasing function in place, this is a no brainer. For assistance, NMSDC has learning programs [and] brochures that can be downloaded free from our website, www.nmsdc.org.

Kristin Clarke, CAE, is a writer and researcher for ASAE & The Center. Email: [email protected]