Supply in Demand
Increased business opportunities for minorities and smart incentives for corporate America
Much like the nation’s population, America’s business demographics are rapidly evolving. According to the U.S. Census Bureau’s 2007 Survey of Business Owners, minorities now own and operate more than 5.8 million small businesses — that’s roughly 21% of the nationwide total and a 46% percent increase from 2002.
Those Minority Business Enterprises (MBEs) generate more than $1 trillion in revenue each year and employ nearly six million people. Their combined payrolls top $164 billion a year. Perhaps even more astounding is the fact that the number of minority businesses is growing at double the national average.
Factor in that minorities will make up more than half of the U.S. population by sometime in the 2040s, there is little doubt that African-American, Hispanic, Asian and Native American business men and women will play a huge role in the future of both small business and corporate America.
Over the last 40 years, supplier diversity has become increasingly more important to thousands of companies nationwide, achieved largely through the use of minority-owned businesses as suppliers and service providers. Supplier diversity has expanded to include women-owned, veteran-owned and other historically underutilized businesses.
“As these diverse suppliers grow and prosper,” said Monetta Stephens, supplier diversity manager for Toyota, “they hire, train and advance others like them, creating new employment opportunities, fueling complementary new businesses and generating new jobs and tax revenues that are essential for sustaining of communities.”
TAKING THE LEAD
The Southern California Minority Supplier Development Council is at the forefront of promoting supplier diversity. It began circa 1973 as a collaborative effort between the Minority Enterprise Coalition of Los Angeles and the L.A. Chamber of Commerce— with funding from the Minority Business Development Agency at the U.S. Department of Commerce.
“In the beginning, most people felt that government was the driving force behind corporate interest and support [of minorityowned businesses],” said Hollis Smith, one of the founders and past president of the organization. “Since then, the corporate effort has proven to be sincere and definite. As the outreach expanded, the corporations saw the benefit of their involvement and continued to grow their programs.”
“It wasn’t easy in the beginning,” said council attorney Robert Carlson, who has also been there since the organization’s birth. “A turning point came in the early 1990s when the movement started to pick up steam both in the Southland and nationwide, and there was more awareness in the corporate community that supplier diversity is a very valuable resource.”
Now, four decades after its inception, SCMSDC is the largest nonprofit minority business advocacy organization in the region. The council represents the interests of more than 600,000 minority business enterprises across 13 counties in Southern California. At the heart of the organization are 1,700 officially certified MBEs and more than 200 corporate members committed to supplier diversity. It is also one of 35 regional councils in the National Minority Supplier Development Council network and is nationally recognized for its ethnic-minority certification program and strategic networking between corporate procurement professionals and minority entrepreneurs.
BIG BUSINESS, BIG IMPACT
Many major industries and government agencies in Southern California — including automotive, aerospace, utilities, telecommunications and banking/financial institutions — have supplier diversity programs, which all require valid MBE certification.
SCMSDC’s corporate membership is a who’s who of American big business: Apple, Raytheon, IBM, American Honda — all the big names are there. And many of them have invested consid- erable time, energy and money in diversifying their supply chain both through the council’s programs as well as through their own.
“Large companies have embraced supplier diversity programs because they understand the whole economic impact MBEs have on our communities and the importance of inclusion of diverse businesses in their supply chain,” said SCMSDC president and CEO Virginia Gomez, who has been involved with supplier diversity initiatives in Southern California for over 20 years.
Wal-Mart, for example, has had ongoing initiatives around supplier diversity for years. In 2011 alone, Wal-Mart spent $11 billion nationwide with more than 3,000 total woman- and minority-owned suppliers.
“By working with diverse suppliers, we provide opportunities for significant growth and development to diverse businesses,” said Robert Dyer, SCMSDC board members, and director of merchandising for the retail giant’s Irvine-based Pacific Division. “We offer a broader assortment of products to our customers at prices they can afford, and we contribute more to the economic well-being of the communities we serve.”
For corporations, supplier diversity makes for good public relations, and it’s good for the bottom line.
“It’s the right thing to do,” said Tony Piazza, SCMSDC board vice chair, and vice president of human resources and administration at American Honda Motor Co. “But it also does make business sense. In Southern California the Hispanic population is just booming. So you’re getting a lot more businesses now that are finally waking up and saying, ‘You know, a lot of our customers are Hispanic and maybe
we should become involved in some Hispanic suppliers.’ So we’re seeing a lot more corporations becoming involved.”
Using a minority supplier creates more jobs locally, putting more money into the pockets of local consumers.
“While we all know that small business is the backbone of our economy, the job creation that MBEs generate has proven to have a positive financial impact on the communities we serve,” said Joe Alderete, SCMSDC board chair and director of Supplier Diversity at Southern California Edison.
THE FUTURE OF SUPPLIER DIVERSITY
Looking forward, Smith feels that organizations like SCMSDC should play a larger role in matching Southland MBEs with potential clients around the globe. “We also need to help minority businesses to operate at the international level, individually or through partnerships.”
As of January 2013, the council’s certified MBEs employed approximately 122,761 fulltime and 18,884 part-time workers, of which 91,353 are minorities, according to Gomez.
“With the number of ethnic minority entrepreneurs growing exponentially each year — and the value they bring to the corporate world, in terms of flexibility, innovation and competitive pricing — supplier diversity initiatives will only grow stronger,” added Alderete.
Piazza envisions a future in which today’s MBEs spawn a third tier of minority businesses that supply them with goods and services. “We’re going to say we’d like you to mentor another small business, help them get to the next level, teach them what others taught you. They’re not going to be competitive to your $500 million company — they’re only doing half a million dollars, maybe $2 million a year. That’s going to enhance the program a lot more.”