News Column

Amid Recession, Companies Still Value Supplier Diversity Programs

July/August Issue

Joshua Molina--Deputy Managing Editor, HispanicBusiness Magazine

In this tumultuous economy, companies big and small are scaling back. They are looking to reduce costs and boost revenues to survive the recession.

From retail and automobile to construction and technology, the decline of traditionally strong industries has shaken the economy and rattled the American work force.

When companies are squeezed, they sometimes turn to what are perceived as voluntary or bonus programs.

In that context, supplier diversity contracts often take a hit. In fact, among the hardest hit during this recessionary economy are the minority-owned suppliers the small businesses that contract with Fortune 500 companies to provide an array of services.

"We had some anecdotal information that corporations may have scaled backed on their minority supplier development programs and goals as a result of the faltering domestic and global economy," said Harriet R. Michel, president of the National Minority Supplier Development Council (NMSDC).

Large companies have also been laying off or transferring supplier diversity staff. Such reductions are notable because if there is not dedicated staff who are responsible for creating and implementing supplier diversity programs, it is possible that fewer and fewer contracts will be granted.

But there is hope.

Suppliers are hopeful that the $787 billion stimulus package will boost the economy and result in a resurgence of supplier contracts.

Based on what she hears in the market, Ms. Michel is optimistic that the situation will stabilize and even improve in the coming months.

"We conducted a survey of our national corporate members," Michel said. "Based on nearly 500 responses, most members report that their efforts in minority supplier development will remain the same or increase. Our corporate members understand that if strong, effective, quality-driven minority suppliers are good partners for corporate America during times of prosperity, then those same suppliers must remain partners in challenging times such as these."

CSX Transportation: Supplier Diversity
on the Right Track

Since 1896, CSX Transportation has been a leader in delivering the nation's most essential products, from food and drink to clothes and cars. On any given day, CSX runs about 1,200 trains and operates a fleet of more than 100,000 freight cars.

And while the company, which had second quarter revenues of $2.2 billion, has displayed a successful track record of delivering goods across the country, in recent years CSX has also emerged as a business that values diversity in both its hiring and supplier contracts.

"It has become critically important that we do the right thing, not just for the company but for the communities we serve," said Elaine Mosley, manager of Supplier Development, Purchasing & Materials. "It is important to our core values."

CSX in 2009 increased its spending with minority contractors by 34 percent and is looking to continue that upward trend in 2009. The company, which has 35,000 employees, also joined the National Minority Supplier Development Council, a group that links corporate America to minority-owned companies. CSX has also developed partnerships with ethnic chambers of commerce around the country.

The company recently created a Minority Supplier Purchasing Program, where it actively seeks to develop business relationships with minority suppliers. Doing so not only creates a culture of inclusion, but there's a hard financial benefit as well. Contracting with qualified minority suppliers broadens the pool of bidders for various jobs, which allows CSX to obtain the most competitive price.

Even CSX, the third-largest railroad company in the nation, was hurt by the rising cost of coal, and smaller freight loads to transport. CSX revenues were down 20 percent year over year after the second quarter of 2009.Still, CSX is investing in minority and women-owned supplier development companies.

"We know the economy is going to rebound and we need to be ready for that," Mosley said. "We know that growth is going to happen. We are still spending. We want to develop relationships with these minority business entrepreneurs."

Source: (c) 2009. All rights reserved.

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