News Column

The Persistence of Supplier Diversity Partnerships

March Issue

Rob Kuznia -- HispanicBusiness Magazine

The Persistence of Supplier Diversity Partnerships

Like untold numbers of other well-established minority-owned businesses, last year was the worst on record for MOD Design.

The Michigan-based commercial furnishing company, which employs five people, thrived in the boom times, raking in upwards of $8 million in revenue a year. But last year, for the first time since its 1994 inception, MOD, which stands for Michigan Office Design, made zero profit.

"I've had this business for over 16 years, and I've weathered a few recessions," Sarah Ayala Jones , the company's president and founder, told HispanicBusiness Magazine. "But this was more than a recession."

In light of the economic downturn, MOD's contract with Comerica--HispanicBusiness Magazine's No. 1 corporation for supplier diversity--is all the more valued.

As companies large and small struggle to survive the rough waters of the lingering recession, minority-owned firms are particularly vulnerable.

Minority-owned businesses suffer disproportionately from access to capital and from opportunities to penetrate competitively corporate supply chains.

Minority firms also tend to enjoy less of a capital reserve cushion. On average, they generate less than $200,000 in annual revenue, while non-minority-owned businesses average more than $400,000, according to the U.S. Department of Commerce.

And yet, the benefits of supplier diversity programs go both ways.

Summing up the philosophy of many corporate paragons of supplier diversity is Kevin Bell, the senior procurement manager at Chrysler LLC.

"We don't view supplier diversity from an altruistic perspective," he told HispanicBusiness Magazine. "We think of it as a business imperative."

Many large corporations are keenly aware of the seismic demographic shifts taking place in the United States. Most demographers agree that by 2050, minorities--who currently constitute a third of the American population--will be the majority.

Also, by keeping a stable of competitive minority-owned contractors, corporations are spreading wealth to communities filled with potential customers.

But perhaps most importantly, diverse companies bring diverse ideas.

At General Mills, for instance, a Hispanic-owned advertising firm last year spotted an opportunity.

Bromley Communications, which bills itself as the nation's largest Hispanic advertising agency--and which has produced ads for General Mills products such as Honey Nut Cheerios and Yoplait Yogurt--came to General Mills with a proposal to launch a new brand of Progresso Soup.

"They pointed out the opportunity for Progresso to address an unmet consumer need -- convenient and ready-to-serve, yet authentic and flavorful, Mexican soups," Maerenn Jepsen, a General Mills corporate public relations manager, told HispanicBusiness Magazine.

Within months, General Mills had put out a line of Progresso Recetas Autenticas Soups regionally in Texas.

Understandably, the owners of some minority-owned firms sometimes bristle at the mention of supplier diversity programs.

Acento Advertising is an example of a Hispanic-owned company on the rise with or without such programs. Bucking industry trends, the company--despite the ravages of the Great Recession--has more than doubled the size of its staff in two years, from 27 to 60.

Acento President Roberto Orci told HispanicBusiness Magazine he rarely thinks about supplier diversity.

"We don't get people coming to us and saying, 'Hey, we're looking for a diverse agency,'" he said. "We get people saying, 'Hey, we're looking to have an effective marketing plan.'"

Supplier diversity programs, he added, amount to little more than an additional procurement perk.

"Yes, we are diverse, and we are minority owned, but what clients really focus on is, 'How effective are you?'

To this end, Orci adds that his one of his major corporate clients -- Wells Fargo, which ranked No. 4 on HispanicBusiness Magazine's list this year -- closely monitors the effectiveness of Acento's ads. For instance, during focus-group sessions, the bank equips Hispanic subjects with hand-held meters measuring their emotional responses to Acento's TV commercials.

"My pressure is to make sure my clients are growing their businesses, improving their brands and making their cash registers ring," he said.

Although Hispanics account for roughly 15 percent of the U.S. population the proportion of contracts that go to Hispanic-owned firms is somewhere between 1 and 5 percent, said Jorge Corralejo, owner and president of Macondo Leasing Company, and chairman and CEO of the Latino Business Chamber of Greater Los Angeles.

As an example, Mr. Corralejo cited the Department of Defense, which he said dedicates about 1 percent of its contracts to Hispanic-owned companies.

"It's a growth area, with two wars," he told HispanicBusiness Magazine of the DOD. "If that's what the growth economy is, we're just not a part of it."

Mr. Corralejo added that Hispanic-owned companies and other minority-owned businesses have much to offer government and private-sector interests in return.

"There's much more to supplier diversity than just about 'You have business, we need it,'" he said. "We're talking about generating partnerships with these entities. Our market is an enormous market, and one that few have been able to successfully capture in a meaningful way."

Source: (c) 2010. All rights reserved.

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