HispanicBusiness

In this report, Hispanic Business magazine spotlights the Top 25 Supplier Diversity Companies and minority-owned businesses that are battling to keep their contracts as virtually every industry downsizes its operations.

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

And as unemployment levels climb above 7 percent, longtime companies continue to close their doors, and questions linger over the government's stimulus package, major uncertainty remains heading into the second quarter of 2009.

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.

Large companies are cutting back to stay alive and their supplier diversity contracts are sometimes the first to get slashed. But amid the upheaval, companies are discovering new business models and ways to innovate as they navigate the rocky financial waters. "We don't rely on any one specific customer," said Elise Hernandez, CEO of Ideal System Solutions in Maple Grove, Minn. "In this economic climate that can be risky. We listen to our customers and they often tell us in which direction we need to go."

For example, the company, hearing a need for temporary staffing from companies that are laying off their own workers, recently opened a branch that offers staffing resources on a project-by-project basis. It also now offers remote monitoring of entire networks to companies that no longer have in-house technicians. "The needs of our customers are fluid right now and we provide whatever is necessary to help them lower costs and be more efficient," she said.

The extent of the challenge facing minority suppliers is still unclear.

Staffs Are Transferred, Laid Off

"Everything right now is anecdotal," said Harriet Michel, president of the National Minority Supplier Development Council in Washington, D.C. "There are no economic figures so far, but we are hearing stories – lots of stories – and they aren't good. We know it is happening because we are hearing from minority suppliers from all over the country, but we don't know yet what the damage will be."

One ominous note is the fact that many major companies are laying off or transferring their supplier diversity staff. "There's no question about that," said Ms. Michel. "It's a free-for-all right now in terms of cutting these departments. That is very troubling to us. If you don't have a dedicated staff of people whose responsibility it is to carry forward the supplier diversity initiative, there will be fewer and fewer contracts for us in the future. We may see the negative effects of these cutbacks for a long time."

The technology sector, among the biggest drivers of supplier business, has slowed, although some companies have managed to dodge the downturn so far. In fact, Ideal System Solutions has actually seen a 20 percent increase in annual revenues in the past 12 months. The company reported revenues of $30 million in 2007 and were ranked 185 on the 2008 HB 500 list of Hispanic-owned companies.

But Ms. Hernandez knows that she must keep her eyes on the ball because the reality looks perilous. While companies publicly promise they are doing everything possible to preserve their minority supplier contracts, it's clear that the recession is taking its toll.

"Many of the large companies are just trying to survive out there and attention to supplier diversity issues is being overshadowed," Ms. Hernandez said. "There is no question that many companies are now cutting back support and service to minority suppliers."