MBEs find ways to survive the global economic crisis
Strategies include creative financing, streamlining through technology, supplier collaboration and more
Corporations that support supplier diversity can help MBEs make connections
By Adriene Marshall
The world economic crisis that began in 2008 continues to challenge business owners, whether their companies are small or large. Terri Quinton, chairperson of the National Minority Supplier Development Council (NMSDC) national minority business enterprise input committee, indicates that the biggest challenge to minority business enterprises (MBEs) has been access to capital.
“To survive the recession, most MBEs had to consider alternative financing methods like private equity financing, accounts receivable financing, or negotiating better payment terms with clients,” Quinton says.
But technology can also make a big difference in a business’ success, she notes. Quinton, who is the CEO of Alliance of Diversity Printers LLC (Dallas, TX), said that her company uses a project management tool to cut waste. “If you have a technology tool that helps streamline processes, you can do more with less.”
Quinton observes that during times of recession, some major corporations are less likely to foster development among MBEs and more apt to hire “ready now” suppliers. “That means that minority businesses may need to partner and align with other entrepreneurial companies in order to build the capacity to remain in the supply chain,” Quinton explains.
“Businesses that have persevered so far through the recession and have continued to market their companies have probably seen their prospects improve during the past year or so,” Quinton notes.
W.W. Grainger: no limit to diversity goals
“We want to be a world leader in offering time and money-saving solutions to our business customers as they maintain and repair their facilities,” says Nancy Conner, manager of supplier diversity for industrial supply company W.W. Grainger, Inc (Lake Forest, IL). “We have a policy that everyone at Grainger who makes a buying decision has the responsibility to be inclusive in that process. Rather than focus on a specific amount, we look for the maximum opportunity to improve our diversity spend year over year. Our diversity suppliers are critical to our success.”
Conner noted that the poor economy has limited the number of suppliers available to Grainger recently. “But the quality of the suppliers that we do have is high,” she adds. Years ago, most of Grainger’s diverse suppliers provided easy, low-cost items like janitorial products and chemicals. Now, for example, one supplier of windshield wiper fluid also provides wipers and windshield wiper motors. “Diversity suppliers move to a different level of complexity and quality as they become more sophisticated,” she says.
“Using a diverse supplier base makes us relevant to the more than two million customers who look to us to help them have an inclusive supply chain,” Conner said. “By the same token, our suppliers get exposure to a large customer base that they wouldn’t normally have access to. Everyone wins. It’s a beautiful formula.”
Superior Workforce Solutions: contingent workforce productivity
Superior Workforce Solutions, Inc (Williamsville, NY) was founded in the mid-1960s. The company has recently sharpened its focus, says president and CEO Lynne Marie Finn. “Our customers consistently told us that they valued our managed service program (MSP) expertise. Because this was also the fastest growing segment of our business, we made the strategic decision to dedicate ourselves to MSP process innovation and service excellence.”
To that end, Superior uses a proprietary vendor management system (VMS) called Work Nexus. “One way we’ve dealt with a tough economy is by helping our customers enhance productivity and drive down costs through automation,” explains Finn. “We were one of the first companies to create a VMS. Work Nexus is a web-based tool that automates many functions surrounding contract labor procurement, including requisitioning, timekeeping, invoice production, and data reporting.”
Finn, who is on the national board of the Women’s Business Enterprise National Council (WBENC), met the supplier diversity manager for W.W. Grainger at a WBENC event in 2003. “MBE/WBE certification provides an opportunity to let companies know who you are and what you can do for them. Once that access is granted, though, you have to compete just like anyone else for their business,” Finn points out.
“One challenge of being an MBE/WBE is that majority-owned companies often perceive that you cannot compete on cost or do not have the capacity for high volume or global services,” Finn adds. “But we do have a large capacity, we are global, and we offer significant value. Work Nexus has helped Superior become more scalable and compete with the large, publicly traded global entities.”
Alcatel-Lucent achieves SD growth despite recession
“We have increased our percentage of diversity spend over the past three years even though the economy was not strong,” says Mark Artigues, senior director of supplier diversity for telecom equipment manufacturer Alcatel-Lucent (Paris, France). “We want to continue to provide opportunities for our diverse suppliers even during these difficult economic times.”
Diversity is key to a creative and healthy marketplace, Artigues adds. “Having a diverse supplier base is as important as having a diverse workforce,” he notes. “Each business owner’s individual background adds value, allowing each company to offer a different perspective and cost savings.”
Artigues, who works in the Alcatel-Lucent Plano, TX office, noted that the companies in his diverse U.S. supplier base have kept pace with technological trends. “Although our basic needs remain unchanged, our products and technology continue to evolve. We have suppliers who have been with us for a while and who have been able to support us through those changing technology trends.”
EMFG LLC outlasts the competition
Juan Hernandez, president and CEO of EMFG LLC, was an employee of Alcatel-Lucent for twenty-five years before establishing his own business in 2006. His last six years with Alcatel were spent as project manager in the product sourcing group. A full-service assembly and packaging solutions company, EMFG has corporate offices in Carrollton, TX and warehouses in Mexico. In addition to Alcatel, EMFG also provides services to global electronics manufacturers Flextronics International and Sanmina SCI Corporation.
When Hernandez took the leap into entrepreneurship, the economy had already started to show signs of decline. However, that timing turned out to be an unexpected advantage for him.
“Most of our competitors had a lot of overhead costs associated with their businesses. As a result, they were severely impacted when the recession hit with full force. They had to take measures like downsizing in order to stay afloat,” Hernandez explains. “On the other hand, we were starting from square one. We couldn’t go any further down. We were used to functioning as a lean operation. All we could do was keep going up from there.”
U.S. Bank encourages tier 2 opportunities
In 2011, U.S. Bank (Minneapolis, MN) spent about $210 million, or 15 percent of its discretionary spending, with diverse suppliers, according to Robin Morgan Billups, the company’s national supplier diversity manager. In 2012, U.S. Bank committed to increasing its spending with diverse suppliers to about $235 million. “This is a great time to be in the diverse supplier arena because the current administration understands that small businesses are the engine that drives this country,” Billups says.
She notes that U.S. Bank has focused recently on training MBEs to form teaming relationships with majority or minority-owned companies that complement their services and/or territorial reach. “These teams can access larger contract opportunities,” she explains. In addition, U.S. Bank is encouraging more tier 2 opportunities in 2013. “U.S. Bank’s contracts with prime majority-owned firms include language that specifies the percent of contractual spend that should go to diverse suppliers,” she says.
“We would like to see our suppliers and employees replicate the communities that we do business with. It helps us to grow,” Billups asserts. “Diverse suppliers provide innovation and flexibility. They keep us abreast of the emerging trends in a particular commodity.”
Synico Staffing applies diversity to its business practices
Synico Staffing, Inc (Minneapolis, MN) is an MBE supplier to U.S. Bank that provides staffing in IT, administrative, clerical, financial, and light industrial areas, according to Robert Marsh, president and CEO, and his brother Jerry Marsh, senior vice president.
The company started with one employee in 1996, and after growing to 250 employees in 1998, was part of the team facilitating the merger between First Bank and U.S. Bank. In 2000, Synico participated in a yearlong U.S. Bank/Minnesota Minority Supplier Development Council mentoring program called “Partnering for Success,” where its leaders learned about risk management, working with large businesses, and creating requests for proposals.
From its modest beginnings, Synico has hired more than 10,000 employees and serves every state in the U.S. except Hawaii.
Jerry Marsh notes that Synico has thrived during the recession while other staffing companies have stalled. “Robert has a knack for looking ahead and determining the layout of the economy as it pertains to the workforce.”
“We make sure our business is totally diversified,” Robert says. “No one company comprises more than twenty-five percent of our business. We also diversify the types of businesses we work with. We have placements in the automobile, banking and food industries.”
PG&E champions supplier collaboration
According to Joan Kerr, director of supplier diversity and supplier development at San Francisco-based Pacific Gas and Electric Co (PG&E), diversity is integral to PG&E’s core values and strategy. “Diversity allows us to better anticipate, understand, and satisfy the needs of the fifteen million Californians we serve,” she says.
“Our customers are among the most diverse of any utility in the nation and when we leverage this diversity by including diverse suppliers in our supply chain, we optimize PG&E’s operations,” she says. “This also supports the development of a more competitive and innovative supply chain that delivers the best value to our customers.”
In 2011, PG&E spent $1.61 billion with suppliers that are certified as diverse-owned by the California Public Utilities Commission (CPUC) Clearinghouse, an all-time record, Kerr points out. The spending accounted for 36.6 percent of the utility’s total procurement budget, exceeding the goal of 34 percent. It capped a nine-year upward trend that started at 18 percent in 2003.
“Our 2011 results are particularly significant in light of ongoing challenges,” Kerr notes. She explains that PG&E has devoted significant capital to ensuring the safety of its gas pipelines and continuing generation of energy for customers. The substantial investments required in these major infrastructure plans pose a challenge in that few small or diverse suppliers are large enough to independently handle such projects.
“PG&E responded to these challenges by encouraging our direct, non-diverse prime suppliers to work collaboratively with diverse suppliers,” Kerr explains. “The utility was diligent in working with prime contractors and diverse enterprises to examine the end-to-end supply chain of these projects, seeking the best opportunities for diverse suppliers to serve as subcontractors and business solution partners.”
Pacheco Utilities Line Builders receives PG&E supplier award
Robert Pacheco, president of Pacheco Utility Line Builders, Inc (Menlo Park, CA), said that despite the recession, things have been going well for his business. In 2012, his company received the Small Business Supplier of the Year award from PG&E. The journey toward this honor began when Pacheco was a young man, and was hired at PG&E to work in construction. He was employed with the company for twenty-five years before starting his own business in 1998.
“We landed work with PG&E after being certified as an MBE by the CPUC,” Pacheco says. “This qualification gave us the clout to provide service to utilities, municipalities, communication companies, water agencies, and other private power line owners.”
Pacheco finds that MBE classification helps big companies fulfill a commitment to support a part of the business community that needs help. “The results benefit everyone,” he says.
“The challenge for the MBE is to never compromise safety, always provide quality service, and build the trust of customers.”
COMPANIES INTERESTED IN DOING BUSINESS WITH MBEs
Check website for current listings.
|Company and location
|Alcatel-Lucent Inc (Paris, France)
|Pacific Gas & Electric Co (San Francisco, CA)
|Gas and electric services in Northern and
|PepsiCo (Purchase, NY)
|Global foods and beverages
|U.S. Bank (Minneapolis, MN)
|W.W. Grainger, Inc (Lake Forest, IL)
|Maintenance, repair and operations (MRO) products and services
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