Diverse suppliers bring flexibility and value
MBE certification provides opportunities, but as one MBE CEO advises, “don’t lead with it.”
Many large companies are helping smaller diverse suppliers scale up to specialize and diversify
By Jon Boroshok
Companies large and small encourage diversity in their supply chains, but the way supplier diversity is practiced varies from one company to another.
Large corporations say their priorities range from growing smaller suppliers and mentoring protégés to looking for vendors that are already large corporations themselves. Some corporations are willing to help suppliers scale up, while others expect established, muscular providers.
Minority business enterprises (MBEs) that do business with large customers report a more consistent list of advantages and challenges. Supplier diversity programs offer an opportunity to make contacts and present credentials, but suppliers recognize they have to be at least as good as the competition. As one interviewee put it, “save the MBE designation for the last slide; make it a bonus.”
Commonly cited challenges among these potential suppliers included lack of cash flow, limited access to funding, and the misconception that a smaller MBE can’t be a true competitor.
The large corporations and MBE suppliers interviewed here come from several industries and minority groups. Their insights and stories show that diversity is indeed diverse.
Cisco: supplier diversity is a top priority
Cisco (San Jose, CA) is known as a “worldwide leader in networking that transforms how people connect, communicate and collaborate.”
Denise Coley, director of change management and global supplier diversity business development, says supplier diversity is a top priority, and that Cisco truly believes in corporate social responsibility. “We want the opportunity to utilize diverse suppliers within our supply chain and create economic benefit globally with our customers, supplier-partners and communities,” says Coley.
The Cisco global supplier diversity business development program started more than fourteen years ago. The program finds certified diverse supplier-partners that provide products and services of value to Cisco and its customers, and connects them with Cisco business functions that can use their products and services.
Cisco has a range of initiatives, including a protégé program, that develop its diverse supplier-partners. The protégé program is designed to increase the use of diverse suppliers and help suppliers secure new business through basic skill building, business development and mentoring.
Coley calls inclusion and diversity “the fuel of the innovation engine and a competitive differentiation. It helps Cisco develop products that meet customers’ needs.
“It also supports our social investment strategy by contributing to economic development in underserved communities by partnering with minority, women, disabled and veteran-owned businesses and companies in historically underutilized business (HUB) zones,” says Coley.
D.W. Morgan gets certified
CEO David Morgan and his wife started D.W. Morgan Company, a global transportation and logistics company, in a spare bedroom in their house. It began with a computer, a printer and $1,000.
The Pleasanton, CA company grew and became successful, but had never really considered itself a diverse supplier, despite meeting the qualifications for certification. Morgan “wanted to compete on service and intellect.” When a customer told Morgan that the company had to get certified as a diverse supplier in order to keep a contract, Morgan finally filled out the required paperwork and became NMSDC-certified. In 2006 the company was certified as a national NMSDC Corporate Plus supplier.
D.W. Morgan has grown large enough to have a supplier diversity program of its own, and is a WBENC corporate member.
The ups and downs of MBE status
Morgan says that being a certified MBE is advantageous in some ways, but may be detrimental in others. As an MBE, he finds great opportunities to meet champions of diversity. However, he also hits roadblocks, particularly in the form of misconceptions of what a certified MBE looks like.
“I’ve been told on more than one occasion that a prospective customer met with me only because I was an MBE, implying that I wasn’t able to add value because of my service offerings, but only because of my minority status,” says Morgan.
When doing a capabilities presentation for new business, Morgan says he saves the MBE slide for last. His first goal is to present the company’s abilities and value to the prospect. Everything else has to be right, with the MBE designation presented as a “bonus” at the end.
Persistence leads to success
Through growth and persistence, D.W. Morgan became a Cisco supplier, using what Morgan called a back-door approach. At first, D.W. Morgan was too small for Cisco, but started working for Cisco customers. Cisco took notice as D.W. Morgan grew. Since 2001, Cisco and D.W. Morgan have been conducting business together that has added value to both companies. Morgan won the 2003, 2005 and 2009 Cisco diverse supplier award.
In 2010, D.W. Morgan joined the Cisco Executive Mentor Protégé Program (EMP2). Within six months of entering the program, the company saw a 54 percent increase in Cisco business, and Cisco gained increased visibility and cost savings.
Through the mentoring program, D.W. Morgan was also able to sharpen the way it defined its capabilities and market the company to a broader audience. Since its involvement in the Cisco program, the company has expanded its business operations globally to include the Americas, Asia, Europe, and Africa, and has done business in more than eighty-five countries.
Electric Boat: “a million parts” to buy
Since 1899, General Dynamics Electric Boat (Groton, CT) has designed, built and supported submarines for the U.S. Navy. That’s a lot of subs, and a lot of parts that are not always commercially available “off the shelf.”
As small business liaison officer and supplier diversity officer Jea Hur explains, “Electric Boat buys everything. The subs have a million parts, and are very complex.” From steel plates to computers to hoses, many of these parts are specialized and custom-made. Part of his job is to work with regional organizations like the Greater New England Minority Supplier Development Council (gnemsdc.org) to help find diverse suppliers.
“Technical requirements often limit the pool of suppliers. Sometimes a vendor gets designated as a ‘sole source’ from the U.S. government due to security needs,” Hur explains. The technical requirements mean that Hur needs to do lots of networking to source suppliers. He says some regional events offer “one-on-one” meetings, somewhat like speed dating, where he quickly tries to match up qualified suppliers with Electric Boat’s buyers.
The goal is to achieve supplier diversity, while also getting the value of large-scale purchasing. Many of Electric Boat’s suppliers are distributors of maintenance, repair and operation (MRO) products. The challenge is to find the right supplier in terms of product, quality and delivery time. Hur looks at what the supplier can do first, and then looks for the diversity possibilities. Best price, best quality and on-time delivery are a must.
PCNet provides competitive IT services
An enterprise solutions provider of technical services, hardware and software, PCNet started as a division of Dun & Bradstreet in 1985, and spun off in 1993. The Trumbull, CT company is Hispanic owned, and a member of the GNEMSDC.
The relationship between PCNet and Electric Boat started in the usual way. A PCNet representative reached out to Electric Boat and did a formal capabilities presentation that was shared with Electric Boat managers. PCNet provided competitive bids for the next RFP and won a contract.
MBE status brings opportunities, but “don’t lead with it”
Most of PCNet’s customers are large companies. As the economy slowed down, many cut costs and deferred projects, but PCNet VP and general manager Erik Soto says that seems to be turning around now. The company is doing well financially.
Soto says that being an MBE brings opportunities to make connections and present credentials, but that doesn’t close deals. “I don’t find there’s a roadblock because you’re an MBE, but don’t lead with it.”
Northrop Grumman: global giant requires a thorough SD approach
Northrop Grumman (Falls Church, VA) is a global security company providing systems, products and solutions in unmanned systems, cyber, C4ISR, and logistics and modernization to government and commercial customers.
Gloria Pualani, corporate director of socio-economic business programs, says that because Northrop Grumman is such a large corporation, it buys a wide range of products and commodities.
The company has a longstanding supplier diversity program in place, and it’s been a successful one. More than 36 percent of Northrop Grumman’s procurement spend goes to small and/or women or minority-owned businesses, and the company has received several awards for its diversity efforts.
Its diversity outreach is done on regional, geopolitical and sector levels, with a great deal of internal sharing of resources.
There’s also a socio-economic business programs office that acts as the liaison between prospective small disadvantaged businesses interested in working with Northrop Grumman and the company’s procurement organizations.
Northrop Grumman can support its small business suppliers in many ways when they face challenges, Pualani reports. Mentor-protégé and Small Business Innovation Research programs are available. Education programs that give small business owners access to an executive level development course are designed to help them increase their profitability.
Castillo & Associates: Northrop Grumman protégé
Castillo & Associates (Houston, TX) provides Northrop Grumman with IT technology support services. The company does networking, app development, network security and asset management.
President Mike Castillo started the company in 1998. He has a BSEE from the University of Houston (TX), and worked in Exxon’s telecom group after graduating. Before long he was “bit by the entrepreneurial bug,” and went out on his own as an independent tech services provider. His first customer was Exxon.
Deciding he needed more customers, Castillo looked for opportunities to provide similar services to other companies. Castillo is a second-gen Mexican American, but he didn’t know about MBE designation and certification until he started researching supplier diversity. Castillo & Associates is now certified by the State of Texas as a historically underutilized business (HUB), as well as NMSDC certified.
Certification led to his relationship with Northrop Grumman, which was looking for a HUB partner. He bid for an opportunity, and the two companies began working together in 2007 as part of a mentor-protégé relationship.
“Northrop Grumman has a very good supplier diversity program. Some companies put in more effort than others. Northrop Grumman offers us education, mentoring and networking opportunities, but we still have to be very competitive to win business,” he notes.
Castillo cites the normal small business challenges, such as sometimes spotty cash flow and more limited access to capital than a non-MBE might have. In fact, Castillo & Associates’ revenues were down a bit in 2012, but Castillo is seeing improvement this year.
Castillo says that with the support of supplier diversity programs, he looks forward to his next fifteen years in business. “Northrop Grumman has been a great mentor for my company.”
UTC: a thirty-year history of support
United Technologies Corporation (UTC, Hartford, CT) has ongoing relationships with more than 50,000 suppliers in more than 180 countries, reports Aprile Ricardi, the company’s corporate responsibility and supplier diversity officer. “The size and scope of our operations create responsibilities for ourselves and those who work with us. To produce superior products in a responsible manner, we need suppliers who will meet high standards for business practices, environmental responsibility and operational excellence. We work closely with suppliers to help them meet our stringent requirements and enable UTC to deliver superior solutions for customers.”
UTC’s five divisions provide a broad range of high-tech products and support services to customers in the aerospace and building industries worldwide. Over the past four years, the company has purchased more than $3 billion in goods and services from minority and woman-owned businesses, Ricardi reports.
In 1976, UTC helped found the Connecticut Minority Supplier Development Council (now the GNEMSDC), the regional affiliate of the National Minority Supplier Development Council (NMSDC). UTC is also a corporate NMSDC member; its chairman and CEO chaired the NMSDC board from 1998 to 2001. Since 2002 UTC has held an annual Diversity Business Exchange to connect diverse suppliers with buyers across the company.
A corporate supplier diversity council shares best practices across UTC’s business units, and a supplier database gives each division access to the entire list of diverse UTC suppliers. Formal and informal mentoring relationships are a big part of the program, and have proven beneficial to both UTC and its suppliers, Ricardi notes.
Pratt & Whitney requires specialized parts
As an aerospace engine company, UTC business Pratt & Whitney (East Hartford, CT) and its suppliers operate under strict regulations and guidelines. Supplier diversity manager Alton Moss says all suppliers must be AS9100 certified. Released in 1999, AS9100 is a widely adopted, standardized quality management system for the aerospace industry.
Pratt & Whitney’s suppliers must use very specialized equipment and machines. The materials the company buys are low weight, highly durable, and high-heat resistant. Many are somewhat “exotic,” says Moss. That narrows down the field of available suppliers.
MN Aerospace gets trained for new capability
Three years ago, MN Aerospace (Suwanee, GA), a veteran-owned supplier of metal brackets, produced industrial sheet metal parts, but had never worked for an aerospace customer. Owner Mike Nance wanted to get into the field, so Pratt & Whitney helped the company develop the appropriate capabilities.
In 2010, Pratt & Whitney spent about one week each month for a year training MN Aerospace to make the specialized brackets it needed for fuel lines and controls.
A transformation, but the four-day workweek stays
Pratt & Whitney took the time and expense to help develop a new supplier, but MN made the capital investment and took the risk of building a new plant to Pratt & Whitney specifications. Nance funded it through another company he owns, MNdustries. He expects to recoup his investment within the next year or two. The new plant is clean, air conditioned, and developed on lean principles. “These are all rarities for our industry,” says Nance.
The two companies did $14 million in business last year, and expect to do $15 million by the end of 2013. The new plant and capabilities, along with the Pratt & Whitney relationship, have created new opportunities for MN. Other Pratt & Whitney suppliers are ordering brackets from MN, and one gave MN orders for its entire product line. Another is helping MN begin to work on Rolls-Royce aircraft engines.
That’s not bad for a seven-person shop where not a single person, including Nance, has an engineering degree. Nance, a U.S. Marine Corps veteran, is self-taught. He says he doesn’t necessarily want his company to get much bigger. Each employee works a four-day week, ten hours a day. “We enjoy life,” he says.
Moss says Pratt & Whitney has learned that suppliers who are new to aerospace may have a lower cost structure than established aerospace contractors. Pratt & Whitney can take advantage of their expertise, help grow the vendor long-term, and achieve savings.
Pratt & Whitney does business around the globe, and Moss sees additional supplier opportunities in international markets. Some diverse Pratt & Whitney suppliers do business in Poland, India, China and Turkey. This adds to the importance of export controls and international trade compliance.
Ongweoweh: a unique pallet supplier
Technological innovation, sustainability and diversity are a powerful trio. Not many people would associate those characteristics with a pallet company, but they describe the Ongweoweh Corp (Ithaca, NY) well.
The pallet company was started in 1978 by Frank Bonamie, an enrolled member of the Cayuga Indian Nation of New York State. He hired his son Dan to round out the labor force, and the company began building pallets for an auto plant.
Having a large, visible customer led to more large corporate customers. This was a mixed blessing for Ongweoweh. As with most small companies, it found the scale-up needed to accommodate new business was a challenge that required resources.
Ongweoweh needed to either invest significantly in its own facilities or farm work out. Funds were tight, so the company started to broker some of the contracts. Ongweoweh wound up working with lots of local competitors, and became a network of vendors. The network evolved into a national company with broad capabilities.
Dan Bonamie, now the CEO, reports that Ongweoweh has developed NativeTrax, proprietary software that is used to track and recover assets. Now its pallets can be easily reused or recycled, which adds sustainability to Ongweoweh’s value proposition. It’s ahead of the industry at a time when going green is desirable.
“The company was the first to offer customized pallets that can be recovered and reconditioned, resulting in cost savings along with using fewer natural resources,” Bonamie adds. “Ongweoweh customers like being able to report the sustainability efforts to the EPA.”
Passing it on
In addition to being an MBE itself, Ongweoweh has its own supplier diversity program, which helps customers meet their tier 2 diversity metrics. Bonamie says, “Supplier diversity can be difficult because not all vendors who meet the qualifications want to be registered as minority businesses.” He attributes this to too much red tape and paperwork, especially in the pallet industry, where many companies are smaller family businesses.
Surviving in a tough economy
The pallet industry, like many others, has been affected by the economic downturn. The costs of raw materials and goods have increased and corporate customers have cut back. Ongweoweh’s sustainability initiative has helped increase its attractiveness to customers and offset the downturn. At the same time, the company has successfully diversified its customer base, and survived in good shape.
Bonamie says his status as a certified MBE may give him a chance to compete, but doesn’t result in an easy business win. “We get in the door, but once we’re there we have to perform like anyone else,” he says.
COMPANIES WITH ACTIVE SUPPLIER DIVERSITY PROGRAMS
Check website for current listings.
|Company and location
|Cisco (San Jose, CA)
|Networking to help people connect,
communicate and collaborate
|DynCorp International (Falls Church, VA)
|Aviation, logistics, training, intelligence and operational solutions and services for the global market
|General Dynamics Electric Boat (Groton, CT)
|Designs, builds and supports submarines for the U.S. Navy
(Houston, TX and Dubai, United Arab Emirates)
|Products and services for the upstream
|Northrop Grumman (Falls Church, VA)
|Global security systems, products and
|Ongweoweh Corp (Ithaca, NY)
|Pallet services for industry, including national recovery network and inventory tracking
|Pratt & Whitney (East Hartford, CT)
|Design, manufacture and service of aircraft engines
|United Technologies Corp (Hartford, CT)
|High-tech products and support services for the aerospace and building industries
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