Some of the nation’s largest companies continue to make good on their promise to develop a more diverse supply chain by spending more with minority-owned and women-owned businesses, according to recent announcements from some key U.S. companies.
This spring, Ford Motor Company announced a corporate milestone for 2011, surpassing its goal to source 10% of U.S. production and nonproduction purchases with diverse suppliers. This is the third straight year Ford has exceeded its diversity sourcing goal, which includes the purchase of goods and services from tier-one minority-owned and women-owned businesses.
For 2011, Ford purchased more than $5 billion in goods and services from its tier-one minority-owned suppliers, a 34% increase over 2010, and bought more than $1 billion in goods and services from tier-one women-owned businesses, a 22% increase over 2010. Ford said the increases reflect higher vehicle production and incremental new business of $661 million for existing diverse suppliers.
To qualify as a diverse source, a third party must certify suppliers as minority-owned or women-owned businesses. Many small and mid-sized contractors, subcontractors, distributors, and others have undertaken this process through federal, state, and local programs. Certification often helps open doors to new opportunities, but many suppliers say it functions best as a way to maintain relationships and build existing business with government and large corporate customers.
Small regional electronics distributor Amidon Corp. is one such example. A certified minority-owned company, it is in the process of being certified as a woman-owned company through the Women’s Business Enterprise National Council (WBENC), the largest third-party certifier of women-owned businesses in the country. Amidon has been a certified minority-owned company for about seven years, but only recently embarked on the WBENC certification, which managing director Julie Yuan describes as a complex process.
“We felt it might be helpful to [do this] for some of the companies that we deal with that are military or government-driven,” Yuan explains, adding that such customers already value the firm’s status as a small business and a minority-owned business when it comes to satisfying spending goals and requirements. “When someone asks about [certification], it’s good to be able to prove it. I don’t think we’re out there winning any business because of it, but it can help you build or keep business.”
Yuan says customers are more focused on cost and delivery these days.
“If you have the other stuff, great. But you need to meet [cost and delivery] goals first,” she says. “In the early 2000s, there was a big push [for certification] because there were more military contracts at the time. That has slowed because of the slow in spending.”
Indeed, companies with diversity sourcing programs include a host of requirements for winning business as a minority-owned or woman-owned supplier. Wyndham Worldwide, which recently hit key supplier diversity goals as well, requires companies to have been in business at least three years, offer competitive pricing, and have “proven financial viability.”
Wyndham Worldwide ranked fifth in DiversityInc’s recent list of the top 10 companies for supplier diversity, with more than 15% of its overall purchases in diverse spending—a 49% increase over 2010. Fellow global hospitality company Marriott International ranked first in DiversityInc’s list, which also included companies such as AT&T, HP, and Pacific Gas & Electric. DiversityInc began publishing its Top 50 Companies for Diversity in 2001, and the list includes breakout categories such as the supplier diversity list.
For some companies, the push to diversify the supply chain goes even further than its own purchasing department. Ford tracks its tier-one suppliers’ diversity spending goals as well. In 2011, Ford’s tier-one suppliers spent $1.7 billion with minority-owned businesses, up from $1.3 billion in 2010.
Amidon’s Yuan agrees that the sourcing goals are making their way throughout the supply chain, pointing to the many contractors and subcontractors that commonly ask whether or not a supplier is certified as a small-, minority-, woman-, or even veteran-owned business.
“I think it’s important for them to keep that image. And again, it’s good to be able to provide that certification when asked,” Yuan says. “I’ve also noticed that with some of the custom work we do for customers, it’s important that you can still manufacture in the U.S. In addition to them asking for [diversity] certification, they need to know that you can still produce it here.”