One of the biggest challenges that MBEs face is understanding where they fit in the corporate supply chain.
Like many MBEs, I have spent hundreds of hours filling out registration forms on supplier diversity websites, providing the corporations with the required information and telling them who we were and how they could buy our products and services. I have also sent many emails that outline why we are such a good fit for them.
Unbelievable, but the phone never rang, not once. Sound familiar? I’m here to tell you that you are not alone. Not to discourage anyone, but there are some realities that all small diverse businesses need to deal with. During the 2010 NMSDC conference in Miami, I had the opportunity to attend a roundtable that was hosted by a large corporate member. They clearly believe in supplier diversity and wanted an honest discussion about the myths, the challenges and the opportunities. The facilitator opened with a Good News/Bad News scenario. “The good news is our corporation purchases $50 billion dollars of goods and services each year; the bad news is we already have excellent and competitive suppliers providing us with $50 billion dollars in goods and services.” He then went on to say; “this is not a social entitlement program, so with that out of way; why should we do business with you?”
All of sudden our MBE certification didn’t seem so important. The facilitator drove home the point that we needed to find a way to be marketable, profitable and sustainable. Tough love? Maybe. But this is the reality of today’s business climate. It is important to align our visions and goals with the corporations while providing value to them. We need to understand where we fit in the supply chain and whether we are really ready to be a prime supplier. For many of us the better fit is as a Tier 2 or even a Tier 3 supplier.
We need to ask ourselves if we can minimize or eliminate a problem or challenge, the corporation has. A quick look at the corporations’ website often explains what they are looking for. They often list the commodities and certifications or requirements. So are you asking yourself the right questions? How are you adding value? We must all be prepared to answer the question: why should they buy from us?
The unfortunate reality is that most corporations are currently under mandates to shrink their supply chain or eliminate vendors. For new suppliers this means we must be able to add value at multiple points of the supply chain. Many MBEs don’t have the scale or capacity to occupy multiple points of the supply chain. In order to work with corporations, we must be able to provide scale and service multiple plants, sites, states, and regions. We need to understand what the term “Global Footprint” means. Most importantly, we need to have all the necessary quality certifications and/or regulatory requirements. With this said, for many MBEs it makes sense to look for opportunities as a Tier 2 or Tier 3 supplier to a Tier 1 supplier. At the end of the day, you are still providing products and services to the corporation. Let’s face it, a contract is a contract whether it is as a Tier 1, Tier 2 or Tier 3.
To improve both sides of this situation we need some help from the corporations, also. I started this article by mentioning all my failed efforts with filling out supplier registrations and questionnaires. It is always the first directive I hear at any panel discussion, trade fair or networking event. We are instructed to go to the corporation’s website and fill out the potential supplier registration because that is where sourcing people find new suppliers. The unfortunate truth is that most buyers don’t have the time to search the database for a new supplier. I realize the need to have us register but maybe the corporations can get together to have one site, one form, a one-time registration, which feeds all of their databases. Wouldn’t it be wonderful to register just once and then direct our info to the companies where we see a potential match?
Supplier Diversity managers are inundated every day with phone calls and emails. I have heard many diversity managers say they are frustrated with all the small diverse companies, which continually reach out to do business and are not well prepared. Let’s put an end to the frustration. Many corporations have launched mentorship programs to develop diverse suppliers. These corporations take an active role in guiding, educating and providing the tools necessary to add value and be competitive.
So, where do you fit in the supply chain? As a Tier 1, Tier 2 or Tier 3 supplier? In order to be considered for opportunities, we must be ready to answer the question and demonstrate how we add value. We also need to encourage the corporations to support the development of small diverse businesses. The solution to creating marketable, profitable and sustainable diverse companies can only be achieved by creating partnerships between the corporations and MBEs. After all, the best solutions are partnerships where everyone is invested in the outcome.
About the Author:
Hermann Schneider, Owner/Partner of KrisDee & Associates, Inc. a minority owned precision machining and die cast company located in Elgin, IL. Mr. Schneider is an entrepreneur with a long history of establishing sustainable businesses including a manufacturing firm that provides products for the aerospace, automotive, medical, military and OEM markets; a construction development company that builds industrial and commercial buildings and restaurants; and a restaurant company with multiple restaurants with locations throughout the Midwest.
He holds an AS in Mechanical Engineering from Harper College, a BA in Management from National-Louis University and an MBA from Lake Forest Graduate School of Management. In addition, he is a Six Sigma Black Belt and has been a YPO-WPO member since 1994.
Mr. Schneider was inducted into the Chicago Area Entrepreneurship Hall of Fame in 2009 and was awarded the Chicago Regional Minority Manufacturing Firm of the Year Award for the Minority Business Development Agency is Chicago MED Week 2010. He is committed to raising awareness around the critical issues that minority businesses face.
