Dunlop tells of meeting in late 2000 with the diversity procurement directors of major food industry companies to discuss minority supplier enablement. All the corporations had bought e-procurement platforms, and all planned to join an industry-sponsored marketplace. At the meeting, the directors worried out loud that their companies' Internet initiatives would make it impossible for them to do business with diversity suppliers. "We have spent five or 10 years building our supplier diversity programs, and this e-business initiative is going to kill those programs," Dunlop says the executives told him. One company, for example, was using an online reverse auction site to bid out contracts, but the volumes sourced through the site were so large that MBEs and other small companies could not realistically compete. Other companies reported that diversity suppliers could not afford the technology that is necessary to be able to connect to customers.
That a group of diversity directors from Fortune 500 companies would sit down to address this issue is indicative of the seriousness with which Corporate America is taking the challenge of mixing supplier diversity and e-procurement. Companies are mindful of the need to ensure that their supplier base mirrors their customer base for the reasons discussed above, but many companies also face diversity spending mandates from corporate customers or government clients. "Our own customers are putting those demands on us," says the purchasing manager at one automotive industry supplier. "They are telling us we have to do this in order to do business with them."
In addition, corporations risk missing out on the innovations MBEs bring to the table as one of their key value-adds, according to UtiliCorp's Carter. "Our supplier diversity initiative has always been about competitive advantage and enhancing our operations," Carter says. He points out that Small Business Administration statistics show a high percentage of innovations coming out of the small business sector. With minority-owned firms making up the majority of the growth of the small businesses segments, "It's not difficult to do the math," Carter says. "I want to make sure we don't exclude the players that offer innovative solutions to our company."
Opportunities on Both Sides
Challenges and risks aside, both MBEs and buying organizations have much to gain from e-business. First, the Internet has provided tools that allow certain smaller companies, including MBEs, to operate outside their immediate geographies and to compete with much larger firms. "e-Procurement has allowed minority suppliers to grow by truly leveling the playing field," says Clarke of CCAII. Clarke should know, because his 20-year-old consulting company has used the Web to recruit IT talent nationally to meet clients' localized requirements in 18 states across the country. Boasting this kind of expanded reach, CCAII can now compete for business from national clients that demand service in multiple locations.
The Tomas Rivera Policy Institute survey indicates that other business executives at MBEs engaged in electronic commerce share Clarke's view of e-business' benefits. Among African American executives, 24 percent cited "bigger market/global reach" as an e-business boon (as did 19 percent of Latino and 18 percent of both Asian American and Native American executives). Between 14 percent and 18 percent of the minority executives cited "increased profits/sales" as a benefit.
Second, those MBEs that do invest time and resources to connect to e-marketplaces can accrue the same supply chain benefits as other participants. For example, Thomas Hill, a spokesman for Covisint, says the industry-sponsored marketplace for the automotive industry provides MBEs and other members with a low barrier to entry into supply chain management, collaborative commerce and e-procurement. The opportunity is for all suppliers — minority or otherwise — to get connected and see what is happening up and down the supply chain, regardless of the supplier's size or location. Thereby, suppliers can generate new revenue streams, better manage inventory, develop more effective business processes and drive inefficiencies out of their businesses. Interestingly, however, only 4 to 6 percent of the MBE executives responding to the Tomas Rivera Policy Institute survey cited "cost reductions" or "speed/faster" as benefits of e-business.
e-Business can also be beneficial for corporations pursuing diversity initiatives. The opportunities to increase market share by doing business with minority suppliers and to benefit from the innovations that MBEs can offer have been discussed above. But a company can also use e-business technologies to achieve cost savings by bringing diversity suppliers into its "extended enterprise."