As small businesses, diversity suppliers frequently feel they cannot afford the cost of connecting electronically to their customers, Dunlop reasoned. On the other hand, large corporations would be unable to fully realize the potential of their enterprise procurement platforms until their smaller suppliers became enabled. Dunlop's solution: provide a relatively inexpensive solution that would allow large buying organizations to enable their small suppliers. Dunlop says his company initially focused on enabling MBEs with its SupplierConnect solution. However, after American Management Systems (AMS) approached Expansionet to participate in a bid to provide e-commerce services to the state government of Virginia, which deals with more than 50,000 suppliers, AMS suggested using SupplierConnect for all the small firms in the state's supply base.
The cost of enabling a single supplier using SupplierConnect includes a software licensing fee of $600 to $700 annually and a monthly fee of $100 to $200 for Expansionet to host the supplier's catalog at an IBM data center in downtown Chicago. A supplier that has $5 million to $10 million in revenue will pay between $2,000 and $3,000 annually, Dunlop estimates. Expansionet's strategy is to entice buying organizations to cover the cost to enable their suppliers on the theory that automating those connections will result in substantial cost savings for both sides, more than covering the necessary fees and accelerating the return on investment (ROI) in an enterprise procurement platform. SupplierConnect will also help buying organizations track diversity spend.
Another alternative for minority-owned businesses is to sign onto an MBE-focused online marketplace. Minority-owned start-up DiversityeCommerce offers a site that will allow MBEs to respond electronically to requests for quotes (RFQs) posted by buying organizations. A second company, mwSupplier runs an e-marketplace called miwOve.com, which provides a forum for small to mid-sized minority-, women- and veteran-owned businesses to set up Internet storefronts. Recognizing that MBEs frequently do not have IT staff to focus on e-commerce, mwSupplier used technology from the now defunct OrderFusion to provide its supply-side customers with the tools they need to get started quickly. For buyers, the site aims to provide a one-stop location for diversity purchasing, including reporting on expenditures through the site.
Best Practices for Suppliers
New tools notwithstanding, with so much conflicting information about e-business, its no surprise that Harriet Michel, president of the National Minority Supplier Development Council, has seen a growing level of concern among the council's 15,000 member MBEs about the impact that e-commerce will have on their businesses. At the same time, many of the NMSDC's 3,500 corporate members are talking about the inevitability of e-procurement. Consequently, the first step that minority business owners must take in responding to e-commerce is to accept that business is moving inexorably online. "If procurement is going to be done electronically now, minority suppliers have no choice but to try to respond," Michel says.
Having accepted that change is necessary, minority business owners must educate themselves about what e-business will mean for their industry and then plan accordingly. Expansionet's Dunlop recommends that MBEs look to their client base. "Find out what your major customers are doing and what you need to be doing to keep them satisfied," he advises. "Go to the buyer and say: "I want to be e-ready. What do I need to do to connect to you?'"
Corporate executives working on supplier diversity initiatives second that view. For example, Walt Jennings, manager for minority supplier development at Delphi Automotive Systems, a $29.1 billion tier-one auto industry supplier, says for MBEs, as for other companies, "Smart business is knowing all you possibly can about your customers and their needs." Linda Hamlet, purchasing manager at Delphi, adds that MBEs can look at e-procurement as a tool for possibly getting closer to customers: "I don't think they should try to win one big order from Delphi. They should look a little further than that and ask, 'How do I become a strategic partner with a company like Delphi?'"
William Harper, global contracts manager at Delphi, recommends that minority businesses look for a customer that can assist them in making the transition to e-business. At Harper's company, for instance, each of the purchasing teams working in a particular commodity line has the responsibility of mentoring a minority supplier. Part of the mentoring process includes making sure the suppliers have the necessary training to become enabled to the extent necessary to continue to do business with Delphi, which currently mentors 19 diversity suppliers (including InfoServices), from a total of 360 MBEs in the company's supply base.