How to Unlock the Potential of Minority Suppliers
Archer Smith, Supply Chain Associate — Stimulus, Inc.
If you have paid attention to Stimulus on social media in the past few weeks, you may have noticed our poll showing that after price, recommendations are the key element to supplier choice by an overwhelming margin. Despite all the changes in procurement in recent years, the value of a good business network remains unparalleled, but this becomes a problem for companies that want to bring on diverse suppliers. Minority-owned businesses (MBE’s) provide the same quality of service but have less access to the important business relationships that are so favored when making procurement decisions. So, what can be done to bridge this gap?
First, let’s look at why the divide exists in the first place: wealth disparity. Minority communities in America have far less wealth than white communities, often more than ten times less per household. This results in both limited access to capital for business owners, and a bias towards operating in lower revenue service industries. Combine this with both the fact that professional networks primarily include people from similar backgrounds, and that minority business owners have historically been purposely excluded from making more lucrative connections, and it is no wonder that MBE’s have less access to opportunities, investments, and the recommendations that our poll shows are so coveted.
In response, both minority business owners and the US government have created organizations meant to develop networks for non-white businesses. These include various minority Chambers of Commerce, the US Minority Business Development Agency, numerous nonprofits, and other groups. The problem is that even with this support, MBE’s still often travel in different circles than other businesses and are harder to both find and evaluate as potential suppliers.
This persistent disconnect is not only unjust, it’s also a massive lost opportunity for American companies. Fifty percent of American businesses started within the past 10 years have been minority-owned, despite minorities comprising about 32% of the population. Minority communities are hotbeds for entrepreneurial talent and drive, and companies that are better able to involve MBE’s in their supply chains will gain a competitive edge from those partnerships.
The solution is to integrate contact with MBE’s into core procurement functions. Rather than having to reach out to them with targeted diversity initiatives, firms need the ability to find and connect with MBE’s as easily as they do with other suppliers. On top of that, procurers and decision-makers need to be able to easily find recommendations from outside of their current networks for the products and services they require. Doing this will require structural changes to procurement activities, both in process improvement and in software, where an in-group preference is often reflected in the system design itself.
At Stimulus, we believe that this inclusive vision is the future of supply chains, and we strive to ingrain that vision into our work. MBE’s of all types are listed alongside established suppliers, benefiting from the same visibility and access. Their achievements and product offerings are as accessible as those of any other business, and with a few simple clicks, they can be highlighted, compared, and connected with one platform used for all supplier discovery. We hope that our product will help to lower the barriers that exist between MBE’s and opportunities for growth, and facilitate new business relationships that lead to stronger supply chains. If that peaks your interest, check out our website for more information.