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Use The Web To Enhance Your Supplier Diversity Program

Author(s):

Brian G. Caffrey
Brian G. Caffrey, President, SOLCON Group, Jackson Heights, NY 11372, 718/457-3246, bcaffrey@solcon.com.

83rd Annual International Conference Proceedings - 1998 

Abstract. Minority Business Enterprises (MBEs) want more business from Corporate Purchasing Personnel (CPPs). In turn, CPPs want to give more of their business to MBEs. Yet, despite this seemingly common desire, each face significant impediments to doing business with the other. This presentation will focus on how the Internet, and the World Wide Web in particular, can help overcome some of these impediments and make it easier for MBEs and CPPs to conduct business by improving initial sourcing and pre-qualification processes and by lowering transactional costs.

Sourcing. One of the problems facing CPPs is the relatively small number of MBEs that exist in many product and service areas. In order for a supplier diversity program to be successful, CPPs must be effective in locating potential MBEs suppliers. Although printed sourcing directories have traditionally been used by CPPs, the very process of producing such directories causes them to suffer from an intrinsic flaw: much of the information contained within will have changed by the time CPPs actually use them.

The immediacy of the Internet and the ease with which information can be kept current overcomes this data lag and allow purchasing to access the very latest information. Here are just a few of the online databases that can help CPPs to locate Qualified MBEs:

  • U.S. Small Business Administration Pro-Net - http://pro-net.sba.gov/ This site provides access to a database of information on more than 171,000 small, disadvantaged, 8(a) and women-owned businesses. Businesses profiled on the Pro-Net system can be searched by SIC codes; key words; location; quality certifications; business type; ownership race and gender; EDI capability, etc.
  • Minority Business Directory <http://new.melanet.com/mebc/minority_directory> Database contains listings of MBEs in a wide variety of business categories.
  • World-Wide Minority Business Network <http://www.mbnet.com/freelist.htm> Provides both a Minority Business Directory
    <http://www.mbnet.com/minbzdir/minbzdir.htm> and a Major Corporation Directory <http://www.mbnet.com/majbzdir/majbzdir.htm> to assist MBEs and CPPs in locating each other.

Using the term "Minority Business Directory" in any of the popular Internet search engines will return a list of other MBE directories, including those maintained by state and municipal governments. In addition to directories, there are numerous other MBE related sites that could prove valuable from a sourcing perspective to both CPPs and MBEs. Here are just two examples:

  • Houston Minority Business Council - http://www.hbc.org/
    Shell Services Company sponsors the site of this member organization for minority business owners interested in forming successful business relationships with Houston's major corporations. Membership includes more than 750 minority business owners and more than 220 major corporations.
  • National Minority Business Council - http://www.nmbc.org
    The NMBC is an umbrella organization that encompasses hundreds of small businesses located nationally and internationally. The primary purpose of the organization is to enhance the success and profitability of the small business community through the provision of high-quality services, programs, advocacy and networking support.

MBEs face related problems in approaching CPPs. Although they may know which large corporations they want to do business with based on the corporation's primary industry, the size of the corporation itself may present a problem. Where to begin? Whom to contact? These questions can present quite a daunting situation to an MBE. If the initial contact is not with the right CPP, one who is motivated to see that the supplier diversity program succeeds, the MBE's information may simply sit with that of all other hopeful suppliers. After following up to no avail with the initial CPP contact, the MBE may simply give up and move on to the next prospect corporation, never knowing that they weren't talking to the right person to begin with.

Indeed, one of the other major impediments facing MBEs is that of the complexity of the corporate purchasing environment. Large corporations often have extensive rules, policies, guidelines, and reporting procedures that can be both confusing and off-putting to smaller businesses. Since MBEs may have to deal with multiple sets of such administrative requirements, it can drive up their cost of doing business (another impediment that is addressed later in this presentation) and may actually discourage some from seeking a business relationship.

Some large corporations, mindful of this potential problem, have found solutions by publishing information about their supplier diversity on their corporate Web site. Two good examples of this are Apple Computer <http://www.apple.com/supplierdiversity> and Wal-Mart - http://www.wal-mart.com/vendor/minority.shtml. Both sites provide potential suppliers with extensive non-corporate-jargon-laden information about doing business with the respective corporations and contain features that could work well as models for other corporate programs. For example, here are the main sub-headings from Apple Computer's Supplier Diversity Program page:

  • Opening Letter - A Message to Suppliers
  • About Apple - Who We Are
  • Supplier Diversity Program Basics
  • Apple Supplier Diversity Corporate Policy
  • Purchasing at Apple
  • How to Get the "Apple" Rolling
  • What We Look for in Suppliers
  • What You Can Expect from Us
  • Assistance from the Supplier Diversity Team

Such clear communications can go a long way toward ensuring that MBEs have the right information that they need before ever initiating a personal contact with a large corporation.

Pre-Qualification. Once a potential supplier has been identified, the next step for CPPs is to begin the process of pre-qualification. Here again, there are numerous Internet-based tools that can help in this effort:

* Annual Reports Library < http://www.reportgallery.com/search.htm> Site gives the ability to search for nearly 1.5 million online annual reports and proxies from corporations, foundations, banks, mutual funds and public institutions.

* Better Business Bureau < http://www.bbb.org/bureaus/index.html> There are 130 Better Business Bureaus located throughout the United States and 20 that serve Canada. This site enables CPPs to find the nearest location for any desired background checks.

* Dun & Bradstreet Information Services < http://www.dnb.com/> Allows CPPs to check out potential suppliers online by accessing their D&B subscriber accounts or via credit card purchase of reports.

* Hoover's Online < http://www.hoovers.com/>

Hoover's Company Profiles provide in-depth information on more than 2,700 public and private companies in the US and around the world.

* KnowX < http://www.knowx.com/>

Access to online databases allows searches for a wide variety of public information including bankruptcies, lawsuits, judgments, liens, UCC filings, etc. Most searches are free and detailed reports are available for a nominal fee ($1-7).

* LEXIS-NEXUS <http://www.lexis-nexus.com/>

Among the purchasing related services available here is Tracker which provides

comprehensive supplier information to be delivered daily to the desktop. Such a service is a useful way to monitor

Transactional Cost. EDI (electronic data interchange) is used by many large corporations to facilitate the flow of information between themselves and their suppliers. Although EDI can be a very beneficial tool and may reduce corporate transactional costs, it can be a very complicated process to implement. It can also be cost prohibitive for many small businesses, from both implementation and ongoing operation standpoints.

Fortunately, there are Internet-based tools that can reduce both the complexity and the cost of such buyer-supplier EDI linkages. The largest EDI VAN (Value Added Network), General Electric Information Systems offers one solution with the GE TradeWeb service. TradeWeb - http://www.getradeweb.com/ is an entry-level, Internet-based, EDI service that enables small businesses to electronically exchange business documents with their trading partners for a fraction of the cost of a more traditional EDI implementation.

Some companies are forgoing EDI entirely in favor of messaging "middleware" that promises to allow companies to exchange information between different computer systems and platforms, requiring only an Internet connection and a Web. Another approach could be to use standard information technology tools such as e-mail to communicate with the supplier base. (See E-mail- Based RFP Management elsewhere in these conference proceedings.)

Conclusion. The first recommendation from the CAPS focus study, Purchasing From Small Minority-Owned Firms: Corporate Problems, was to work harder at implementing the programs that already exist. The recommendation went on to explain that this meant directly addressing the impediments to supplier diversity programs. The Internet has given purchasing a number of tools that can do just that. What remains is for purchasing to take the initiative and start using Internet-based technologies in new and innovative ways.

SUGGESTED READINGS
Dollinger, Marc J. and Daily, Catherine M. Purchasing From Small Minority-Owned Firms: Corporate Problems. Copyright c 1989 Center for Advanced Purchasing Studies.

Auskalnis, Richard J., Ketchum, Carol L., and Carter, Craig R. Purchasing From Minority Business Enterprises: Best Practices. Copyright c 1995 Center for Advanced Purchasing Studies.

NAPM TECHnotes Publication Minority-Owned and Women-Owned Businesses: Examples of Brochures, Policies, & Procedures. Copyright c 1994 National Association of Purchasing Management


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