Southport, CT, Oct 21, 2009 / -- DiversityBusiness.com with over 48,000 members nationally and over
500,000 small businesses using our services receives feedback from
business owners who usually talk about two main themes.
1. Focus of large corporations on growing well established
2. Too much attention to “Spend” figures.
Well, we all know
that supply chain strategies require a supplier to have a minimum
scale and scoop to enable global competitiveness of its customers
and in a major corporation: “What Gets Measured Gets Done”.
been clear for the last few years that supplier diversity exists for
3 main reasons:
1. To increase market share within multicultural/diverse
2. To include companies in the supply chain owned by historically
Represented groups thereby creating wealth for these groups.
3. Government contract spend requirements.
created a goal to increase year over year diverse spend. From the
data presented below, it is proven that the mission hasn't been
achieved and has nothing at all to do with reaching the Mission. In
fact, it significantly imbeds progress in addressing items 1 and 2.
The move to have
fewer suppliers with a large spend has certainly created some very
large and successful diverse owned companies. Or has it? If one were
to take a close look at the percentage of ownership, the number of
diverse employees, the location of the company and where its
employees reside you will find not only are we all participating in
smoke screen results but very few times are we creating generational
wealth for a diverse business. The reason for the latter is most
companies that pass over $100 million dollars in annual revenue
have establish themselves as high quality, profitable and
sustainable companies that become the target for takeover’s by
To make matters
worse, I estimate that nearly 30% of reported diverse spend is going
to companies owned by individuals that have been in the United
States less than 12 years. The employees of these companies, while
being a high percentage diverse, are also highly educated and most
have advanced degrees. They average being in the U.S. less then 7
years. So the question is, what communities are we reaching that
have been historically underrepresented and why is this spend
considered supplier diversity?
One would need to
know the history of certification, when and why it came about and
the decisions to include certain groups to appreciate why it has no
place in the current marketplace.
There are only
20,000 businesses certified by third party certification agencies
and another 100,000+ certified by Federal, State and local
governments. Of these, most have gone through the process because
“someone told them they had too”. It still represents less then of
1% of the (by any ones estimates) over 10 million traditionally
defined diverse owned businesses. And by the way ………. everyone can
now get certified somewhere, somehow today!
Are specifics on
market share, segmentation, size, and growth of the U.S.
multicultural market considered to achieve point number of the
mission from above? Do you have an in-depth analysis of the
attitudes and behavior of multicultural consumers to determine if
diverse procurement spend has any effect on purchasing habits?
"multicultural markets" encompass segments ranging from ethnicity
and race to sexual orientation and geographic dispersion, the sector
getting the most play today is the rapidly swelling
Hispanic-American market. Known as the majority minority, this
booming segment--expected to surpass $1 trillion in buying power in
a few years--is spawning many multicultural marketing initiatives.
There is a huge
disconnect in meeting “Mission number 1” based on the current
diverse spend with Hispanics shown in Figure 1.1.
So what companies
becomes your fan club? What has the most impact? A $1 million
contact award to a 50 companies each with 10 diverse employees or a
$50 million contract to one company with 10 diverse employees?
Our research for
the “Top 500 Diverse Owned Companies” (report attached) shows
aggregate revenue of nearly $53 billion. $104 billion has been
reported by a third party agency of diverse spend among Fortune 500
companies. The Top10 diverse owned companies received nearly $20
billion total spend. This means that approximately 10 diverse owned
companies received nearly 20% of total spend reported by Fortune 500
companies. It also means that 50% of all spend went to only 500
diverse owned companies. But the most important number is that 40%
of spend with the Top 500 companies went to the Top 10 companies.
• How many diverse companies are participating in spend?
• The Top 500 diverse owned companies have over $53 billion in
annual revenue that represent over 50% of all reported diverse spend
Are companies with less $100 million in diverse spend as effective
in meeting the mission as companies spending over $1 billion?
What has the greatest impact?
1. A $50
million contact to one company
2. 50 $1
million contract to companies in one geographic area
continue to hide behind ……… It’s too hard to manage too many
are too small to be suppliers but large enough to be customers
Is it true?
Spend doesn’t matter!
Top 500 Diverse Owned Businesses 2008
Subcontinent Asian American
The Big Shift
Looking at the
above chart, it’s interesting to note the Asian Pacific and Black
American gross sales figures. In 2008, both groups had about $11
billion dollars in annual gross revenue. (10) Years ago more then
60% of the Asian Pacific spend would have been in the Black American
category. The shift in these dollars (mostly in IT spend) represents
a huge setback to both mature African American business owners and
new startup entrepreneurs. By all measures, this group has been
under represented and continues to be economically deprived
(limited) of participation in the American dream.
Imbedded in the
total corporate spend is also an unknown number derived from data
scrubbing. A process used quite heavily for the last 5 years,
with the purpose in finding diverse spend within accounts payable
records that weren't tracked through supplier diversity. The use of
this spend in reported dollars is questionable as it accounts for
“No Effort” in sourcing and takes credits for apparent supplier
The total $104
billion corporate spend is also blurred because of the inclusion of
2nd tier reporting spend by some companies.
In the final
analysis, we see that a tremendous amount of effort and resources
are being used to service an insignificant number of diverse owned
companies but it appears to the public that there are efforts for a
much greater inclusion.
World-class procurement organizations
spend 30% less on procurement operations than their peers and
operate with nearly half the staff. The supplier diversity function
within procurement should make more efforts to work with internal
organizations. They also should become more involved with external
organizations that are focused on multicultural market and diversity
advertising as opposed to the traditional path of belonging to
business development groups only.
If the end-game for SD initiatives is to
achieve the goals of the mission then it seems
Areas of supplier diversity programs need
to look at include:
• How are Chief Diversity Officer, Marketing, Advertising,
Sales, Communications and Human Resources departments involved with
your supplier diversity efforts?
• How many internal/external people know of your spend? Is
it in the millions or just in the diverse business network of a few
• Has your spend motivated the diverse marketplace to:
• Choose your company as a preferred product/service
• become employer of choice
Launched in 1999, DiversityBusiness, with over 50,000 members, is the largest organization of diversity owned businesses throughout the United States that provide goods and services to Fortune 1000 companies, government agencies, and colleges and universities. DiversityBusiness provides research and data collection services for diversity including the "Top 50 Organizations for Multicultural Business Opportunities", "Top 500 Diversity Owned Companies in America", and others. Its research has been recognized and published by Forbes Magazine, Business Week and thousands of other print and internet publications. The site has gained national recognition and has won numerous awards for its content and design. DiversityBusiness reaches more diverse suppliers and communicates more information to them on a more frequent basis then all other organizations combined. We also communicate with mainstream businesses, government agencies and educational institutions with information related to diversity. Our magazine reaches over 300,000 readers, a monthly e-newsletter that reaches 2.4 million, and website visitors of 1.2 million a month. It is a leading provider of Supplier Diversity management tools and has the most widely distributed Diversity magazine in the United States. DiversityBusiness.com is produced by Computer Consulting Associates International Inc. (CCAii.com) of Southport, CT. Founded in 1980.