Supplier diversity: a hidden asset: when you think about diversity, what comes to mind? Increasing the diversity of your workforce? Making sure your marketing activities portray your full customer base? But there is one component of corporate diversity that is sometimes overlooked: supplier diversity. (Minorities & Emerging Markets).

What is supplier diversity?

Simply put, supplier diversity programs endeavor to increase the number of minority-owned businesses that supply goods and services to our nation's corporations. Corporations spend billions of dollars every year purchasing goods and services from other, usually

The need for such programs has never been greater. As companies look for more and more ways to save time and money, many are downsizing their vendor ranks and consolidating their purchasing activity with a handful of suppliers. This phenomenon makes it harder to bring in new suppliers, especially MBEs, because they often do not have the capacity levels required to secure such large contracts. In addition, when companies award such large contracts, the natural tendency is to award them to suppliers they have been using for years and for whom they have a certain level of comfort. More often than not, these long-standing suppliers are not minorities.

Why are supplier diversity programs necessary?

As consumers become increasingly aware of the economic impact corporations have in their communities, they have begun to insist that corporations hire and do business with people in their community, and that includes adding MBEs to corporate supplier ranks. Therefore, supplier diversity is no longer just "the right thing to do," it has become a business necessity.

Several franchise companies have had supplier diversity programs in place for several years. They recognized that it makes good business sense to partner with minority suppliers to serve their increasingly diverse customer base. According to Michael Tobolski, senior director of diversity initiatives at Marriott International, Inc., "We look to mirror the communities where we do business, not only by how we staff our hotels, but how we spend our purchasing dollars in each community."

This sentiment was echoed by Megaly Petersen-Penn, director of diversity resources at Burger King Corp. "Burger King has over 8,200 restaurants nationwide and minorities account for approximately 30 percent of our market. We feel strongly that our supplier base should reflect our diverse customer base. Our commitment to supplier diversity demonstrates that we take diversity seriously."

The rewards for such a commitment can be great. According to the National Minority Supplier Development Council (NMSDC) Guide to a Corporate Minority Business Development Program, the benefits of supplier diversity programs include:

* a wider pool of qualified suppliers,

* better quality products and services resulting from increased competition,

* a competitive advantage when seeking government procurement opportunities,

* more personalized service and greater flexibility because MBEs are typically smaller and more willing and able to adjust to your business needs, and

* enhanced community relations, positive publicity, and increased product loyalty among minority consumers.

Creating a Supplier Diversity Program

First and foremost, the company as a whole needs to understand the importance of such an initiative, and experts agree it needs to be embraced by the highest levels in order to succeed. "Commitment for supplier diversity needs to come from the top and be clearly communicated to all levels of the organization, with appropriate accountability," says Marriott's Tobolski. "There should be a company corporate policy on supplier diversity with stated goals and responsibilities, as well as a dedicated staff and appropriate budget to coordinate supplier diversity efforts." These steps will not only convey to employees the seriousness of the corporation's commitment to the program, but will enhance the program's credibility.

Marriott's supplier diversity program has been very successful. In 1998, Marriott increased their commitment to supplier diversity, with a goal that 5 percent of all purchases would come from minority- and women-owned businesses. In 2001, they exceeded that goal, reaching 5.1 percent or $151,000,000 spending with over 3,300 diverse suppliers, which is a 136 percent increase from $64,000,000 in 1997.

In 1999, Marriott also developed a Second-Tier Program, which requests that prime suppliers spend 5 percent with minority- and women-owned businesses in fulfilling their procurement commitments to Marriott. Some of Marriott's customers have the same policy. "Our corporate customers ask Marriott to report back to them our supplier diversity performance on a regular basis as we ask all of our prime suppliers to support our corporate supplier diversity policy and report their supplier diversity performance back to Marriott," Tobolski said.

Burger King's commitment to supplier diversity is also strong. The company has increased its use of minority suppliers to 4.5 percent of its total purchases and has set an internal goal of reaching NMSDC's "World Class" status (5 percent) by the end of 2002. In the last two years alone, Burger King's spending with minority-and women-owned businesses has increased 50 percent.

Supplier diversity is not only publicly embraced by all levels of management, including the CEO, but the company has committed significant time and resources to the effort. Through Restaurant Services, Inc. (RSI), Burger King's exclusive buying contractor, Burger King actively and aggressively seeks out qualified minority- and women-owned businesses. Burger King also supplies technical support from all areas of the company--from quality assurance to marketing to R&D--to ensure that companies that enter the supplier diversity program remain in the program. As Petersen-Penn points out, "We decided to offer this increased level of support because we realize that the more successful our suppliers are, the more successful we are. Plus, our efforts help create a more stable supplier base, and we want to work with suppliers that will be there for the long term."

For example, Brooks Food Group, Inc., of Bedford, Va. had been a provider of onion rings, french toast sticks and cheese sticks for Burger King for quite some time. When they first approached Burger King to extend their product line to include breaded chicken products through the acquisition of another company, they contacted Burger King to gauge their response. The staff at Burger King Quality Assurance reviewed the plans for the plant they purchased, and worked with the company on product development. Thanks to Burger King's involvement upfront, Brooks Food Group's breaded chicken plant was up and running in record time. Burger King was their first customer, and they have been working together for years.

If you would like to establish a supplier diversity program in your company, you should first learn what other companies are doing in this area. "I recommend learning about the companies that have successful supplier diversity programs in place that are leaders in their field, specifically the benefits they derive (their business case), staffing, and budget," says Tobolski. The IFA Educational Foundation has produced a study entitled Minority Outreach Programs in Franchising. Research Report and Case Studies, which outlines several supplier diversity programs of franchise companies. The report can be found at www.franchise.org.

The NMSDC is a tremendous resource, as well. It was created in 1972 to provide a direct link between corporate America and minority-owned businesses. Over 3,500 corporations have joined since its inception. The NMSDC Network is made up of 39 regional councils across the country, which certify and match more than 15,000 minority-owned businesses with member corporations.

The NMSDC Guide to a Corporate Minority Business Development Program can be accessed in their online "Information Center" at www.nmsdc.org. This comprehensive guide covers all aspects of setting up a supplier diversity program, and provides strategies and tactics to consider to create the most effective program, such as:

* establishing a formal mentoring program for MBEs,

* actively participating in NMSDC and other networking opportunities,

* dividing large contracts into several smaller contracts to give smaller companies a chance to compete,

* considering special payment terms and/or advance payments on large purchases to minimize cash flow problems, and

* requiring or encouraging other suppliers and contractors to utilize minority businesses in their contracts or purchase orders as part of the terms and conditions of the bid process.

Supplier diversity has become an integral part of doing business for many corporations. If adequate programs are put in place, companies will clearly see their value, not just in an enhanced corporate image, but in the bottom-line results that come from such partnerships. "I commend the IFA for highlighting supplier diversity," said Petersen-Penn. "It's important that IFA members know about this issue."

Sonya Thorpe Brathwaite is director of diversity and emerging markets for the International Franchise Association. She can be reached at 202-662-0784 or sonya@franchise, org.