ELMSFORD NY Screws and More (SAM), an Elmsford based fastener and building material distributor looks to expand its product line and customer base with the recent addition of Allen Guippone as partner. SAM has enjoyed success with loyal clientele since 1970. Together, owner Andis Woodlief and Guippone will serve a broader market.
New research from Atlanta business consultant Hackett Group shows that companies that "focus heavily on supplier diversity" generate a 133% greater return on procurement investments than the typical business.
"Basically what we found is that world-class organizations are spending the same or even a little more with a diverse group of suppliers, and their operating costs are lower," says Christopher Sawchuk, a senior adviser with Hackett Group.
Such companies spend on average 20% less on their buying operations and have procurement staffs half the size of their peers whose supplier programs aren't as diverse, according to Hackett.
At the request of a client, Mr. Sawchuk and colleague Kurt Albertson set out to test the conventional wisdom that buying goods and services from small businesses owned by women, minorities and the disabled benefit society but not the bottom line. The two also tested whether the effort was an administrative burden that increased costs, and they found "that's simply not true," says Mr. Albertson.
Suppliers owned by women, African-Americans, Asians, Hispanics and American Indians may price their products and services better than larger competitors or operate more efficiently.
"We found that when we bid out construction services, we were able to achieve considerable savings by awarding one contract to a woman-owned enterprise", says Jane Jansen, manager of PG&E Corp.'s supplier-diversity program. That contract, for civil construction services, produced savings of more than 20% for the California utility.
The adoption of minority-purchasing programs has grown steadily for about three decades despite ups and downs in the economy. Minority suppliers to the U.S. auto industry are experiencing a slowdown in demand as the industry struggles to reorganize. The drive to outsource manufacturing also cut into business for minority suppliers, but even contract manufacturers seek minority suppliers to fulfill their customers' expectations for diversity.
Social responsibility is the most frequently mentioned reason for choosing minority suppliers, followed by government mandate.
But such suppliers also can create sales opportunities for companies that use them, meaning they are benefiting the bottom and top lines.
For example, last year, AT&T Inc. spent $2.4 billion with diverse suppliers, or about 15% of its total purchases. "During the same year, the company generated $4 billion in revenue from bids that required AT&T including diverse suppliers as part of its bids", says Joan Kerr, executive director of supplier diversity for the phone company.
"It's often a tipping factor in winning a bid", Ms. Kerr says.
"It's a differentiator for us when we approach customers in certain markets", says Lamont Robinson, corporate director of supplier diversity for Cardinal Health Inc. Last year, the company spent nearly $1 billion sourcing goods from more than 1,000 small businesses that Cardinal in turn distributes to hospitals and medical-buying groups. "We try and target customers in hot spots like Texas, South Florida and Georgia, where we have an advantage with a stable group of minority suppliers in place", he says.