Minority suppliers to play bigger role

May 19, 1994|By Ian Johnson | Ian Johnson,Sun Staff Writer

When James E. Preston, chief executive of Avon Products Inc., tries to figure out who his customers will be in the coming decades, he doesn't just see the white suburban housewife of yore. Instead, he sees a racially diverse group of customers who will demand more products -- and, hopefully, buy more products -- than his company ever thought possible.

That realization has put Avon at the forefront of a growing number of companies that are developing long-term relationships with suppliers owned by blacks, Hispanics, Asian-Americans and other minorities. The company does not create set-asides or quotas, but it makes sure that any potential supplier is competitive enough to win bids.

"Corporations are realizing that they're serving large, diverse markets, and those best able to understand the needs and wants of those communities are from those communities," Mr. Preston told a conference of black entrepreneurs in Baltimore last week. "It's a question of demographics."

The demographics are these: By the year 2000, white men will be a minority in the U.S. work force. Already potent consumer groups, non-whites will become the key to corporate success.

Avon is one of many companies with aggressive programs to increase the number of minority suppliers, said Harriet R. Michel, president of the National Minority Supplier Development Council, which represents 3,500 corporations trying to develop relations with a more diverse group of suppliers. Although some companies -- like Avon and the Big Three automakers -- have had similar programs for years, they are only now becoming a significant trend, said Ms. Michel.

"Are companies doing enough? No. But it's become part of mainstream conversation. Companies realize that they have to reach out to us," Ms. Michel said.

Ms. Michel's council has put her member companies in touch with 16,000 "minority and disadvantaged" companies, which include female-owned businesses.

She estimates that about 2 percent to 3 percent of corporate purchasing is through minority-owned businesses, a figure that has not changed over the past 15 years.

But now, corporations trying to keep up with demographics are looking for ways to increase their business with minority-owned small businesses.

Even the business world's turn toward leaner, more cost-conscious suppliers is not blunting the trend, Ms. Michel said. In fact, it can help because the minority suppliers that win contracts are getting longer-term commitments, she said.

"This can be a hidden benefit for us," Ms. Michel said. "In the past, it was easy to be nickeled-and-dimed to death by these small supplier contracts. Now, if we get the business, it's more likely to be a bigger chunk of business and one that can grow over time."

Mr. Preston said companies are being driven by one simple motive: greed. Minority-owned firms are well-positioned to understand the new, multicultural markets that corporate America wants to conquer, he said. And in today's more competitive environment, every market -- no matter how small -- can be a big edge.

"Just 1 percent can make a difference nowadays. Especially if it's 1 percent of a huge market," Mr. Preston said.

Another company heavily committed to increasing business with minority businesses is International Business Machines Inc. The company, for example, has a partnership with Crest Computer Systems of Skokie, Ill., a black-owned business that IBM figures can sell computers better in the black community.

It also hopes to develop relationships with minority-owned software manufacturers, who may be better able to write software that appeals to niche markets.

Ford Motor Co. is also changing its approach.

For example, the company has hired David Brophy, a professor at the University of Michigan, to devise a new program that will cut the number of suppliers used by Ford but increase the business to the remaining few -- including minority firms.

The idea is to work with some of the minority companies so they can remain Ford suppliers. The automaker would help with technical training and quality improvement.

These programs are not only designed to expand the racial balance of companies' suppliers, Ms. Michel said. Firms owned by women also qualify for most of these programs and have proliferated in recent years.

That has a downside as well because it cuts into business opportunities for minorities, especially black businesses. "Contracts for women-owned firms have doubled over the past five years and now exceed contracts with black businesses," Ms. Michel said.

About 30 percent of businesses in this country are owned by women; blacks own about 3 percent of U.S. businesses.

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