Minority populations – chiefly Hispanic, African American and Asian – continue to grow, changing the consumer base for most corporations. A Minority Business Development Agency (MBDA) study suggests that by 2045 minorities will constitute 46 percent of the U.S. population, with minority population growth in the period 2000-2045 and representing around 86 percent of total population growth. With these increases in population share will come an increased share of the national economy.
Consumers are driving the market and as good corporate citizens, corporations are considering ways to bring in suppliers who reflect their customer base. Companies understand the new market dynamic is that their customers consider their diversity track record in their buying decisions.
For most companies, 30 to 70 percent of their total expenditures are with their suppliers. With that in mind, companies are examining their suppliers to consistently meet sourcing requirements first time, every time and on time. That means corporations want to deliver the same goods and services at the best cost. Thus, corporations desire conducting business with diverse suppliers who have less overhead, are nimble and can meet all their requirements, including timely delivery.
Corporations are starting to see that utilization of diverse suppliers is a strategic market advantage imperative for business growth. In addition, corporations are consolidating their supplier bases to reduce costs and improve efficiency.
The latest report on “Minority Purchasing Power: 2000 to 2045″ shows that minority buying power is expected to represent about $4.3 trillion by 2015. This is a lucrative marketplace for minority-owned firms that desire growth opportunities and for large corporations that want to establish strategic partnerships with minority-owned businesses. The fast-paced growth of minority buying power demonstrates the increasing economic clout of minority consumers, and the numbers are too big to ignore.
Recognizing that race does matter, government policymakers endorsed mandates that supported contracting with minority-owned businesses. The government has taken the lead in enacting legislation that has major impact on utilization of diverse suppliers in the government and corporations. Most federal, state and municipal entities have programs in force that have opened doors that may have remained closed.
While public policy and legislation initially drove supplier-diversity programs, economic considerations have increasingly come to the fore for many corporations. Studies suggest that half of the American workforce is employed because of these small, diverse businesses. Economists believe that the best way to fix the economy now is to provide this business group with the opportunity to grow in size and capacity.
Supporting diverse suppliers in supplier diversity programs is critical to the economy and to corporations’ profits. Diverse supplier development helps not only the diverse suppliers but also those in decaying urban neighborhoods, which can in turn lead to a larger customer base for buying the organization’s goods or services. In effect, as diverse suppliers become economically successful, neighborhoods, cities and even the entire nation can benefit from that success and thus drive increased activity.
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There are several “drivers” toward an increased focus on supplier diversity in the marketplace. This brief overview can help buyers, and give diverse suppliers a better perspective of the overall business and economic operating environment. The increased focus on supplier diversity has been due to several factors as noted below:
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