How to pitch to corporate America: the top seven priorities of corporate procurement officers.
That is not to say that it's any easier for minority businesses to land contracts with major corporations. To be successful, entrepreneurs must understand the goals, customers and culture of potential corporate clients, and be able to present quality products and services at a competitive price. And they must understand that minority business development programs are not a free-for-all sweepstakes for contracts.
BLACK ENTERPRISE polled 10 corporations with active minority-business development programs to find out the key to winning contracts. The executives and vendors of these companies--AT&T, Avon Products Inc., The Boeing Co., Borden Inc., Chrysler Corp., Eastman Kodak Co., First Union Bank, JC Penney Co. Inc., Lockheed Aeronautical Systems Company Inc. and Washington Gas Co.--sound a common theme: Entrepreneurs that are not prepared to compete for business and deliver the goods need not apply. In other words, companies look for people, firms and suppliers who can get the job done.
LISTEN TO THE CLIENT
While stressing that they still take seriously their obligation to treat business owners fairly, regardless of race, most corporations support development programs for minority companies because it makes good business sense. "Many minority purchasing programs were born out of corporate America's need to respond to certain social circumstances," says Connie Hammond, manager, supplier relations/MWBE for AT&T in Greensboro, N.C. "Now we recognize that demographics, markets and the economic landscape are changing. I'm encouraged that people are beginning to understand that those changes have to be reflected in how we do business."
Last year, the 100 American corporations that purchased the most goods and services spent almost $500 billion with outside suppliers. The New York-based National Minority Supplier Development Council (NMSDC) estimates that three-quarters of those corporations either have formal program or informal initiatives generating about $10 billion in business with minority-owned firms.
Among the NMSDC's 3,500 corporate members, 1992 purchases with minority firms totaled $20.5 billion. Two-thirds of the council's 15,000 minority-supplier members report that over the past two years they have done business with corporations through their business development programs. Most have contracts with at least five corporations. For one-third of the council's black-owned companies, corporate contracts represent most or all of their business.
Despite this progress, suppliers say that the single most important action corporations can take to assist the development of their companies is to award them even more contracts. Managers of business development programs agree that corporations still aren't doing enough business with minority firms.
"The long-range goal is to make minority and women business enterprise programs obsolete by institutionalizing diversity," says Hammond. "We're not there yet. Until that happens, we must maintain that focus in our organizations."
For their part, minority suppliers who want to land corporate contracts must know how best to take advantage of the opportunities represented by minority-business development programs. That begins with a fundamental question: What are corporations looking for from their minority suppliers? The short answer is that they are looking for the same thing they want from all of their suppliers--quality products and services, on time and for the right price.
"There's really nothing magical about it," says Ronald Cosey, manager of minority purchasing for Borden in Columbus, Ohio. "We look for companies that are good at what they do, competitive, resourceful and can get the job done."
KNOW THE COMPANY AND ITS ENVIRONMENT
As corporations struggle to stay competitive in today's rapidly changing, global marketplace, it's critical that their suppliers understand what they need in the context of this environment. That means that in addition to knowing what a corporation purchases, minority suppliers need to know something about the corporation's customers, competitors, and most important, marketplace goals and challenges.
"We now have more experienced and educated minority-business people than we had even five years ago," says Fitzroy J. Hilaire, director of external development for Avon Products in New York. "There is a growing awareness that minority-business owners are more knowledgeable about doing business. We see more newer businesses, but not businesses that are less capable."
Hilaire attributes the overall increase in business savvy among African-American entrepreneurs to the large number of executives bailing out of corporate jobs to start their own companies. For example, before he launched Royal Essence Ltd. in 1987, Howard E. Kennedy worked for 21 years as chief perfumer for Revlon and Pfizer. Today, his $2 million company creates flavors and fragrances for several large corporations, including Avon.
"I had an understanding of the industry itself, and I knew where to go to look for business," says Kennedy, president of the Union City, N.J., firm. Within six months of becoming an approved supplier for Avon, he was awarded exclusive rights to produce Undeniable, a woman's fragrance that has proven to be one of the company's biggest sellers.
"I brought them the fragrance as well as the idea of using Billy Dee Williams to endorse it," says Kennedy. "I think it was so successful because Avon has a big minority customer base, but until that point, they had never had a minority to endorse a product targeted to the general market. I think customers appreciate that."
UNDERSTAND THE ROLE OF MINORITY BUSINESS PROCUREMENT OFFICERS
Minority business development executives say it s important that minority suppliers understand their role in the corporation. "I'm not a buyer," explains Isa Powell, operations officer, corporate purchasing for First Union Bank in Charlotte, N.C. "My role is to ensure that minority-owned businesses get an opportunity to avail themselves of the purchasing process.
Most development officers field inquiries about their programs, recruit and certify eligible minority firms, match suppliers with current needs and introduce them to various purchasers, who make the final buying decisions. Some business development officers also coordinate various forms of technical and financial assistance to help minority firms become eligible to bid for corporate contracts.
Eager to get their names in front of a decisionmaker, minority suppliers may try to circumvent the business development department--often to no avail. "Don't send a letter to the CEO," says Joseph E. Harris, special supplier relations executive for Chrysler in Detroit. "Some people don't understand that process and will start at the top, but the minority purchasing department is set up to help them."
If the department is operating properly, it shouldn't be necessary to reach the top person anyway. "Unless the CEO is giving clear, unequivocal support to the program, it isn't going to happen," says Seggie Williams, CEO of Procurement Resources Inc., a consulting firm based in Atlanta. On the other hand, says Williams, when senior management fully endorses development programs, buyers at all levels of the corporation are usually eager to work with qualified minority firms.
KNOW HOW THE CORPORATION MAKES PURCHASES
Executives admit that suppliers often get contracts because someone in the corporation knows and likes them. "That's just the way the world works," says Cosey. "The importance of relationships in business is one reason it's been so hard for minorities. Corporations have a certain comfort level with their suppliers. But more minority firms are beginning to build relationships."
Building relationships with purchasers takes time, and minority suppliers shouldn't expect to do business with corporations overnight. "They need to understand that there is a process," explains Hilaire. "And they need to understand that not everybody who approaches a corporation will get a contract."
Indeed, as corporations look for ways to cut costs, many are drastically reducing their pool of suppliers--thus creating fewer opportunities for minority firms. Chrysler recently cut its list of approved temporary help agencies from 90 to 11. "If a new temporary company comes in, we probably won't add a number 12," says Harris. "And if we do, it probably will be one of the ones we cut earlier. Where we see the new frontier for minority firms is in second-tier purchasing."
Touted by many corporations as the wave of the future for minority business development, second-tier programs set minority participation goals for suppliers with large corporate contracts (generally $500,000 or more for commercial firms and $1 million or more for construction firms). "Corporations are realizing that we can't spend it all," says James C. Sutton, manager of corporate sourcing and director of minority supplier development for Eastman Kodak in Rochester, N.Y. "If we can't spend it, we will get our major suppliers to do it. That way everyone ends up better off."
DON'T EXPECT A HANDOUT
While business development programs should ensure that qualified minority firms have access to corporate purchasers, it is not their role to give contracts to minority firms just because they are owned by minorities. Executives say nothing turns them off faster than would-be suppliers who come to them asking for the company's "set-aside" program. They stress that all contracts are awarded on a competitive basis.
"Before they tell you what they sell, a lot of entrepreneurs tell you that they are a minority," says Williams. "Somehow when you [immediately] bring race into the issue, it obscures the whole capabilities issue. It's important for corporate purchasers to know that you are black, but don't make that a condition of doing business."
Corporate executives say that the more crowded the field, the more likely it is that minorities will use the argument that they deserve a contract because they belong to a disadvantaged group. Facing stiff competition, these entrepreneurs often challenge corporations to prove their commitment to doing business with minority companies.
"My pet peeve is minorities that ask me how much I spent with minority firms last year. It's none of their business, and really, it's not relevant," says Sutton. "Our minority purchasing goals are floors, not ceilings. If you understand my company and have a product I can buy, we can talk."
OFFER A QUALITY PRODUCT OR SERVICE
There is no consensus among minority business development executives about when and how to ask a corporation for a list of the products and services they purchase. Some companies prepare and distribute detailed lists; others prefer that companies first demonstrate expertise in a specific product or service area.
Either way, getting the chance to compete for a contract rests on whether or not the supplier has what the corporation needs and wants. Minority suppliers often are disappointed to find that what they have to sell to a corporation isn't at all appropriate.
"We've had vendors come to us with glow-in-the-dark shoes," says Rosalind Johnson, minority supplier affairs coordinator for JC Penney. "Yes, that's apparel, and yes, it's the kind of merchandise you would find in a retail store. But not in JC Penney."
Overall, minority firms that can supply high-technology products and services at competitive prices are in biggest demand. "We try to find companies that offer significant advantages over our current suppliers in terms of quality, design, reliability, supportability and cost," says Jim Steele, small-business programs administrator for Lockheed in Atlanta. "We find that smaller companies often can offer better pricing because they don't have the same overhead as larger companies," he continues.
Cal-Tron Systems Inc., a $2 million aerospace firm based in Carson, Calif., won its first contract with Lockheed because it proved it could save the corporation money by producing the parts for a windshield heat control system. Carl E. James, president of the firm, says the key to winning the contract was Lockheed's willingness to learn how his firm could help the corporation reach its goals.
"I got connected to the right person," he says. "A personal relationship is extremely important. If you have one and it's good, it serves you well because you're connected with a decision-maker who can help you.
BE ABLE TO DELIVER
When it comes right down to it, what corporations really want to know is whether a supplier will deliver what they promise. "I don't want to set up any minority business enterprise to fail," says Jimmy Harrison, coordinator of the minority business development program for Washington Gas in Springfield, Va.
"So we make sure the company has a track record, that it has delivered the product or service before, and that it is capable of handling any contract we give them--so it's a win-win situation," Harrison continues.
One measure of a supplier's capability is the length of time the company has been in business. Many corporations shy away from start-up firms; others work with new companies, depending on the nature of their business. Among JC Penney's minority vendors are companies that operate from the owner's home. "We don't have a problem with that as long as they are able to manufacture and deliver the products on a timely basis," says Johnson.
Corporations also want to know that a supplier is financially stable. Among other thing, they look for favorable Dun & Bradstreet reports, access to bank and trade lines of credit, low debt-to-equity ratios, ability to regularly meet payroll, and a clear record with the IRS. Finally, corporations look for suppliers that are already looking to the future.
For example, long before Carlton and Michael Guthrie purchased a Lansing, Mich., metal stamping company in 1985, they approached Chrysler to find out what they needed to do to become a supplier to the corporation.
"We try to understand our customers requirements and to exceed those requirements," explains Carlton L. Guthrie, president and CEO of Trumark Inc. "To do that you have to clearly understand where they are going so you can be there when they get there. Looking ahead to tomorrow may dictate that you do something different today," he says.
The Guthries totally revamped the company, making improvements in quality management systems, manufacturing processes, personnel and technical capabilities. A year later, they went back to Chrysler, this time walking away with a $200,000 contract to produce auto body cross members.
Trumark, which posted 1992 sales of $52 million, is now a BE 100s company doing $10 million worth of business with Chrysler. Last May, the firm invested $3 million to buy a new facility and outfit it with five presses and extensive electrical upgrades. Why? To be ready for the business the company projects it will do with Chrysler in 1994. The new space also includes room for the company to expand into exhaust systems, Trumark's next business frontier.
"We are a small company compared to the others we compete with, and we're struggling to make the investments required to keep us competitive," says Guthrie. "That's a continuing challenge for all minority businesses. But we want to be able to deliver more than our customers expect. These days if you're not in a position to do that, you shouldn't go knocking."
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|Author:||Harris, Adrienne S.|
|Date:||Feb 1, 1994|
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