NMSDC President Joset Wright-Lacy shares on the importance of supplier diversity.
By NMSDC President Joset Wright-Lacy
In my work with the National Minority Supplier Development Council (NMSDC), I have recently felt a deep sense of urgency as corporations begin to question the importance of minority-owned businesses to their commercial relationships and supply chains. The refrain is, “What is the ‘value proposition’ for minority supplier development?” That is, of what value is it for corporations to pursue stronger relationships with minority business enterprises (MBEs) in their supply chains? The question itself is deeply troubling, because it suggests both a belief that minority suppliers have to make a “special case” for inclusion in business opportunities and an assumption that minority suppliers can’t deliver service, value, and quality. This kind of thinking can lead to the placement of artificial barriers in front of minorities and usually leads to excuses for dropping support for supply chain diversity when corporate budgets are cut.
This is short-sighted, as there is clear and strong evidence that working with minority-owned suppliers provides business benefits for both buyer and supplier. Moreover, these relationships have a beneficial impact not only on local communities but also on the national economy. NMSDC prepared a study in 2014 that illustrated the economic impact of certified MBEs.1 The study found that MBEs in the United States generate more than $1 billion in economic output every day, which equates to nearly $401 billion annually, in direct, indirect, and induced output effect.
There is no question that a contract with a minority-owned business is more likely to create a job for a minority individual. This will become more important as U.S. demographics shift and minorities constitute a greater percentage of the population—more than 50 percent by the year 2045, according to current projections. If that demographic group does not have access to well-paying jobs, the U.S. economy will suffer. It calls to mind the words of President Richard M. Nixon, who in 1969 signed an Executive Order creating the precursor to NMSDC, the Office of Minority Business Enterprise: “The opportunity for full participation in our free enterprise system by socially and economically disadvantaged persons is essential if we are to obtain social and economic justice for such persons and improve the functioning of our national economy.”
The more jobs consumers have and the more wages they earn, the more they are able to participate in the economy, whether that means buying healthy foods or snacks, durable goods or over-the-counter drugs, life’s essentials or entertainment, even cars and houses. We cannot expect to have a truly robust economy unless everyone can participate. Putting people to work at good wages is good for what ails the American economy. Corporations that understand this macroeconomic principle are figuring out ways to make sure MBEs have the opportunity to participate in job creation, so minorities can participate in the economy.
Taking a closer look, NMSDC-certified MBEs were directly responsible for more than $139 billion in sales of products and services offered to customers. The increased purchases made by certified MBEs from their suppliers produced indirect output of $116 billion. And the employees and families of certified MBEs contributed significant induced output by purchasing $145 billion of goods and services from other merchants within the United States. By the same calculation and methodology, in 2014, NMSDC-certified MBEs were responsible for the maintenance or creation of more than 2.2 million jobs and generated more than $48 billion in tax revenue to local, state, and federal governments.
Now is the time for corporations to affirm their commitment to minority entrepreneurs who live in the communities and among the consumers that they serve, not only because it is the right thing to do, but indeed to ensure their own corporate financial well-being and the country’s social prosperity.
1. Scott Anthony Vowels, Ph.D., “Economic Impact Report: The Effects of NMSDC Certified Minority Business Enterprises on the U.S. Economy,” National Minority Supplier Development Council (2014).
*Condensed by permission from the Q3/2016 issue of CSCMP’s Supply Chain Quarterly. For more information, go to www.supplychainquarterly.com.*