Supplier Diversity: The Procurement Advantage
By Orrin Benn
This article first appeared in the PMAC Reporter (August 2006)
Understanding the dynamics of diversity and its impact on the Canadian business environment is essential for corporations striving to gain a competitive edge in today’s marketplace.
Corporations that take advantage of new opportunities will prosper, while those that resist change will be at a competitive disadvantage.
A demographic scan of Canada will reveal that aboriginals and visible minorities are rapidly increasing as a proportion of the population in the major urban areas, where most business is conducted. Already, 43% of Toronto’s population is composed of visible minorities; in Vancouver 49% ; Montreal 23% and Calgary 17%. Within the next decade Statistics Canada forecasts that approximately 25% of the Canadian population will be aboriginal and people of colour.
However, these groups lag behind the overall population in economic performance. A recent Royal Bank of Canada report forecast that Canada would see a $174 billion boost in its GDP if these groups, along with women, were allowed to reach their full potential.
The key to unleashing this potential is for corporations to recognize that diversity is a strength and a powerful business strategy that must be included in overall business planning.
Canada has the most culturally diverse population among industrialized nations, and has the potential to capitalize on aboriginal and minority diversity to stimulate economic growth.
Adopting supplier diversity as a strategy is a win for the corporation looking to reduce total cost as well as a win for Canada. Consider this: on average, people of colour are starting businesses at more than 1.5 times the rate per year of other entrepreneurs. And according to Industry Canada, in 2001 more than 500,000 people were employed by visible minority companies that in aggregate earned more than $48.5 billion in total revenues.
" Supplier diversity, just like workforce diversity, should be viewed as a key competency for which corporate leadership is held accountable. The marketplace is increasingly multi-ethnic and multicultural. Corporate purchasing performance is enhanced with more comprehensive perspectives and options. "
Corporate Canada can stimulate the growth of these small- and medium-sized enterprises (SMEs) while reducing total costs by extending procurement opportunities to aboriginal and minority companies.
Supplier diversity, just like workforce diversity, should be viewed as a key competency for which corporate leadership is held accountable. The marketplace is increasingly multi-ethnic and multicultural. Corporate purchasing performance is enhanced with more comprehensive perspectives and options.
Through analyzing and managing the entire supply chain, corporations look to continually reduce total costs. Strategic sourcing is the order of the day; winning corporations recognize this and gain competitive advantage by building on the diverse strength of innovative aboriginal and minority companies.
Many organizations find that outsourcing in such areas as manufacturing, facilities management, call centres and information technology is a faster, cheaper and smarter business solution.
Procurement from aboriginal and minority enterprises gives SMEs the opportunity to become embedded in the supply chain of the corporation at low risk and low cost. Aboriginal and minority companies can also leverage this alliance to move up the value chain in the corporation, helping to stimulate diversification and faster growth.
Because smaller firms are typically more innovative, flexible and accustomed to producing in limited volumes, they are uniquely suited to marketing globally. In cases where size is a barrier, strategic alliances with other minority business enterprises (MBEs) can add capacity.
A smaller firm may be willing to accept risk, investment and lower return not justified by a larger firm to enter a market or manufacture a new product on contract. In addition, if the firm is minority owned, it may have global ties or expertise useful to a larger firm.
Competition in the global marketplace is more complex than ever before, with the business world expanding across borders at a remarkable pace. In order to compete effectively and gain competitive advantage, winning corporations see strength in building a larger network of suppliers.
The first private sector organization to facilitate inclusion of minority companies in procurement was the National Minority Supplier Development Council (NMSDC), which was chartered in 1972 in the United States. In 2004, NMSDC member corporations purchased $87.4 billion in goods and services from U.S. minority business enterprises.
The Canadian Aboriginal and Minority Supplier Council – CAMSC – is associated with the NMSDC. Chartered in 2004, CAMSC is a private sector-led, non-profit membership organization governed by a board of directors composed of major multinational corporations operating in Canada. Membership includes such brand names as 3M, Cisco Systems, Corporate Express, DaimlerChrysler, IBM Canada, Magna International, PepsiCo, RBC Financial Group, Weyerhaeuser and Xerox Canada, to name just a few. CAMSC uses a certification process to enroll aboriginal and minority companies, linking them to opportunities in corporate Canada. Similar organizations like the NMSDC and CAMSC are also operating in the United Kingdom, Brazil, South Africa, and soon, Australia.
CAMSC has a reciprocal agreement with the NMSDC in the United States, which means that any Canadian company certified by CAMSC as aboriginal or minority owned will automatically qualify as a minority business in the U.S., thereby opening access to a significantly larger customer base. CAMSC is advocating for the harmonization of Canadian procurement policy, as it relates to aboriginal peoples and minorities, with U.S. regulations, as a means of expanding market opportunities.
CAMSC serves another purpose, as an enabler to governments through its mission of facilitating procurement opportunities for disadvantaged small business enterprises.
Canada needs to increase its export volume as well as the contribution of SMEs to our GDP. Organizations such as CAMSC can help. In the U.S., the NMSDC and Women Business Entrepreneurs Council (WBEC) have become drivers for the strengthening of ties between corporations and minority and women business owners.
The time to unleash the talent of Canada’s bright, innovative aboriginal and minority entrepreneurs is now. Corporate Canada can start the process by actively seeking to include aboriginal and minority firms in their procurement planning.
A dynamic, sustainable entrepreneurial economy will result, bringing with it a long-term solution to poverty and unemployment, and fulfilling Canada’s potential for economic growth.
Orrin Benn is the President of the Canadian Aboriginal and Minority Supplier Council. The council may be reached at info@camsc.ca.