Interfacing with minority suppliers has become a critical issue in recent years for organizations that hope to develop a rich and diversified approach to business that is sustainable into the future. To assist corporations in connecting with minority suppliers, a number of groups have emerged, the most prominent of which is the National Minority Supplier Development Council (NMSDC).
Since 1972, the NMSDC has provided a valuable service both for minority business owners seeking fair access to business opportunities, and for the corporations that wish to do business with them. By acting as a link between minority-owned businesses and large corporations, the NMSDC facilitates lucrative investment opportunities for both parties, and helps to ensure the development of sustainable and ethical business practices across all industries.
The Certification Process
In pursuing this goal, the NMSDC’s primary function is to act as something of a certification board. Minority business owners who wish to gain access to the NMSDC’s services as a liaison to valuable corporate contacts must first undergo the process of becoming certified by the NMSDC as a “minority business enterprise” or MBE. In order to qualify for certification, the business in question must meet certain criteria. The most crucial, of course, is that the applicant must own at least a 51 percent stake in the business, and belong to one of four categories of ethnic minority: Asian, Black, Hispanic, or Native American. It is worth noting as well that the NMSDC does not differentiate between male or female minority business owners, providing equal opportunity to both genders; there are, however, other minority supplier development councils that do specialize in women-owned organizations.
The process of becoming certified confers a number of advantages on the MBE. The most obvious, of course, is that the MBE will be represented to the more than 3000 major corporate entities that are affiliated with the NMSDC, allowing for access to expansion and investment opportunities they might otherwise never have enjoyed. In addition to actively acting as a liaison between MBEs and corporate contacts, the NMSDC also provides a representation service in the form of a meticulously maintained computer database of all affiliated groups on both sides of the issue. This allows the organization to carefully match certified MBEs with corporate partners on the basis of a number of indexed factors to ensure that any business arrangements established between corporate partners and minority suppliers will be made on the basis of mutual compatibility and capacity.
Corporate partners do not then merely select MBEs randomly on the basis of their minority status, but have the opportunity to carefully choose MBEs in line with the corporation’s own goals, strategies, and organizational culture. As a result, business arrangements established on the basis of NMSDC representation can often be long-term affairs that provide immense satisfaction for both parties.
Secondly, organizations that become certified with the NMSDC gain access to certain initiative programs designed to assist in growing MBEs in competitive markets through infusions of equity and capital. This is critical for many MBEs, as the majority of key minority industries, statistically speaking, are so-called “low growth businesses” in areas such as service, direct business operations, and hospitality. Without some stimulus initiative such as that offered by the NMSDC, MBEs in these key minority industries face considerable difficulty in hedging out a sizable market share. Since its inception, NMSDC has made admirable progress towards pursuing its goals: in 1972, the organization boasted $86 million in minority supplier purchases from corporate members. By 2009, this figure had grown to more than $100 billion.
Services offered by the NMSDC are essential to the sustained growth and development of corporate America. Embracing diversity suppliers and supporting the growth of MBEs increases the value of any given market through facilitating truly innovative business solutions that could not be conceived within a homogenous business culture. As innovation is a key determinant of competitive advantage, it stands to reason that those organizations that choose to work closely with MBEs either directly or via a group such as the NMSDC will benefit, not only in abstract measurements such as innovation, but also in terms of productivity and the bottom line.
The NMSDC and Federal Funding
At the time of its inception, the NMSDC was an organization that partnered with a variety of government agencies at both the state and federal level, drawing on federal funding enabled by civil rights initiatives in order to pass capital incentives along to qualifying MBEs. However, certain trends over the last several decades changed all that. The industrial boom of private sector industries in the late 1980s led to a national ideological focus on the value of private enterprise rather than publicly funded alternatives. In light of such developments, both the NMSDC and the Office of Minority Business (another major player in the struggle to gain recognition and opportunities for MBEs) mutually agreed to abandon all government funding of operations and compete exclusively as privately-run and –funded enterprises. Such a decision did not impact the growth or scope of the NMSDC, which has since grown to include some 37 regional councils spread across the United States, and ties with more than 16,000 MBE firms.
That said, the relationship between the NMSDC and the federal government is still somewhat cooperative. Though the NMSDC no longer accepts government funding, it does work in something of a loose partnership with several other organizations devoted to providing meaningful business opportunities for MBEs. For instance, the Small Business Administration (SBA), a federal entity, operates on a premise similar to the goals and methods of the NMSDC, in that they provide certification and funding initiatives for businesses that are owned by individuals who qualify as “minorities” more in the socioeconomic sense than the ethnic sense. This includes businesses owned by veterans or disabled people, regardless of gender or race. By establishing a cooperative relationship with these organizations, the NMSDC has expanded its potential to fulfill its mission.
Future Directions
As an organization, the NMSDC continues to grow and develop. It is encouraging to note that the actions of the organization continually reflect an undying commitment to their fundamental mission of ensuring equal opportunities for MBEs. The NMSDC is thusly perceived as possessing a great deal of organizational integrity, a factor that is as crucial to corporate sustainability as diversity.
For example, in 2010, the NMSDC changed the location of its annual Conference and Opportunity Fair from Arizona to Florida, specifically citing the controversial Arizona immigration law, S.B. 1070, as the reason for the move. By refusing to provide support for a state that had embraced a law antithetical to the organization’s stated goals and values, the NMSDC was able to further bolster its reputation as a serious force for promoting diversity and equality in the business world.
Additionally, the NMSDC has recently adopted a new growth initiative plan both for its certified MBEs and for minority-owned businesses that do not yet meet the fiscal requirements for MBE status. Establishing a new category of certification, the “minority-controlled enterprise”, the NMSDC now allows such businesses to apply for access to equity and capital infusions to facilitate and stimulate growth within competitive markets. This is a profoundly superior alternative for most minority-owned businesses, in comparison to the often predatory nature of traditional debt financing.
Global Impact
As the world moves further into the 21st century, the issue of equality and diversity in business will become ever more important. Consequently, the NMSDC is already beginning to expand its scope beyond the United States to provide support for minority suppliers at a global level. For instance, the NMSDC has recently established ties with the South African Supplier Diversity Council, a group dedicated to representing locally- and minority-owned businesses in robust South African markets traditionally dominated by foreign corporations. By providing support for such initiatives, while at the same time allowing the local enterprise to handle the specifics, the NMSDC is providing a valuable service to the cause of global minority supplier development, while remaining neutral to national and regional cultural values.
Ultimately, organizations such as the NMSDC and the SBA will continue to have a positive effect on business markets in the United States and across the world. The free market model of economic growth is, after all, entirely predicated upon the assumption of having equal opportunity to enter into and compete in any market, and fail or succeed on the merit of one’s performance. By compensating for inherent disparities in opportunity imposed by socioeconomic and cultural inequalities, these groups level the playing field and assist in bringing the ideals of the free market that much closer to reality.
For this reason, the future trend for multinational corporations and minority business owners is to work together to drive innovation in key industries, thereby increasing productivity and profits for corporate America, both domestically and abroad.