- by Shaniqua Thomas

Integrating themselves into the global supply chain is a key goal for many minority and women owned businesses. As global competition for supplier contracts increases, resources and talent are becoming scarcer. Firms that can align themselves with major supply and procurement trends have increased access to key markets, more capital for ongoing development, and a better chance of long-term survival.

Yet despite the importance of supply chain issues, not all U.S.-based minority businesses seem to understand the criticality of supply chain management. They are caught by surprise by the extreme cost-focus of global competitors accustomed to fighting for advantage on fractions of pennies. To be integrated and able competitors, U.S. MBEs need to face the top domestic supply chain concerns, address top worldwide challenges, prepare properly for the rigors of global competition, and take advantage of opportunity spaces created by U.S. legislation.

Top Supply Chain Concerns

For domestic businesses, the global markets are something of a concern. Prices refuse to remain stable for core goods and energy resources, and consolidation and outsourcing within supply chains limit opportunities for minority businesses to partner with the major multi-nationals. While supplier diversity programs have increased in number and robustness, the number of opportunities that firms offer for suppliers looking for partnerships is decreasing as companies respond to pricing pressures by cultivating longer-term relationships with fewer clients.

This consolidation isn’t just a mainly U.S. concern for MBEs. European and Asian markets are seeing the same domestic price instability in response to global unrest and inflationary pressures caused by stimulus and government bailout programs. As corporations have embraced a more global network of suppliers, the stability of lean, just-in time supply programs is being called into question by price fluctuations and spots of international unrest that can disrupt smooth operations. Suppliers of all sizes and backgrounds are scrambling to keep up, keep competitive, and keep cultivating new partners.

The extreme fear factor about supply chain disruption is present in partner firms of all sizes. Companies don’t want to bear the costs of inventory storage if it can be avoided, but the risk of hiccups in their supply chain keeps them up at night. Minority firms have to demonstrate soundness and reliability in these markets to make partners comfortable that even if materials prices shift or normal transport paths are blocked, there is a Plan B or a business sustainable model in place.

Preparing to Compete Globally

Recognizing the limits to operating within the U.S. markets alone, many MBEs are hungry to go global. Unfortunately, some firms headed for the international markets haven’t mastered the fundamentals in the U.S. supply chain. This can make it harder to take domestic relationships overseas, show a track record of success when wooing new clients, and outperform in-country service and product providers.

Still, the hunger to compete globally is a good thing, especially given that only about five percent of the global population lives in the U.S. and the fastest-growing markets are overseas. Chinese and Indian companies are happy to talk with American MBEs who are bringing innovation and smart solutions to the table. Facing their own hurdles to break into the U.S. markets, they can appreciate the commitment it takes to do business overseas, and give respect to firms who can show the scale, capacity, and efficiency to be global contenders.

Minority firms don’t have to win that respect after costly rounds of trial and error. Specially designed training courses for minority business leaders looking to improve their skills and execution are available. One of the leading programs is the Tuck/MDBA partnership, which provides targeted programming such as the “Building a High Performing Business” sessions for minority business owners who do not have an MBA. This program - and others like it at Kellogg and Darden - seeks to provide minority businesses with step by step guides to surviving and thriving on the global stage as suppliers and strategic partners.

Worldwide Challenges to Face

Even with high-quality training on global supply chain tactics, minority firms have to work around the challenges of the global marketplace. Newly emerging middle class populations in the developing world are clamoring for more and more products of a bewildering variety. Supplying that demand is critical for global markets to continue to thrive, and minority firms have the products being demanded if right paths to market can be found.

Finding those paths is a challenge. Slowing worldwide demand from more developed nations affects MBEs as there are more developed MBE programs in northern, mature economies than southern, emerging economies. In an absence of programming and with generally less robustly developed capital support frameworks, emerging markets require MBEs to be better funded as they come to the market. This helps MBEs weather the costs of storing inventory until supply partnerships can be worked out, adapt to local norms in international settings, and find their place in the local supply chain systems.

Opportunity Spaces

Within all these challenges and global market concerns, there are still opportunity spaces. Minority firms that have studied global supply chain needs through the Tuck school and that keep abreast of new legislative developments can find their place among the leading global Tier 1 and Tier 2 suppliers.

One space where U.S. MBEs have an advantage in the global supply chain centers around value migration. Value migration happens when investments and contracts shift from outmoded business models to business designs that are better able to satisfy customers’ priorities. Due to the higher levels of technological sophistication in many U.S. markets, leading edge business practices, and a lack of legacy system encumbrances when entering emerging markets, U.S.-based MBEs can pull value toward their offerings by being more efficient, ethical, and service-oriented than local competitors.

There are also some opportunities being created by new U.S. regulations about the traceability of goods and services. Coupled with the National Export Initiative, programs such as the new FDA traceability system, regulations on pharmaceutical sourcing, and the measures contained in the National Defense Authorization Act for 2011 give domestic MBEs with transparent sourcing system advantages in the global supply chain. Able to provide the quality and origin of their goods, U.S. minority businesses can gain a competitive edge over cheaper but less transparent suppliers.

Being active players in the global supply chain is a forward-looking goal for many minority businesses. With the large markets outside of the U.S. opening up, minority firms want and need to participate to survive in the global economy. By focusing on the domestic supply chain challenges, addressing worldwide challenges and competition, preparing fully, and taking advantage of opportunity spaces, MBEs can find a place for themselves in international supply chains.