Supplier Diversity Boosts the Bottom Line

Each day, Cincinnati-based Cintas Corp. provides a wide range of specialized products and services to more than 900,000 businesses primarily throughout North America. Cintas designs, manufactures and implements corporate identity uniform programs and provides document management services such as shredding, imaging and storage. With its first aid, safety and fire protection products and services, Cintas assists with training and compliance, and its facility services division focuses on providing entrance matting and restroom, tile and carpet cleaning.

To serve its large customer base, Cintas relies on strong relationships with many different suppliers, from manufacturers of eco-friendly work apparel to producers of microfiber mops for facility cleaning. These suppliers are critical to Cintas’ ability to deliver services from its more than 430 facilities across North America, Europe, Latin America and Asia.

In addition to relying on trusted suppliers to deliver these services, Cintas also must use suppliers to support its building operations. These suppliers manage tasks such as snow removal, energy supply and building maintenance. The company has 40 suppliers dedicated to energy supply for its facilities in the United States and Canada. Reliable power sources ensure that every facility runs smoothly.

Cintas encourages partnerships with diverse suppliers, as many times they offer the best overall value, including cost savings. In November 2011, the end of an electricity contract presented an opportunity to look for a new supplier, and Cintas had an eye on the minority market.

Finding the Ideal Supplier
To enhance its value to shareholders and create a competitive advantage, Cintas makes supplier diversity a corporate-wide initiative. Employees are continually educated on the importance of developing a diverse supply chain and encouraged to suggest diverse suppliers during a request for proposal (RFP) process.

Further, a supplier diversity executive steering committee, formed in 2009 and composed of senior leaders from throughout the company, including President and Chief Operating Officer Phillip Holloman, addresses issues related to Cintas’ goals for economic inclusion.

Pamela Brailsford, senior director of supplier diversity and sustainability at Cintas and a member of the steering committee, works to add diverse suppliers to the supply chain and mentor them. She said she has witnessed firsthand how these relationships benefit Cintas and other organizations.

“Leveraging diverse suppliers allows us to build a supplier network that is reflective of the diverse business community and strengthen our organization by securing goods and services of superior value at competitive prices,” Brailsford said. “This helps us to better serve our customers while also providing sourcing opportunities that will enable these suppliers to be successful as our suppliers and as a business in general.”

Each year, Cintas aims to increase its spending with diverse suppliers. In fiscal year 2011, it spent $158.5 million with diverse suppliers, some 11 percent of total fiscal year supplier spending. This is an increase of nearly $40 million in comparison to fiscal year 2009. The increased spending was the result of targeting large-spending opportunities to include diverse suppliers.

“Many of our major customers have their own commitments to supplier diversity and economic inclusion. They expect Cintas to have the same commitment,” Brailsford said. “By bringing diverse suppliers into our supply chain, we can grow the Cintas business and help retain our customers over the long term.”

Typically, Cintas’ energy suppliers are evaluated three to nine months before a contract expires.

By analyzing a supplier’s contract before its conclusion, Cintas can analyze the supplier’s success and determine if more competitive pricing is desired. If Cintas wishes to consider additional suppliers, an RFP is issued.

The RFP submitted for the electricity contract in Illinois involved seven Chicagoland locations, including a 479,117-square-foot distribution center. The aggregated estimated annual usage at the seven locations totals nearly 16 million kilowatts per hour — the equivalent of usage for approximately 1,600 homes.

During the RFP process, Cintas enlisted the help of Ecova, an energy and sustainability management company. Ecova finds suppliers that can fulfill Cintas’ natural gas and electricity loads in deregulated markets, researches utility rates and performs an analysis on all proposals received.

For the electricity contract, Liberty Power, a minority-owned electricity supplier, was identified as a potential supplier. Of the five suppliers considered, Liberty Power submitted the most competitive pricing and was selected for the new contract beginning in February 2012. This is the first diverse supplier Cintas has selected for an electricity contract and the third diverse supplier overall among energy suppliers for the company.

The largest independent retail electric provider in the United States — based on non-residential electric load contracted — Liberty Power is also the largest Hispanic-owned energy company in the nation, works with numerous national accounts and provides electricity to more than two dozen of the Fortune 500.

“When qualified diverse suppliers submit the most competitive proposals, Cintas is delighted to work with them and build long-lasting partnerships,” Brailsford said. “In some cases, we have encountered minority and women-owned businesses that can better respond to unique needs. Even if a diverse supplier is not selected, we work with them so that they can one day qualify as a Cintas supplier.”

Cintas aims to work with diverse suppliers whenever possible and does so by creating relationships with those that offer outstanding service, quality and value. Liberty Power’s reliable infrastructure and history of success with large corporations stood out and demonstrated the company was capable of handling the contract. Further, the low cost offered by Liberty Power will help Cintas achieve savings in laundry operations as well as building heat.

“Energy is typically one of the largest operating costs for a business,” said David Hernandez, chairman and chief executive officer of Liberty Power. “As with any service, value becomes an important determining factor and companies look for energy suppliers that offer very competitive prices along with exceptional customer service. By partnering with diverse energy suppliers, these organizations can achieve savings while fulfilling their diverse procurement targets, creating a true win-win situation.”

Shining Results
Under the contract, Cintas expects to see an estimated annual savings of more than $260,000 across its Chicagoland locations. Its previous energy contract was based on an index rate that fluctuated over time. However, the Liberty Power contract offers a fixed price, providing budget certainty and freeing Cintas from volatile energy markets with constantly changing prices.

The contract also will help Cintas reduce its environmental impact, another important initiative for the company. As a partner in the Energy Star program, a joint effort between the Environmental Protection Agency and the U.S. Department of Energy that identifies energy-efficient products, buildings and practices, Cintas measures and manages its energy use.

The Chicago distribution center is working to become Energy Star-certified by making HVAC (heating, ventilation, and air conditioning) and lighting improvements that will greatly reduce electricity usage. This allows Cintas to limit its overall carbon footprint. When suppliers submit competitive pricing during the RFP process, Cintas also evaluates the supplier’s carbon footprint to determine the best solution. Then, once a supplier such as Liberty Power is chosen, extensive internal and external benchmarking is performed during the course of each contract.

“Working with a diverse supplier in an area that allows for improvements to sustainability is an ultimate goal for us,” Brailsford said. “We want to lead the way in both areas of our business, and this arrangement with Liberty Power brings us one step closer.”

Moving forward, Cintas foresees additional contracts with diverse energy suppliers that will provide savings and allow the company to become a leader in sustainability. This will be accomplished by focusing on the demand side — usage reductions — and the supply side — competitive pricing, renewable energy — while qualifying new suppliers and reducing carbon emissions. Building a strong, lasting relationship with Liberty Power is a major goal and one that can help Cintas realize additional savings.

David Singhoff is an energy engineer at Cintas Corp. He can be reached at editor@diversity-executive.com.