Capacity: Supplier Diversity’s Frenemy

Capacity is both friend and foe for supplier diversity. On one side, it keeps minority business enterprises, or MBEs, out of the running for coveted contracts. On the other, it pushes them to partner — and often succeed — together.

On Tuesday, the NY/NJ Minority Supplier Development Council hosted a panel discussing the state of African-American-owned businesses. It included leaders from established minority business enterprises who discussed how they made it in an economy that’s sometimes set against their success.

Frederick Davis, Jr., Mitchell & Titus
Frederick Davis, Jr., Mitchell & Titus

Among the tips given during the event was the importance of partnerships and associations that help conquer a very real problem facing diverse suppliers — the capacity to provide the right services to prospective clients.

Panel participant Frederick Davis Jr., a partner with minority-controlled professional services firm Mitchell & Titus, talked with Diversity Executive about his organization’s commitment to helping other MBEs succeed through partnerships. Edited excerpts follow.

As an MBE, how did Mitchell & Titus overcome its own capacity issues?
In the ’80s, we started partnering with many of the large accounting firms. For example, we partnered with KPMG on the New York City Audit back in the ’80s. We could not have done an audit for New York City ourselves. There are a lot of jobs out there right now in corporate America we might not be able to do without having the right capacity. So what we try to do with supplier diversity is partner up with another firm to provide that capacity.

When expanding our footprint, we did look at other minority business enterprises providing the same accounting, tax and advisory services. We evaluated them and their client bases, and we thought it would also be great for supplier diversity that we would take firms like that over. One, we’re trying to expand. Two, we’re meeting our clients’ goals. Many of our clients hire us because of our client service, but they also have initiative to help MBEs and expand. One way of doing that is for us to team up with other diverse suppliers similar to us, and we did that through acquisitions.

What are some of the ways Mitchell & Titus has helped businesses outside its industry?
We’re working today with a PR firm. We started in December, and they’re a diverse supplier. We evaluated whether or not they’re a diverse supplier that can supply that service.We deal with a company that provides stationery and brochures. Mitchell & Titus was one of its largest clients, and the firm helped to mentor the company’s owners on best business practices which supported them as they built their company.

We deal with a diverse consultant who specializes in the area of minority and woman supplier diversity. We provide tax services to them, and that helps them tremendously. We’re able to provide any other advice that they need. They connect us to other companies, too — a lot of them could be diverse suppliers or major companies.

What is the current environment like for diverse suppliers, and how can they overcome the challenges it presents?
What’s happening now in corporate America is that you have procurement offices who are saying they’re reducing the number of suppliers they have. But at the same time, they’re saying they have to have a robust supplier diversity program. Here you are as a new supplier, aware that the door is closing, but then there are opportunities because you’re a diverse supplier and they need to increase the level of spending with diverse suppliers. So of course you say, “What gives? How can you accomplish that?”

Now diverse suppliers know that companies are trying to reduce the number of suppliers they do have. On the other end, if you’re very successful diverse supplier, you can help open the door by making them your contractor.

It happens in two ways:

1. You have a need, for example you need PR services, and use a diverse supplier.

2. You can help another company to also be successful. If you’re a company that provides widgets, you may not have capacity to produce 100 widgets. But you do have the capacity to produce 80, so you find a diverse supplier to produce the additional 20. You satisfy your client and provide another company with an opportunity they wouldn’t have had because they could only produce 20 of those widgets.

How does supplier diversity benefit more than just the firms involved?
It impacts the economy as a whole. When you deal with a diverse supplier who might employee people in these diverse communities, you’re allowing those suppliers to bring dollars back to those communities. That’s a win-win for everybody. It’s job creation.

What advice would you give a diversity leader looking to use more MBE suppliers?
The message has to come from the top. It has to be part of the company’s culture for it to really work so that people can understand that it will have a positive effect, that this is not a handout to a company but there are real business reasons why a company would like to expand its supplier diversity program and in a best-case scenario perfect it. It provides diverse ideas, diverse solutions and innovation. It really will help a company compete.