A coalition of Minneapolis–Saint Paul corporate procurement leaders has committed to increasing their local spending by at least $100 million annually with suppliers owned by people of color, women, veterans, and LGBTQ+ and disabled entrepreneurs. These MSP-based procurement executives established this scaling goal for Business Bridge, an initiative of the GREATER MSP Partnership focused on driving local job growth and wealth creation through procurement.

A new study of the state of supplier diversity in the MSP region commissioned by GREATER MSP highlights strategies to deliver on the Business Bridge goal.

“To achieve the ambitious supplier-diversity goals established by corporate procurement executives leading the Business Bridge initiative, we needed to pinpoint specific strategies that will increase corporate contracting with local-diverse suppliers,” says Kristin Guild, director of Business Bridge.

“The study shows that building new business relationships is a priority for both buyers and suppliers, but existing strategies and tools aren’t working,” Guild says. “Given this, we have an incredible opportunity with Business Bridge to harness the buying power of our region’s headquarters economy to accelerate local business and job growth.”

Funded through a grant from the U.S. Economic Development Administration, the study included surveying and interviewing corporate buyers and suppliers headquartered in the MSP region. GREATER MSP staff directed the consultant’s work with an advisory team including representatives from Andersen Corporation, Medtronic, UnitedHealth Group, the Center for Economic Inclusion, Meda, the National Association of Women Business Owners (NAWBO) and the Saint Paul Area Chamber of Commerce.

KEY STUDY TAKEAWAYS

Across the nation, business ownership by diverse groups remains low.

San Francisco ranks the highest with diverse-business ownership levels at 26%. From there, the proportions of diverse-owned businesses are as low as 9%, in Pittsburgh. The Minneapolis–Saint Paul region ranks 10th among 12 peer regions for the percentage of local diverse-owned businesses (13%), tied with Boston. Peer regions are identified in the MSP Regional Indicators Dashboard.

Relatively few MSP-based corporations focus on supplier diversity.

Only 24 of the region’s largest 100 companies by revenue report having supplier-diversity goals or a supplier-diversity program.

That said, attention to diverse suppliers isn’t new for several MSP-based corporations.

Of the companies headquartered in the Greater MSP region that do have a supplier-diversity program, for most it’s not a new endeavor. Half of corporate-buyer survey respondents reported having a corporate supplier-diversity program for 10 years or more, and only 18% reported that their program was launched in the past 3 years.

Corporate investments in supplier diversity are growing or remain steady.

Two-thirds (66%) of corporate survey respondents reported investments in their 2023 supplier-diversity initiatives similar to 2022. One-third (33%) said they expanded them over 2022 levels. None reported a decrease in supplier-diversity program staffing and resources in that period.

Still, a disconnect between buyers and suppliers persists.

Because corporations typically invite suppliers to submit proposals rather than publishing contract opportunities, suppliers must be known to the buyer company to learn about an opportunity. This system favors incumbents and relies heavily on relationships. Over two-thirds (67%) of suppliers surveyed reported that they often don’t hear about bidding opportunities, and about three-quarters (77%) reported that most of the work they pursue is with existing clients.

On the demand side of the market, corporate buyers report difficulty identifying new suppliers that are operating in areas of high demand, such as property maintenance and contingent labor. They also report that many diverse suppliers are not operating at the scale needed to compete for contracts.

Mixed perspectives on the value of third–party certification for diverse businesses.

Diverse-owned businesses are often advised to pursue 3rd-party certification, such as from the National Minority Supplier Development Council (NMSDC) and the Women’s Business Enterprise National Council (WBENC), as a strategy to open doors for contracting opportunities. The study asked both buyers and suppliers about their perspectives on the value of 3rd-party certification.

• Corporate-buyer survey respondents view 3rd-party certification as an important tool to verify their spending with diverse-owned firms. Half reported that their companies require 3rd-party certification of diverse-owned businesses for those contracts to be included in reports on spending with diverse businesses.
• Of diverse suppliers surveyed, 76% are certified as diverse; among these, 29% see a high value for certification, 4 or 5 on a scale of 1–5. Certified diverse suppliers reported that certification alone does not generate contract opportunities, and the primary value they see from certification is the network of diverse businesses.

Frustration with existing tools designed to connect diverse suppliers with buyers.

Buyers and suppliers both see most “matchmaking” events as ineffective. This is largely because they usually don’t establish direct relationships with business unit buyers, and event timing is rarely aligned with contracting opportunities.

In addition, the marketplace is crowded with vendor portals and supplier databases, leaving suppliers to work double time to be seen and requiring buyers to check multiple databases when seeking new suppliers.

The upshot? There’s room to improve—and steps to begin.

The corporations engaged with Business Bridge have committed to work together right away on three specific action steps to increase contracting with local-diverse suppliers recommended by the study:

• Adopt 30-day payment terms for certified diverse suppliers (if not already in place).
• Implement a simplified contract template for work with certified diverse suppliers.
• Incorporate specific Tier 2 supplier-diversity goals into contracts with prime Tier 1 suppliers.

Several of the study recommendations are already being implemented by corporate Business Bridge members, including:

• Aggregating future demand forecasts to understand where there is significant projected spending that could be with local-diverse suppliers.
• Identifying common supplier-vetting criteria for assessing contract readiness.
• Introducing local and local-diverse suppliers to peers.

GREATER MSP and the Business Bridge Council are also expanding the corporate peer network, with the goal of increasing the number of large buyer companies headquartered in the MSP metro bringing a supplier diversity focus to their purchasing.

For organizations supporting suppliers, such as trade groups and Chambers of Commerce, the study recommends:

• Support supplier growth to become contract-ready for corporate work, particularly in the sectors where the Business Bridge corporations have identified substantial local demand, including property maintenance and construction, contingent labor, marketing and IT services.
• Specific ways to support supplier contract-readiness include offering workshops on topics such as developing a corporate sales strategy, learning the basics of common corporate supply-chain management systems (eg, Coupa and Ariba), and evaluating the ROI of 3rd-party certification.

For all of us in the Minneapolis–Saint Paul region:

• Celebrate success stories and impact. Lift up the stories about businesses in the Greater MSP region that have grown and added jobs as the result of a contract with an MSP-based corporation.

Contact Kristin Guild, director of Business Bridge, to learn more. Kristin.guild@greatermsp.org.