Purchasing from Minority Business Enterprises: Key Success Factors

By Carter, Craig R.; Auskalnis, Richard J. et al. | Journal of Supply Chain Management, Winter 1999 | Go to article overview

Purchasing from Minority Business Enterprises: Key Success Factors


Carter, Craig R., Auskalnis, Richard J., Ketchum, Carol L., Journal of Supply Chain Management


SUMMARY

There is a growing realization among purchasing managers that sourcing from minority business enterprises (MBEs) results in more than just window dressing for public relations. MBE suppliers bring value and innovation to the supplier base. Furthermore, sourcing from MBE suppliers can help strengthen the economic outlook of the overall minority community. The authors used a combination of case studies and a mail survey to identify the key factors that can result in successful MBE purchasing programs.

INTRODUCTION

In 1978, the federal government mandated that organizations, prior to receiving a contract with the federal government in excess of $500,000 for materials or services or $1 million for construction, submit and have approved a Minority Business Enterprise (MBE) subcontracting plan. Subsequent to receiving a contract, performance against the plan was closely monitored. Many state and city governments have similar requirements for contractors. These regulations have directly impacted the relationships among government contractors and MBE suppliers Also, these regulations have increased overall corporate awareness of the need to establish MBE buying programs and have increased the aggregate dollar purchases from MBE suppliers.

Broadening the supply base to include MBEs can also result in suppliers that more closely mirror the buying firm's customer base (Roosevelt 1990). In recent years there has been a growing recognition, accelerated by changing demographics, that the support of MBEs can result in job creation and economic development in decaying urban neighborhoods, which can in turn lead to a larger customer base for the buying organization's goods or services (Saddler 1994). There is also clear evidence that as MBEs become economically successful, neighborhoods, cities, and even the entire nation benefits from that success (Makower 1994). Unfortunately, not all MBE buying programs are successful, due to potential barriers that often stem from misperceptions on the part of both buyers and MBE suppliers (Dollinger, Enz, and Daily 1991; Lowry 1992; Williams 1991).

This article reports the results of a study that examined the key factors that result in successful MBE purchasing programs. The definition of success was based on the percentage of the organization's purchases awarded to MBE suppliers. Minority Business Enterprises were defined as:

Businesses in which at least 51 percent of the ownership and the management of daily business are controlled by one or more of the following groups: Black Americans, Hispanic Americans, Native Americans, Subcontinent Asian Americans, and Asian-Pacific Americans.

A combination of focus group interviews, case studies, and a mail survey was used to empirically examine success factors. In the next section, the findings from the focus group interviews and case studies are combined with prior reports from the areas of purchasing, corporate social responsibility, and general management, to develop a group of success factors for MBE purchasing programs. The next section describes the methodology for and results from a mail survey that was used to confirm the key success factors for MBE purchasing programs.

PRIOR RESEARCH

Only a few studies dealing specifically with MBE purchasing were found in the research literature. The majority of these studies occurred after 1990 and most were found in the National Association of Purchasing Management (NAPM) Conference Proceedings. There were several success factors identified in these studies. The focus group interviews and subsequent case studies identified many of the same factors. These are presented in Table I.

Top Management Support

Researchers, consultants, and management experts have long promoted top management support as being a key driver of organizational programs and efforts (Mintzberg 1973). Such support can result from management acting in the capacity of figurehead, leader, liaison, and spokesperson (Mintzberg 1975). …

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