Minority supplier programs are slowly taking hold at U.S. transplants
By Tim Minahan -- Purchasing, 1/15/1998
Minority supplier development has been on the radar screen of the U.S. auto industry since the late 1960s. However, foreign automakers with manufacturing facilities here have only recently begun to tap minority-owned businesses."The Big Three are doing their part to support minority suppliers," says Harold R. Kutner, vice president of worldwide purchasing and North American production control and logistics for General Motors Corp. "But when it comes to the transplant companies such as Honda, Mitsubishi, BMW, and Mercedes, however, minority suppliers seem to have fewer opportunities to supply systems and modules to them."
Indeed, GM, Ford, and Chrysler have long had formal commitments to spend at least 5% of their purchasing dollars with minority business enterprises (MBEs), as minority suppliers are known. Together, the three companies spend more than $4 billion a year directly with minority suppliers and another $1 billion or so through their second-tier programs.
By contrast, transplant auto makers have only recently developed formal minority supplier programs and few have established spending targets for buying from minority businesses. The reason: Foreign automakers are relatively new to the U.S., have different corporate cultures, and typically don't possess the production volumes to woo leading MBEs.
"The real large minority suppliers, like Bing Steel [a tier-one automotive steel service center], already have all the business they can handle," says Dean Derbyshire, director of supplier development for Mitsubishi Motor Manufacturing of America. "They're not really interested in my business because I don't have the volumes they want. That makes it more difficult for us. We have to do a lot more work to find minority suppliers."
Mitsubishi, which manufactures vehicles in Normal, Ill., is not alone. Mercedes Benz, which recently began producing its popular M-Class sport utility vehicle in Vance, Ala., only has 75 tier-one suppliers, compared to the hundreds used by The Big Three automakers. "This really limits the opportunities we have to do business with minority suppliers," says Dennis Glenn, a supplier diversity specialist for Mercedes Benz U.S. International Inc.
From trade shows to payrolls
That said, foreign transplants have made a concerted effort in recent years to increase purchases from MBEs for both production and non-production goods. For example, Toyota Motor Manufacturing North America Inc. recently announced it would buy at least 5% of its total tier-one purchases from minority suppliers. In addition, the automaker is pressing its tier-one suppliers to make the same commitment.
Such a goal may seem ambitious. (Indeed, the 5% target is by far the most aggressive set by any of the U.S. transplants.) But considering Toyota already spends nearly 3% of its annual $7 billion North American procurement budget with about 100 MBEs, it is not out of reach. The automaker, which has four factories in North America and is building two more, says it will meet its targets by bringing in new minority suppliers and increasing business with existing ones.
Toyota recruits a good number of new MBEs through its annual Opportunity Exchange Trade Show, which, sponsored by the automaker's buying team, brings minority businesses together with tier-one suppliers. "Prior to last year's show we had a met with our tier-one suppliers and provided them with training in how to develop a world-class supplier program of their own," says Lisa Thomas, supplier diversity coordinator. To date, the show has resulted in more than $2.5 million of new business between Toyota's tier-one suppliers and MBEs.
Toyota also helps existing minority suppliers take on new business. One example: Minority-owned Burns Enterprises has provided janitorial services to Toyota's Georgetown plant since it opened a decade ago. Since then, Toyota has parceled additional business to Burns, such as applying plastic to the finished vehicles rolling off the assembly line. This year, Burns will supply completed wheels and assemblies to Toyota's new truck plant in Princeton, Ind.
Mercedes Benz has not set targets for what it will spend with minority suppliers because, according to Glenn, the company is concerned that buyers would stop bringing new MBEs online once minimum spending goals were met. Instead, the automaker is promoting supplier diversity by actively participating in local, regional, and national minority supplier groups. In fact, Bob Birch, vice president of purchasing and logistics for Mercedes, sits on the board of directors of the National Minority Supplier Development Council.
And such efforts aren't just window dressing. Mercedes already has located several minority suppliers through the various councils. Some examples: Tire and Wheel Assemblies sequences the wheels and tires for the M-Class. Midwest Stamping supplies over 90% of the small stampings used on the vehicle. And Dawson Manufacturing produces the rubber mounts for the exhaust system.
Similarly, Mitsubishi, which launched its supplier diversity program a little over a year ago, has found new supply partners through a host of minority-supplier trade fairs, including one it co-sponsored with Catepillar and State Farm Insurance. "The most productive method of finding minority suppliers is to participate in minority trade fairs," says Derbyshire. "It offers us a way to deal with smaller companies that don't have the advantage of a marketing budget or broad sales force to reach us."
Derbyshire says Mitsubishi is doing business with several minority suppliers it found through trade shows during the past year. These include such production part suppliers as a plastic injection molding company out of Kentucky and a stamping company from Wisconsin. In addition, the automaker is tapping tier-one suppliers to help bring more MBEs on board.
One example: Mitsubishi is working with Bundy Tubing, a leading automotive tube supplier, to craft ACT Tube and Bending, an MBE that doesn't currently supply to the auto industry, into an automotive supplier.
Honda of America Manufacturing Inc. has been working with businesses owned by minorities, women, and people with disabilities through its "special supplier development program" since 1989. Each year, the automaker establishes internal goals and objectives for minority supplier development and benchmarks its performance in this area against similar programs at other companies. "We are constantly looking at new methods and the processes of our competitors to see how our internal goals can be improved upon," says Nancy E. Jones, director of Honda's special supplier development program.
Key to Honda's efforts is increasing business with existing MBEs and encouraging tier-one suppliers to work with more minority suppliers. "As we continue to grow we're understanding that it's not only important to implement these goals in the first-tier but also at the second tier," says Jones. "We are actively tracking the use of minority suppliers at the second tier and we're beginning to focus on the lower tiers as well."
Other transplants are still hashing out how they'll handle supplier diversity. For instance, Nissan North America Inc. says it has a minority supplier program in place but refused to discuss it in print.
While slow to embrace the concept of minority supplier development, transplants have begun to see the importance of using MBEs.
"It's imperative that the transplants develop some kind of formal minority supplier purchasing program, considering so many of their customers are minorities," says Reginald T. Williams, president of Procurement Resources Inc., a leading minority supplier consulting firm. "Programs like those at Toyota are a step in the right direction and will pressure other transplants to follow suit."
However, Williams says, while the transplants are "making progress" with minority supplier initiatives, "most still have a long way to go."
Talkback
Related Content
Related Content
Sponsored Links
View All Blogs
Now Playing:
