Last month I have written an article on supplier diversity titled Supplier Diversity have you checked your Supplier base? it gathered lot of interest among industry players in the topic. So I thought of having a one comprehensive article to cover all aspects of Supplier Diversity, what is it, its importance in supply chain etc is. So here are my 2 cents –
So what’s the definition of Supplier Diversity worldwide? In the United States of America diversity suppliers are defined as businesses that are at least 51 percent owned, operated and controlled by one or more persons who are:
• A racial or ethnic minority, including African American, Asian Indian American, Asian Pacific American, Hispanic American and Native American
• Female
• Gay, lesbian, bi-sexual or transgender
• U.S. veteran or U.S. service disabled veteran
Additionally, businesses certified as Small Disadvantaged Business (SDB) or Historically Underutilized Business Zone (HUB Zone) by the U.S. Small Business Administration, are considered diversity suppliers.
In countries other than the U.S., definitions vary. Generally to be considered a racial or ethnic minority, persons must be citizens of the country where their business is headquartered and be of an officially recognized socially or economically disadvantaged ethnic minority group.
What are the different types of diversity certifications?
Federal Certifications
8(a) Certified or 8(a) Joint Venture: The 8(a) Business Development Program provides business development assistance to companies owned by socially and economically disadvantaged individuals.
Small Disadvantaged Business: SDB strictly pertains to benefits in Federal procurement. When competing for government contracts, SDBs receive a 10% price evaluation adjustment over non-disadvantaged business owners
HUBZone Certification: Historically underutilized business zones, referred to as HUBZones, provides contracting assistance to small businesses located in economically distressed communities. E.g. Alpine CA, Lassen CA counties in California
Disadvantaged Business Enterprise, Certification States: Issued by state departments of transportation
Ownership Certifications
• Minority Owned -
• Native American Owned
• Tribally Owned
• Alaskan Native Corp (ANC) Owned
• Native Hawaiian Org (NHO) Owned
• Other Native American
• Other Minority Owned
• Community Development Corporation (CDC) Owned
• Disabled Veteran Owned
• Veteran Owned
• Woman Owned
• Self-Certifications
• Self-Certified Small Disadvantaged Business Service
Definitions of certification types:
Minority Business Enterprise (MBE): For profit enterprise presently located in the United States or its trust territories, and is at least 51% owned and operated by a U.S. citizen(s) who is a member of one of the following groups:
1. African American: Black racial groups of Africa
2. Hispanic American: Spanish or Portuguese speaking areas of Latin American or the following regions: Mexico, Central America, South America and the Caribbean basin
3. Native American: American Indian, Eskimo, Aleut and Native Hawaiian. Individuals must be regarded as such by the community of which the person claims to be a part. Native Americans must be documented members of a North American tribe, band or otherwise organized group of native people who are indigenous to the continental United States or who otherwise have a special relationship with the United States or a state through treaty, agreement or some other form of recognition.
4. Asian Pacific: Japan, China, Indonesia, Malaysia, Taiwan, Korea, Vietnam, Laos, Cambodia, the Philippines, Thailand, Samoa, Guam, the U.S. Trust Territories of the Pacific or the Northern Marianas
5. Asian Indian: India, Pakistan and Bangladesh
Woman Business Enterprise (WBE): For profit enterprise presently located in the United States or its trust territories, and is at least 51% owned, controlled, and operated by a woman or women of U.S. citizenship. Individual(s) must be involved in the day-to-day management of the business.
Disabled Business Enterprise (DBE): For profit enterprise presently located in the United States or its trust territories, and is at least 51% owned by an individual(s) of U.S. citizenship with a permanent physical or mental impairment which substantially limits one or more of such persons' major life activities. Individual(s) must be involved in the day-to-day management of the business.
Veteran-Owned Business: For profit business presently located in the United States or its trust territories, and is at least 51 percent owned, controlled, operated and managed by one or more veterans of U.S. citizenship.
Disabled Veteran Business Enterprise (DVBE): For profit enterprise presently located in the United States or its trust territories, and is at least 51% owned by an individual(s) who have performed active service in one of the United States armed services and has/have a disability. Individual(s) must be involved in the day-to-day management of the business.
Service Disabled Veteran Business Enterprise (SDVBE): A for profit enterprise presently located in the United States or its trust territories, and is at least 51% owned by an individual(s) who have performed active service in one of the United States armed services and has/have a service-connected disability. Individual(s) must be involved in the day-to-day management of the business.
HUBZone Small Business Concern (HUBZone): A small business, located in a HUBZone (Historically Underutilized Business Zone), owned and controlled by one or more U.S. citizens, and at least 35 percent of its employees reside in a HUBZone.
Small 8(a) Business: A small business unconditionally owned and controlled by one or more socially and economically disadvantaged citizens of the United States, and demonstrates potential for success.
Small Disadvantaged Business (SDB): For profit enterprise presently located in the United States or its trust territories, and is at least 51% owned, controlled, operated and managed by a socially and economically disadvantaged individual or individuals, who must have a net worth of less than $750,000, excluding the equity of the business and primary residence and must meet applicable size standards for small businesses in their industry.
Lesbian, Gay, Bisexual, and Transgender (LGBT): For profit enterprise presently located in the United States or its trust territories, and is at least 51% owned, controlled, operated and managed by a LGBT individual(s) of U.S. citizenship.
What is NMSDC? The supplier diversity movement traces its roots back to 1972, when the National Minority Supplier Development Council (NMSDC) was chartered to provide a direct link between corporate America and minority-owned businesses with a mandate to provide increased procurement and business opportunities for minority businesses of all sizes.
The NMSDC network includes:
• 39 regional councils across the country
• 3,500 corporate members throughout the network
• Most of America's largest publicly-owned, privately-owned and foreign-owned companies
• Universities, hospitals and other buying institutions.
Why should I think about having supplier diversity when business strategy talks about supplier consolidation?
That’s a perfectly valid question. As the world is more about consolidation and adding value through aggregation, why should one go for supplier diversity?
Since most diverse suppliers are also small businesses, companies find that diverse suppliers offer greater flexibility, more customer focus, and lower cost structures. The vast number of diverse suppliers and the fierce competition for business is also seen as a powerful driver for innovation.
As supply chain industry is driving more towards the diversity suppliers for reliability and flexibility and innovation that they provide – as the same thing may not be possible for big suppliers with quick turnaround time – more and more enterprises are turning to their supplier base to have this information in their database. They have started making sure that the specific percentage of their supplier base is from diversity suppliers. They ask more suppliers to come forward and register themselves for their status.
Who can help me in capturing, maintaining and developing the supplier diversity database in my organization? Who can guide me on why and how I should be doing this.
I should be able to help and guide you on this. You can mail me specific comments on pmendki@gmail.com
So what’s the definition of Supplier Diversity worldwide? In the United States of America diversity suppliers are defined as businesses that are at least 51 percent owned, operated and controlled by one or more persons who are:
• A racial or ethnic minority, including African American, Asian Indian American, Asian Pacific American, Hispanic American and Native American
• Female
• Gay, lesbian, bi-sexual or transgender
• U.S. veteran or U.S. service disabled veteran
Additionally, businesses certified as Small Disadvantaged Business (SDB) or Historically Underutilized Business Zone (HUB Zone) by the U.S. Small Business Administration, are considered diversity suppliers.
In countries other than the U.S., definitions vary. Generally to be considered a racial or ethnic minority, persons must be citizens of the country where their business is headquartered and be of an officially recognized socially or economically disadvantaged ethnic minority group.
What are the different types of diversity certifications?
Federal Certifications
8(a) Certified or 8(a) Joint Venture: The 8(a) Business Development Program provides business development assistance to companies owned by socially and economically disadvantaged individuals.
Small Disadvantaged Business: SDB strictly pertains to benefits in Federal procurement. When competing for government contracts, SDBs receive a 10% price evaluation adjustment over non-disadvantaged business owners
HUBZone Certification: Historically underutilized business zones, referred to as HUBZones, provides contracting assistance to small businesses located in economically distressed communities. E.g. Alpine CA, Lassen CA counties in California
Disadvantaged Business Enterprise, Certification States: Issued by state departments of transportation
Ownership Certifications
• Minority Owned -
• Native American Owned
• Tribally Owned
• Alaskan Native Corp (ANC) Owned
• Native Hawaiian Org (NHO) Owned
• Other Native American
• Other Minority Owned
• Community Development Corporation (CDC) Owned
• Disabled Veteran Owned
• Veteran Owned
• Woman Owned
• Self-Certifications
• Self-Certified Small Disadvantaged Business Service
Definitions of certification types:
Minority Business Enterprise (MBE): For profit enterprise presently located in the United States or its trust territories, and is at least 51% owned and operated by a U.S. citizen(s) who is a member of one of the following groups:
1. African American: Black racial groups of Africa
2. Hispanic American: Spanish or Portuguese speaking areas of Latin American or the following regions: Mexico, Central America, South America and the Caribbean basin
3. Native American: American Indian, Eskimo, Aleut and Native Hawaiian. Individuals must be regarded as such by the community of which the person claims to be a part. Native Americans must be documented members of a North American tribe, band or otherwise organized group of native people who are indigenous to the continental United States or who otherwise have a special relationship with the United States or a state through treaty, agreement or some other form of recognition.
4. Asian Pacific: Japan, China, Indonesia, Malaysia, Taiwan, Korea, Vietnam, Laos, Cambodia, the Philippines, Thailand, Samoa, Guam, the U.S. Trust Territories of the Pacific or the Northern Marianas
5. Asian Indian: India, Pakistan and Bangladesh
Woman Business Enterprise (WBE): For profit enterprise presently located in the United States or its trust territories, and is at least 51% owned, controlled, and operated by a woman or women of U.S. citizenship. Individual(s) must be involved in the day-to-day management of the business.
Disabled Business Enterprise (DBE): For profit enterprise presently located in the United States or its trust territories, and is at least 51% owned by an individual(s) of U.S. citizenship with a permanent physical or mental impairment which substantially limits one or more of such persons' major life activities. Individual(s) must be involved in the day-to-day management of the business.
Veteran-Owned Business: For profit business presently located in the United States or its trust territories, and is at least 51 percent owned, controlled, operated and managed by one or more veterans of U.S. citizenship.
Disabled Veteran Business Enterprise (DVBE): For profit enterprise presently located in the United States or its trust territories, and is at least 51% owned by an individual(s) who have performed active service in one of the United States armed services and has/have a disability. Individual(s) must be involved in the day-to-day management of the business.
Service Disabled Veteran Business Enterprise (SDVBE): A for profit enterprise presently located in the United States or its trust territories, and is at least 51% owned by an individual(s) who have performed active service in one of the United States armed services and has/have a service-connected disability. Individual(s) must be involved in the day-to-day management of the business.
HUBZone Small Business Concern (HUBZone): A small business, located in a HUBZone (Historically Underutilized Business Zone), owned and controlled by one or more U.S. citizens, and at least 35 percent of its employees reside in a HUBZone.
Small 8(a) Business: A small business unconditionally owned and controlled by one or more socially and economically disadvantaged citizens of the United States, and demonstrates potential for success.
Small Disadvantaged Business (SDB): For profit enterprise presently located in the United States or its trust territories, and is at least 51% owned, controlled, operated and managed by a socially and economically disadvantaged individual or individuals, who must have a net worth of less than $750,000, excluding the equity of the business and primary residence and must meet applicable size standards for small businesses in their industry.
Lesbian, Gay, Bisexual, and Transgender (LGBT): For profit enterprise presently located in the United States or its trust territories, and is at least 51% owned, controlled, operated and managed by a LGBT individual(s) of U.S. citizenship.
What is NMSDC? The supplier diversity movement traces its roots back to 1972, when the National Minority Supplier Development Council (NMSDC) was chartered to provide a direct link between corporate America and minority-owned businesses with a mandate to provide increased procurement and business opportunities for minority businesses of all sizes.
The NMSDC network includes:
• 39 regional councils across the country
• 3,500 corporate members throughout the network
• Most of America's largest publicly-owned, privately-owned and foreign-owned companies
• Universities, hospitals and other buying institutions.
Why should I think about having supplier diversity when business strategy talks about supplier consolidation?
That’s a perfectly valid question. As the world is more about consolidation and adding value through aggregation, why should one go for supplier diversity?
Since most diverse suppliers are also small businesses, companies find that diverse suppliers offer greater flexibility, more customer focus, and lower cost structures. The vast number of diverse suppliers and the fierce competition for business is also seen as a powerful driver for innovation.
As supply chain industry is driving more towards the diversity suppliers for reliability and flexibility and innovation that they provide – as the same thing may not be possible for big suppliers with quick turnaround time – more and more enterprises are turning to their supplier base to have this information in their database. They have started making sure that the specific percentage of their supplier base is from diversity suppliers. They ask more suppliers to come forward and register themselves for their status.
Who can help me in capturing, maintaining and developing the supplier diversity database in my organization? Who can guide me on why and how I should be doing this.
I should be able to help and guide you on this. You can mail me specific comments on pmendki@gmail.com
Excellent Stuff...
ReplyDeleteHi Prashant,
ReplyDeleteThe information is quite useful to understand the definitions of Supplier Diversity in US