By Mike Turner
March/April, 2012
It’s Kevin Bell’s job to help ensure that the owners of the companies Chrysler Group LLC spends money with are demographically similar to the consumers who buy the company’s vehicles.
As senior manager-diversity supplier development at the Auburn Hills-based automaker, Bell’s objective is to identify qualified minority- and women-owned businesses and determine where they might fit within Chrysler’s supplier base, either at the tier one level selling to the company directly or at the tier two level doing business with Chrysler’s tier one suppliers.
While ensuring that minority- and women-owned companies have the opportunity to do business with Chrysler might seem like simply the right thing to do or more of a public relations strategy, it also makes good, bottom-line business sense, Bell says. Chrysler’s supplier diversity goals require that 10 percent of a tier one company’s procurement buy is sourced to certified minority business enterprises, or MBEs. The sourcing goal for women business enterprises, or WBEs, is 3 percent (both forms of certification, which guarantee that businesses are at least 51 percent owned by ethnic minorities or women, are offered by various governmental and other agencies).“This vision is shared from the top of the house -¦ and filters through our total organization,” Bell says. “We feel that it’s very important to have a supply base that’s representative of our customer base. When you look at the demographic trends in America, the minority populations are growing much faster than the nonminority populations. So it’s important for us, on an enterprise level in fact, to reach out to those minority consumers.
“If it was just for altruistic reasons, programs like this wouldn’t survive, and it probably wouldn’t have survived as strong as it survived -¦ when we went through our 2008-2009 economic calamity,” Bell continues, referring to the nationwide economic downturn that included Chrysler’s Chapter 11 bankruptcy reorganization. “But what we have found is that some of the MBEs, because they have a tendency to be smaller than the very large, multimillion-dollar tier one companies, that also provides them the opportunity to be more flexible, more adaptable and more willing to be innovative and creative in the way that they deliver services and products. And we take advantage of that.”
Many minority-owned suppliers did indeed struggle during the recession. For example, the number of companies affiliated with the Michigan Minority Supplier Development Council (MMSDC) stood at just more than 1,100 in 2011, down from 1,600 before the recession. But Bell says those that are part of the Chrysler supply chain largely bucked that trend, at least in part because of their track record of success.
“Chrysler started its supplier diversity program in 1983, so many of our minority suppliers that we deal with have been playing this game for a long time,” he says. “They’re experienced. They’re not startup businesses. They have a longstanding tradition of excellence, and so they’re able to survive. In another area or another organization where you had companies that didn’t have as much background, that’d be a different story.”
The relative strength of many minority suppliers is a tale that’s not widely known, Bell says.
“If there’s one thing we try to educate all of our tier one suppliers when we encourage them to do business with minority companies, is that generally the challenges that you see in the minority community, in the minority businesses, are no greater than you see in the population at large,” he says. “I think sometimes it’s easy to have a broad brush that dealing with minority companies or small companies in general can be risky.
“But in general, one of the things that we were proud of as we looked at our supply base coming out of 2009, was our minority businesses on average tended to fare better than our nonminority businesses. Again, one of the reasons that I believe that is, is because a small company was (better) able to go back and cut costs and restructure operations and do the things that were necessary to do to get their product or their company on firm footing than a larger company that had much higher levels of hierarchy and political structure to get through to make those same levels of cuts.”
Award-Winning Efforts
If the relative stability of MBEs is widely underappreciated, Chrysler’s diversity efforts are well-recognized by the minority business community. Last year, the MMSDC - a privately funded organization that certifies businesses are truly minority owned and operated - named Bell its National Advocate of the Year for his leadership in promoting the growth of minority supplier spending and business development at Chrysler.
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Although Chrysler’s goal of having its tier one companies devote 10 percent of their procurement buys to certified minority suppliers was not met in 2011, the trend is heading upward, Bell says. “We ended up at about 8.5 percent, which is an all-time-high figure for us,” he says. “What we’re especially proud of is, as we exited the 2009 catastrophe in the industry, many of our tier ones’ focus on diverse spending went down, and last year they had a significant increase. Last year (2010), our tier two spend - and that’s the spending that our tier ones do with minority suppliers - was just above $1 billion. This year (2011) that number is $1.8 billion. Our tier one companies, because of pressure that we’ve applied on them and in partnership, they’ve been able to increase their spend and get back up to the levels that they had in the past.”
Whether the general public is aware of the company’s attempts to include minority-owned businesses in its supplier base, and whether those efforts directly foster goodwill toward Chrysler among minority consumers in particular, is less certain.
“It’s kind of hard directly to say why someone bought a car,” Bell says. “But we’ve made very strong inroads in the minority community with several of our cars, and we do monitor that within our marketing organization. So we think that there’s a connection.”We’ve done a lot of surveys in this regard to try to understand the market and the MBEs,” he says. “One of the things that is clearly evident is that MBEs have the tendency to employ significantly more minorities in their operations than nonminorities. Minority suppliers are also more often than not more likely to be located in minority communities. That also provides a good backstop for opportunities to spread the word.”
Other diversity initiatives at Chrysler also serve to boost the company’s image in minority communities, Bell says.
“Part of our role in this organization and part of our role within marketing is to make sure that the population at large is aware of what we do,” he says. “Earlier I mentioned on an enterprisewide basis, supplier diversity is one thing that we do at Chrysler Corp., but we also have strong diversity programs with workforce diversity. We have a dealership diversity organization. We also have a strong focus in our marketing efforts. Our supplier diversity is just one part of the legs on that stool. And we use that as an advertising medium to make sure that people know what we’re doing and that they’re comfortable that we’re part of their community.”
Chrysler was named 2012 Company of the Year in workforce development at the Urban Wheel Awards, part of the North American International Auto Show in Detroit. The award cited the company’s commitment to programs that promote the values and principles of diversity. Its mentoring programs engage some 70 percent of its managers and 40 percent of its employees with cross-cultural considerations.
Making Connections
Bell says minority-owned companies hoping to gain Chrysler’s business should also feel comfortable reaching out to the company. “We’re very active and involved in the community,” he says. “I always like to say we’re not hiding and people can find us pretty easily.”
Bell and his three staff people regularly attend trade fairs and other events in search of qualified MBEs. “There are several ways to approach us,” Bell says. “We are very active in the Michigan Minority Supplier Development Council. That organization has several events where they can reach out and meet us at those events.”
Chrysler itself stages an annual trade fair to promote supplier diversity. The event, called Matchmaker, is held at Chrysler’s Technology Center in Auburn Hills.
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“On the third Thursday of September for the last 12 years, we’ve basically taken over this building,” Bell says. “We have exhibitors, a mixture of minority companies and tier one companies but predominantly minority companies, who have booths here. We like to say it’s the largest free trade fair in America, and certainly the largest free trade fair in this industry. Last year, we had about 2,200 people attend our trade fair. Since we’ve been doing this for 12 years, we have a unique tracking system to make sure to find out if people are making matches. And through that system we can attest to $1.8 billion of spend being generated from that one-day event.”
The Matchmaker event serves a simple but crucial need - helping minority-owned suppliers get introduced to prospective customers. “The challenge for any company is to get introduced,” Bell says. “There is a concept in purchasing that I’ve heard called comfort purchasing. People like to do business with (people) who they’ve done business with in the past. You can be a very able supplier and not have the opportunity to break into the supply chain. And that’s our role, to go out and find qualified suppliers. Just the opportunity to get introduced to the people that are in the capacity to procure products and services, that’s the biggest hurdle.”
Bell’s department is part of Chrysler’s purchasing department, but he and his staff don’t have the power of contracting directly with suppliers. “Our department’s primary responsibility is to find qualified MBEs that we can bring back to the sourcing directors and the sourcing community,” he says. “Oftentimes we find companies that have a lot of capability but not the scale to be able to support a company like Chrysler. That’s when we find matches. Someone might not be at a scale where they can support us, but they can support our tier one supply base. So we use a lot of our efforts in order to increase the spend of our tier one suppliers, as well.”
Chrysler also uses other tools to push its tier one suppliers toward doing business with minority suppliers.
“Last year we kicked of the Hi-Focus program with 134 of our largest suppliers that weren’t meeting our objectives,” Bell says. “Dan Knott (Chrysler’s senior vice president of purchasing and supplier quality) hosted a meeting early in the year and we brought these 130 companies and we just had a conversation with them and let them know what our expectations were, that we were serious about our commitment to diversity, and we expected them to do better in the space they were in if they intended to be a long-term supplier. We also, again, went out with the process to try to help them find minority suppliers and -¦ we set up a system to monitor and track them. I can say, at the end of the year, those 134 companies, their spend with diverse companies, in total, increased by over 130 percent.”
Among the two dozen companies that “graduated” from the program this year (a graduation ceremony was slated for Feb. 1), spending with minority companies increased by more than 350 percent, Bell says.
“Another thing that we implemented last year, and I don’t think most other organizations are taking supplier diversity to this level of seriousness, is our chief procurement officer makes sure that any time we award a contract over $2 million, before we award that contract, if that company is not performing well in the supplier diversity space, if they’re not meeting our objectives, they have to turn in a diversity improvement plan that their senior leadership signs off on, my team and myself will sign off on, and then that’s their plan for the year,” Bell says. “They have to give us a forward look of what actions they’re going to take this year in order to improve their spend. That has been extremely successful.”
A scoring system that gauges the overall performance of tier one suppliers also provides incentives for companies to partner with minority companies. “We have a scorecard that we judge all of our suppliers,” Bell says. “We have five categories, and one of the categories is partnership. Part of that partnership is the supplier diversity category. Supplier diversity is only 5 percent of the 100-point (formula). It’s only five out of the 20 partnership points. But if you get a zero in supplier diversity, you lose all 20 partnership points, and that makes it increasingly difficult to be able to remain on our bid list.”
Ability Matters Most
Minority companies that are part of Chrysler’s supply chain perform a variety of functions, Bell says.
“There really is no typical MBE,” he says. “We have suppliers that do everything from hardcore manufacturing, casting and machining. We have MBEs that participate in the logistics realm. We have MBEs that participate in providing services, whether that’s engineering services, whether that’s facility management. If you look at the facility here today, the security company that allowed you to enter the building is one of our minority business enterprises. The people that service our cafeteria are a minority enterprise. Our custodial staff is employed by a minority enterprise. We have a ton of opportunity in this building alone. Many of our engineers are employed by minority staffing companies. So there’s no typical MBE. They participate in the whole gamut of products and services that we procure.”
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But they all have one thing in common, Bell says: They’re capable companies fully qualified to do the job expected of them.
“At the end of the day, I think if there is one misconception that I would like to take off the minority suppliers is the fact that by some means or process they have generated or won business that they shouldn’t have,” he says. “I can tell you that is certainly not the case.
“One of the things I would like people to know about the minority supplier community is that there are good, strong, capable companies out there ready to service all gamuts of the supply base. And that’s one of the hurdles that oftentimes we have to get over.”
The most successful minority-owned companies focus on what they do best, Bell says.
“I think the biggest tip that they can have is to understand where do they add value,” he says. “Oftentimes when we speak to minority businesses, we ask them, ‘What do you do?’ And they say, ‘We do anything,’ or, ‘We do it all.’ There’s a level of aggressiveness that I think it takes to be an entrepreneur of any yoke, whether minority or not, and they’re willing to take on any piece of business because they think they can take it and be successful. Oftentimes we find that when they get outside of their core niche - and that’s again true for minority businesses or nonminority businesses - that’s when they can run into trouble. I think I would say that the most important rule for minority businesses is to figure out what you do and learn how to do it well and expand from there. Expand into different products or different markets, but make sure that you have a core focus and function that you do well, that you do better than anyone else.”
Entrepreneurial optimism can often backfire, Bell says. A common mistake is “trying to expand too fast and take contracts at any price because they optimistically think that they can come back and figure out how to cut costs and make that nonprofitable contract profitable,” he says. “Moving into different markets or different geographical areas -¦ chasing sales, I think that’s the biggest thing. Also, making sure that you have a sound financial balance sheet and a good relationship with your financial institutions.”
Minority-owned businesses needn’t necessarily worry about being too small to approach a company the size of Chrysler, Bell says.
“It greatly depends on the product and service,” he says. “I would say the more generic or ubiquitous your product or service is, probably the larger you would have to be. So if you’re a trucking company, for instance, there are quite a number of trucking companies. So Chrysler would probably never put a trucking company with a fleet of two trucks in our product portfolio. But if you have a different or unique way to do metal stamping that could offer a cost advantage or a cost savings, then you could be a much, much smaller company because you’re offering something that’s not generally available on the market. We do see a lot of that when I go out to trade fairs now in the marketing space, whether it’s in global marketing or Web marketing. You’ll find some companies that may be small but have a level of expertise that they can bring to the table.”
Bell has held his current post at Chrysler since January 2009. Bell, who has a bachelor’s degree in accounting and a master’s degree in business, both from Wayne State University, began at Chrysler in 1987 as a budget analyst and held a series of finance-related jobs until 2003.
“And then I had an interesting opportunity to move into our product strategy organization. From that I had an opportunity to move into the procurement space. I ran a team that was in charge of procuring many of our interior components. From that position, I ended up settling in this job, and I’ve been in this position for the past three years.
“I never would have thought when I started for the company 25 years ago this is where I’d end up,” Bell says. “I didn’t even know this organization existed. But I think it’s a good match for my skill sets because I do know a lot about strategic and strategy planning, I have a finance background and I like getting out and meeting people and talking to people,” Bell says. “And I think those are some of the skill sets that it takes to be successful in this role.”
