Shifting priorities squeeze women, minority suppliers

Ruby McCleary, who heads supplier diversity efforts at United Airlines, spoke Friday at an event organized by the Women’s Business Development Center at Target’s Wayzata Boulevard campus in Minneapolis. (Staff photo: Bill Klotz)
An ongoing push for companies to consolidate their supply bases to trim costs puts a particular squeeze on women- and minority-owned businesses that are frequently among the smaller contractors and the first to go.
The effects are reverberating across industries, especially among smaller suppliers that have a tougher time recouping business, Ruby McCleary, who heads supplier diversity efforts at United Airlines, said at a Friday gathering in Minneapolis organized by the Women’s Business Development Center.
Shifting dynamics put more pressure on contractors to firm up relationships with the companies that hire them, and prove their worth. Today, when there’s less room for error, that means beating expectations and heading off problems before business suffers.
“You need to know how you’re performing and if you’re meeting customers’ expectations,” McCleary said. “That’s how you keep customers.”
Against the backdrop of widespread consolidation, companies eager to tighten spending are increasingly willing to end relationships even with longtime partners. The evolution can be an uncomfortable one for parties on both sides of the table, but it’s the new reality.
“In a consolidation environment, relationships are tested more frequently,” said Aron Khoury, who helps steer supplier diversity efforts at Medtronic, whose operational headquarters are in Fridley.
Even at companies like Medtronic that prioritize a diverse supplier base, there’s not enough leeway for contractors to sit back. Without finding ways to fit into the changing landscape, suppliers risk losing out on opportunities to grow, or even just sustain, their operations.
Adapting to the changing supplier framework starts at the beginning of the contracting process, Khoury said.
“Suppliers need to be comfortable being able to communicate their value through the RFP (request for proposals),” he said. “The process is going to be more and more important.”
The shift toward more conservative contracting is fueled in part by the robust mergers and acquisitions climate over the past few years. When companies combine, they cut overlapping suppliers through the integration process – a push that often puts price point before diversity and inclusion goals.
When United Airlines merged with Continental Airlines in 2011, the unified company had more than 300 information technology vendors – way more than was necessary. McCleary fought to preserve women- and minority-owned outfits through the culling process, but still lost $10 million in related spending.
“Once you start cutting the little guys, you don’t get that back,” she said. “It’ll take years.”
At United, McCleary’s efforts largely paid off. Under her direction, the airline since the merger has more than doubled its spending on contracts with women- and minority-owned businesses. In that span, the figure has jumped from $409 million to $1.08 billion, according to company numbers.
But while United isn’t quite an anomaly, it’s not quite the norm either.
Lili Hall, president and CEO of Minneapolis-based advertising and branding agency KNOCK, said her firm hasn’t lost contracts amid the corporate belt-tightening but has faced a more rigorous review process with some existing clients.
It’s a more labor-intensive and less certain atmosphere for suppliers.
“Unfortunately that’s just the world we live in,” Hall said. “It’s not going away and it’s not changing.”
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