Minneapolis Community and Technical College has concluded its relationship with Sodexo, a national food services vendor, and commenced dining and catering services this week with Groceries & Deli on Harmon, announced MCTC Interim President Avelino Mills-Novoa. Harmon deli owner Jag Arora graduated from MCTC in 2004, and received a bachelor’s degree from Metropolitan State University in 2009. “We are really excited to bring in a local vendor who is in the Central Corridor, particularly a person of color and former student,” said Mills-Novoa.
MCTC’s news comes just as a study by the Initiative for a Competitive Inner City (ICIC), founded by Harvard Business School’s Michael Porter, has determined that Anchor Partners could feasibly shift over $328 million in purchasing from out of state businesses to the Central Corridor. The ICIC study examined 1.6 million spending transactions to assist the Central Corridor Anchor Partnership (CCAP) with its goal of increasing Anchor Partner spending in the Central Corridor by 5% over five years.
With key support from the Central Corridor Funders Collaborative and the McKnight Foundation, the Partnership turned to ICIC for help in analyzing spending trends and opportunities. ICIC is a nonprofit research and strategy organization focused on inner city economies. Kim Zeuli led ICIC’s study for the Partnership, and she knows that steering institutional spending to local vendors is not easy. “It’s hard work—a lot of blood, sweat, and tears,” she noted. “But it is possible to do.”
The Partnership has committed to this goal because its partners believe that such an effort can create wealth in communities adjacent to the Central Corridor by focusing and aggregating the demand from the Anchor institutions to local suppliers that employ and invest in the community. Together, the Anchor Partners spend $3 billion annually in goods and services.
25% of Anchor spending is addressable
Zeuli’s team at ICIC analyzed 2014 spending by 10 Anchor Partners and reported its findings in an August 5 report. The analysis of 1.6 million transactions confirmed the challenge of making Anchor Partner spending more local. A majority—about 75%—of Anchor spending is not addressable, meaning that the purchases are governed by sole source agreements or the goods and services are so specialized it is unlikely a different vendor can meet the Anchors’ need.
That leaves 25% of Anchor spending that is addressable -- the goods and services that could be reasonably supplied by a different vendor than that which is currently being used. Some of this addressable spending is already within the Central Corridor, the Twin Cities region, or the state of Minnesota, but a significant amount is potentially shiftable to vendors in the Central Corridor from vendors located outside of Minnesota. Out of state addressable spending by Anchors currently totals $328.7 million. If Anchors shift even 5% of their out-of-state addressable purchases to the Central Corridor, local businesses will realize $16.4 million in additional revenue.
“ICIC’s report is helpful in showing us exactly where Anchor Partners can change current purchasing practices to increase their spending in the Central Corridor,” said MCTC’s Mills-Novoa. “These recommendations can help our institutions promote economic opportunity in our urban communities.”Jag Arora, Harmon Deli, owner
MCTC’s move to the Harmon deli for dining and catering services is one powerful example. Mills-Novoa believes this change also opens the doors for additional local vendor partnerships. “You can see that the spirit of this Anchor Partnership work is starting to influence campus decisions,” he reflected. “We are proud to partner with an immigrant business created by a former student, located right between our campus and the LRT.”
Harmon deli owner and operator Jag Arora immigrated from India when he was in high school. He established his business in 2009.
ICIC has conducted analyses similar to its recent report for CCAP in communities and cities across the country. “The results in the CCAP study are comparable to those we found in other cities,” explained Zeuli. “Based on the success of local spending initiatives ICIC has helped analyze and track elsewhere, CCAP’s goal of increasing Central Corridor spending by 5% is very achievable.”
The University of St. Thomas is a prime example of just how achievable local purchasing can be. St. Thomas currently spends 39% of its total purchasing within the Central Corridor.
‘Quick wins’ and ‘big bets’
ICIC assigned North American Industry Classification System (NAICS) codes to each sector of Anchors’ addressable spending, focusing only on industries where Anchors spend over $1 million. Applying these criteria, ICIC identified a total of 36 industries in which Anchors could potentially shift spending to Central Corridor businesses.
The report identified 6 “quick wins,” industries where the gap between Anchors’ current Central Corridor spending and potential Central Corridor spending is less than $1 million. Because quick win industries represent a $1 million-and-under potential increase in Anchor spending, they are a lower scale means of expanding Anchor spending in the Central Corridor.
The larger industry targets are the 30 addressable spending industries with bigger gaps—over $1 million—between current and potential Anchor spending in the Central Corridor. CCAP could opt to define a path focused on these higher scale opportunities for increased spending – the “big bets” -- by focusing Anchor purchasing on specific industries in the Central Corridor.
“This information is very important for us to engage in big-picture planning,” commented Michael Noble Olson, Chief Procurement Officer of MNSCU.
CCAP’s next steps include determining which Central Corridor businesses provide the services and goods that fall within Anchors’ addressable purchases. CCAP will also identify whether Central Corridor businesses have the capacity to satisfy Anchors’ quantity and quality needs.
Shifting 5% of Anchor spending to the Central Corridor is feasible, but requires energy and motivation. “Procurement teams are on the front lines,” noted Kim. “What they are doing is really hard and really important.” Dedicated Anchor procurement teams will play a key role in helping CCAP to advance this mission.
“We knew that our Partnership could have a substantial, positive impact on Central Corridor businesses,” said Vini Manchanda, Vice President for Supply Chain Services at Health Partners. “What the ICIC report provides is a tool for focusing Anchor Partners’ purchasing priorities on industries where our effort will provide the most benefit to the Central Corridor while getting our institutions the services and goods that we need.”