Keep Tribal Dollars in the Tribal System

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Revenue generation is a central component to Tribal self-governance. While most Tribes purchase millions of dollars in goods and services, relatively few are buying from themselves. Blue Stone Strategy Group has assisted Tribes in exploring ways to do just that; strategic planning for supply chain integration promotes growth while maintaining respect for culture and traditions.

Supply chain integration, or horizontal integration in the private sector, is a proven economic development strategy that can offer Tribal Nations a path to stability and sustainable diversification. A supply chain refers to a system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer.

“Although most functions are likely to be involved with Tribal purchasing, there are many ways to penetrate the supply chain,” says Blue Stone Senior Strategist Anthony Farese. They may include operations management, sourcing, procurement, logistics, information technology, customer support, telecommunication service and so on. Tribes may be looked upon as a resource for raw natural materials, manufacturing, assembly or distribution, while others may choose to bring their suppliers in-house.

A model with high potential in Indian Country is convenience store/fuel supply chain integration, where there can be significant cost savings and tax advantages.

“In general, the place to start looking at integration is usually with some of the larger existing contracted service agreements and competitive advantages,” added Blue Stone Principal Tim Keller.  Some, such as the Seminole Tribe of Florida, have been successful at taking control of their entire fuel supply chain, including transportation, storage, distribution and marketing. Blue Stone Strategy Group guided Seminole, a large purchaser of gas for its fleet vehicles, through an eight-month process to enter wholesale distributorship, ultimately saving money and creating incremental jobs.

Whatever the integration point, there are distinct advantages of going into the business of the biggest cost areas. By cutting out the middleman, Tribes save money and literally improve the bottom line. Expanding into businesses with some existing community knowledge and customer base helps keep more dollars in the Tribal economy and can spur job creation. Tribal businesses may begin to offer value to outside entities, creating new customer bases.

“All of these are ways Tribes can express and assert economic sovereignty,” notes Keller. Diversified economies provide Tribes the stability to take care of responsibilities if federal funding streams dry up.

Farese, a former Tribal CFO and risk management expert, warns that supply chain management is best for Tribes with resources. He says leaders should ask themselves, “What is the value proposition being offered to my Tribe or other end customers?” He suggests a practical exercise: “If your supply chain is disrupted or interrupted and you’re the end user, you need to do a lot of risk management. Are you going to run out of clean linens or food? Look at what can go wrong at each stage along the supply chain.”

Problems at any point in a Tribe’s supply chain may translate into schedule delays, lost revenue or PR issues. Farese advises Tribes that are looking to build or expand existing operations to look closely at whom they contract with and decide whether there is a need for a product or service that they can fill.

Bearing expertise in successful supply chain integration, Blue Stone Strategy Group partners with Tribal Nations to provide timely, high-level strategic planning and implementation. We encourage Tribal leaders to identify existing assets or contracts, time requirements, possible tax advantages and even competitors’ reactions.

It is critical to examine capabilities, to determine whether a Tribal Nation is primed for growth in terms of leadership, governance and planning. To that end, Blue Stone Strategy Group can help establish a Tribal governance structure that enables successful enterprise development including updated regulatory policies, LLC formation ordinances and a strong court system.

“Navigating Tribal bureaucracy is one of our strengths,” says Keller. He points out two processes for Tribal Nations entering the supply chain: internal, in which key decisions are made and opinions are sought from stakeholders such as legal counsel and the Tribal membership; and external, which may include negotiation, permitting, acquisition or site preparation. At times, these processes can expose competing interests that need to be balanced.

“Effective communication between Tribal Council and the community can help ease friction or resistance to change,” says Farese. “If leadership is involved and participates from the beginning,” he says, “it is easier to engage the community at large” about the risks and benefits of this type of development. They must gauge the community’s support for diversification and if the current Tribal workforce is prepared to carry out additional roles within the supply chain.

Taking time to strategize for a strong Tribal economy is not easy in today’s demanding environment. This is why Blue Stone Strategy Group requires no more than 30 minutes for introductory meetings between our team members and Tribal leaders.

Balancing financial stability with the welfare of the people is a constant test for Tribal leadership. “The answer is always unique to a Tribe’s specific situation,” says Keller. “One of Blue Stone’s strengths is managing that challenge.”

The Takeaway:  Supply chain integration is a proven economic development strategy that can offer Tribal Nations stability and sustainable diversification.

By analyzing a Tribe’s largest contracted service agreements and competitive advantages (such as taxes, regulations and natural resources), the value of supply chain integration can be determined in advance.

Diversified economies provide Tribal Nations the stability to take care of responsibilities if federal funding streams dry up.

Blue Stone Strategy Group can help establish a Tribal governance structure that enables successful enterprise development.

Introductory meetings between Blue Stone team members and Tribal leaders require only 30 minutes.