Why You Should Support Supply Chain Diversity in 2021

Prior to the 2020 pandemic, the decades old wisdom surrounding lean supply chains shattered under pandemic conditions.  In early February, before COVID-19 was declared a global pandemic, 70% of US businesses were already assessing their suppliers and trying to figure out which were in lockdown.  A month later, supply chain issues grew so widespread that the public noticed shortages on essential products, namely food, toilet paper, and PPE.  When all was said and done, 97% of businesses worldwide were impacted by pandemic-related supply chain disruptions.  

These supply chain disruptions did more than cause delays and annoyance.  At the same time disruptions were happening.  81% of businesses reported lower demand for their products while 76% of businesses reported decreased revenue.  The average decline in annual revenue was 23%, enough to drive many companies into the red.  A year later, and 60% of business closures during the pandemic are now permanent.

Who was hardest hit? Small businesses, to start.  According to Avinandan Mukherjee, Dean of the Lewis College of Business at Marshall University, “small companies are at the mercy of larger retail buyers and suppliers sometimes, they do get less focus and attention, especially when production is lower at the other end.”  Another determining factor was zip codes; in the first 2 weeks of the pandemic, small businesses in high rent zip codes laid off 65% of their staff as compared to 30% layoffs in more affordable areas.  The most troubling disparity, however, is racial.  From February to April, minority business ownership declined twice as much as white business ownership.  The worst affected were black business owners, whose number fell by 41%.

For racial minorities to lose their businesses in such a disproportionate manner is more than a tragedy.  By University of California, Santa Cruz economics professor Robert Fairlie’s estimation, it is a setback for racial equality.  According to him, minority-owned businesses are important for “local job creation, economic advancement, and longer-term wealth [equality].”  One of the worst parts of the business closures was their timing; in summer 2020, public outcry for diversity and racial equality exploded.  70% of Millennials chose to shop with brands they felt demonstrate diversity and inclusion.  53% of adults under 35 said they had no desire to work for a firm that failed to speak out during the protests.  

At that time, companies promised more diversity.  It’s time they keep that promise.  Diversity isn’t just a mandate; in the right hands, diversity can be a winning business strategy.  As Katherine W. Phillips, Senior Vice Dean and Paul Calello Professor of Leadership and Ethics at Columbia Business School, said, “diversity makes us smarter.”  Diverse workforces have more product innovations, more new patent filings, and more citations on patents than their less inclusive peers.  Bringing people with different experiences together in a productive environment generates great ideas and initiatives in companies across industries. 

Diversity is more than just who a company hires.  It also matters in choosing which suppliers a company does business with.  When businesses use local suppliers, communities flourish.  More than protecting against distant lockdowns, local suppliers keep money in the community where a business operates, leading to a greater likelihood that money circulates through the local economy, creating better outcomes for everyone.  According to billionaire Mark Cuban, “when we get to the other side [of this pandemic], companies are going to be operating differently.”  For many, the end of the pandemic is in sight.  It’s time to see if Cuban’s prediction comes true in the ways people are counting on.

It’s time to redefine the rules of engagement.  It’s time to move beyond diversity compliance permanently.

Why You Need Supply Chain Diversity