Why Your Company Needs Supply Chain Diversity

While 2020 will be remembered for many things, those in the logistics business are likely to memorialize it as the year of supply chain disruption. For decades, lean supply chains had been the key to doing business across industries, but now supply chains must adapt. In 2020, US businesses saw supply chain issues happen in early February. 70% were assessing their suppliers and trying to determine which were in lockdown. By March, issues became so widespread that the general public knew what was going on.

Eventually, 97% of businesses worldwide were impacted by pandemic-related supply chain disruptions. At the same time, 81% reported lower demand for their products and 76% reported declining revenues by an average of 23%. For some business, that decline was enough to drive them out of business. The problem was especially acute for small businesses, who lack the bargaining power of large retail buyers or major suppliers. Making the problem even worse was the issue of race: minority business ownership declined at twice the rate of white business ownership from February to April. Black business owners saw the worst drop at 41%. For many, these losses will not be recovered when the pandemic ends. 60% of business closures during the pandemic are permanent.

These statistics spell more than a collection of personal tragedies. They are a setback for racial equality. According to Robert Fairlie, economics professor at the University of California, Santa Cruz, “the negative early-stage impacts [of the pandemic] on minority- and immigrant-owned businesses, if prolonged, may be problematic for broader racial equality because of the importance of minority businesses for local job creation, economic advancement, and longer-term wealth [equality].”

Another tragic aspect of these business closures was their timing. Soon after they shut their doors, public outcry for racial equality exploded. 70% of millennials are choosing to shop with brands they believe demonstrate diversity and inclusion. 60% of people have said brands’ reaction to the summer protests will influence their future buying decisions more generally. At the time, companies promised more diversity. It’s time they keep their promises.

Despite all the talk, 1 in 3 companies are unprepared to move beyond diversity compliance and embrace diversity as a business strategy. Diversity should be seen as more than a law to comply with. According to Katherine W. Philips, Senior Vice Dean and the Paul Calello Professor of Leadership and Ethics of Columbia Business School, “diversity makes us smarter.” Companies committed to diversity initiatives are more innovative. That means they make more product innovations, more new patent filings, and more citations on patents. When businesses use local suppliers, especially those in historically underserved parts of the community, whole areas flourish. Not only are those businesses sheltered from distant lockdowns, but they keep wealth in the community as well. Media billionaire Mark Cuban already believes that “when we get to the other side, companies are going to be operating differently.”

Don’t commit to the bare minimum on supply chain diversity. Embrace it at every step of the supply chain.