2020 was a year of disruption. Notably, it was the year lean supply chains were jeopardized. COVID-19 affected businesses months before it reached global pandemic scale. By early February, 70% of US businesses needed to assess suppliers. Later, 97% of businesses worldwide suffered pandemic-related supply chain disruptions, leading to an average drop of 23% in revenue for 76% of companies. Supply chain diversity is the key.
These disruptions impacted everyone, but small businesses were the hardest hit. At the mercy of larger retail buyers and suppliers, small businesses are often overlooked and in possession of less bargaining power. And it shows: 60% of business closures during the pandemic are now permanent. In the first two weeks of the pandemic, 65% of small businesses in high-rent zip codes laid off staff. By April, black business ownership declined by 41%, with Latinx business ownership not far behind at 32%. Minorities lost businesses at twice the rate of white people.
More than an individual tragedy for each business owner, these figures are a setback for racial equality. Minority businesses are important for “local job creation, economic advancement, and [fixing] longer term wealth inequality” among the races, according to Robert Fairlie, economics professor at the University of California, Santa Cruz. This all took place as public outcry for diversity exploded, particularly among younger generations.
Diversity in supply chains is good for business, especially tech businesses who rely on product innovations, patent filings, and patent citations to stay ahead of the competition. When businesses use local suppliers, communities flourish. Far-flung supply chains are vulnerable to global crises, but local chains keep the value and profit close to home. According to Mark Cuban, “when we get to the other side, companies are going to be operating differently.”
Diversity compliance isn’t enough. Diversity needs to be a business strategy to dominate going forward.
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