Every economic downturn raises corporate budgeting questions that may affect business programs such as Supplier Diversity. While some may wonder if companies will continue their Supplier Diversity efforts due to tightening budgets, others feel that these efforts become more necessary during an economic slowdown. We are squarely in the latter camp.
COVID-19 will bring fundamental changes in the purchasing needs and behaviors of US organizations. Supplier Diversity teams bring the skills, knowledge, and networks that can help organizations better navigate these changes.
- With COVID-19, companies will need to buy products and services that they had not bought before. Supplier Diversity teams are uniquely equipped to help. "N95" and "PPE (Personal Protection Equipment)" were not in the vocabulary for many corporate buyers before COVID-19. Now, all B2C establishments – banks, stores, hotels, restaurants, airlines, retailers, movie theatres – are looking for protective gear (masks, gloves, sanitizing chemicals and equipment, etc.) for their employees and customers. Depending on the guidelines that emerge as the economy begins to reopen, it is possible that all work environments – any office, manufacturing facility, or distribution center – will also look to provide masks and sanitizing stations for their employees. These situations will create many buying needs – ones that Supplier Diversity managers and diverse suppliers can help fulfill together.
- The demand for such new commodities will outstrip supply. Companies will need to discover and develop new businesses that can meet these changing needs. Supplier Diversity managers are trained in finding companies that can meet unique needs. Diverse Suppliers are often overlooked by purchasing teams during normal times. In times of limited supply, diverse suppliers can help fill in where traditional suppliers are unable to keep up with demand. Additionally, Supplier Diversity teams have access to networks such as the NMSDC (National Minority Supplier Development Council), WBENC (Women’s Business Enterprise National Council), MBDA (Minority Business Development Agency), and SBA (Small Business Administration) that can connect suppliers to financing and management development opportunities that to help scale their businesses to meet growing demand.
- Companies will begin to bring sourcing back to the US to reduce supply risk. Diverse Suppliers can fill in the gap. The current crisis has exposed the weaknesses in relying solely on offshore suppliers for US companies. In times like these, countries impose restrictions on what can and cannot be exported – saving supplies to meet their own citizens' needs first before supplying to other nations. Even in the absence of restrictions, quarantine measures can limit the manufacturing and transport of goods to the US. Many US companies had to suddenly ramp up US plants to make up for a decrease in supplies from China – often running 24-hour shifts. Many others were not able to fulfill orders at all. Even before the crisis, the trade wars had forced companies to reduce their supply chain risk by bringing some manufacturing back to the US. The COVID-19 situation will only accelerate this trend. To create a sustainable procurement strategy, companies will need to find and develop local suppliers that can help meet these new needs. Once again, Supplier Diversity managers can be critical in going beyond the usual suspects and tapping into a broad pool of diverse businesses that can help companies find new sources of supply.
- Diverse companies created 72% of all new jobs in the five years after the Great Recession. They are critical to helping bring back the US economy. With 16.6 million jobs lost in the first three weeks of the shutdown, this crisis is too big to be solved by large companies alone. After the 2008 financial crisis, diverse businesses were critical in creating new jobs that fueled the recovery. Diverse (minority, women, veteran) businesses created 2.5 jobs for every job created by a non-diverse firm. Diverse companies are the fastest-growing group of businesses in the US economy today. They are critical to tapping into a talent pool that can provide the ideas, knowledge, skills, workforce, and ambitions necessary to create novel solutions in a changed economy. All companies need a healthy and growing economy to succeed. And diverse companies are essential to help recreate such an economy.
The coming year will bring about changes in what and how US businesses buy. Through all these changes, it will become even more critical for companies to find new and previously under-utilized sources of supply to meet new buying needs and to reduce their supply chain risk. Supplier Diversity teams are uniquely qualified to find the "needle-in-a-haystack" suppliers that companies will need because this is what they have been doing forever, and this is what they do best. Now is not the time to wonder if you need a Supplier Diversity team. It is time to lean on them even more.