Brian Wallace, Founder & President, NowSourcing
While 2020 will be remembered for many reasons, one of the most prominent effects of the year is companies rethinking their lean supply chains. In 2020, issues of supply chain disruption became so widespread that the general public were aware of them. Shortage of basic necessities like toilet paper and food items were bare for the public eye. As early as February, before COVID-19 was declared a global pandemic, 70% of US businesses were assessing their suppliers. In the months that followed, 97% of global businesses were impacted by pandemic-related supply chain problems. Over three quarters of companies reported a drop in revenue at this time, the average decline being 23%.
The vast majority of businesses suffered, but they didn’t all suffer equally. Small businesses were at a disadvantage going into the pandemic due to low bargaining power and attention paid to them relative to large retail buyers and suppliers. In the first 2 weeks of the pandemic, small businesses in high rent zip codes laid of 65% of their staff, compared with the 30% of more affordable areas. Furthermore, as with many phenomena in the US, the disaster disproportionately hit nonwhite Americans. From February to April, minority business ownership declined nearly twice as much as white business ownership. 60% of business closures during the pandemic are now permanent.
These figures represent more than a collection of individual tragedies. Steep declines in minority business ownership are a setback for racial equality. According to Robert Fairlie, an economics professor from the University of California at Santa Cruz, minority businesses are important for “local job creation, economic advancement, and longer-term wealth [equality].” One of the saddest parts about these closures is the timing; soon after many shut their doors, public demand for diversity and equality exploded. 70% of millennials have changed their shopping behavior to support diverse, inclusive brands. Over half of young adults said that a firm’s response to the summer protest would determine their willingness to work for that business. In the outrage, companies promised more diversity. Time to follow through on that promise.
Diversity isn’t just a mandate. It’s a success strategy. Diverse workforces create more product innovations and file more patents. When companies use local suppliers, they keep money in the community while avoiding the pain of distant lockdowns. According to Mark Cuban, 2020 has made it so “companies are going to be operating differently” after the pandemic.
About the Author: Brian Wallace is the Founder and President of NowSourcing, an industry leading infographic design agency in Louisville, KY and Cincinnati, OH which works with companies ranging from startups to Fortune 500s. Brian runs #LinkedInLocal events, hosts the Next Action Podcast, and has been named a Google Small Business Adviser for 2016-present. Follow Brian Wallace on Linked