The COVID virus pandemic led to the discovery of many weaknesses in supply chains. Some companies found their sources of materials cutoff due to cross border trade restrictions. Some companies permanently lost suppliers because they went out of business. Other companies discovered their supply chains were not diverse enough, so they had few options when one supplier interrupted the flow of goods and services. The supply chain vulnerabilities were exposed, including the fact single-sourcing practices driven by the desire to lower costs led to low or no inventories.
There is another impact to consider too. The closing of small to medium sized businesses due to lack of business or inability to conduct business to meet government restrictions has had a devastating impact on diverse businesses. The Federal Reserve Bank of Cleveland issued a report in October 2020 that demonstrated minority-owned businesses were disproportionately harmed by the COVID-19 pandemic. The number of active self-employed Black business owners decreased by 41 percent between February and April 2020, and Latino and Asian self-employed did not fare much better at 32 percent and 26 percent, respectively.
Though these numbers are grim and could be viewed as discouraging after all the effort corporations have put into building diverse supply chains, there is always another perspective. The future of supply chains has been permanently altered going forward, and in that alteration are opportunities. There are a number of predictions as to the shape supply chain models will take, and diverse suppliers can step in and provide the diversification and innovation needed.
Consider some of the predictions. The World Economic Forum (WEF) says that procurement will need to make much more rapid progress in digitizing the procurement function because it will make it much easier to recruit new suppliers. It also believes that manufacturing will have to be more distributed among suppliers in order to prevent another supply chain disruption for critical goods and services in the future.
The nonprofit Business for Social Responsibility (BSR) is focused on building a just and sustainable world through business strategies and solutions. BSR looked into the 5-year future of supply chains and anticipates significant changes. Like the WEF, BSR believes there will be a demand for technology in the procurement arena – real-time data availability, predictive analytics to identify trends, innovation projects, assistance with keeping pace with technological advances, to name a few anticipated needs. Risk management will take priority too, and BSR believes corporate procurement professionals will need better risk screening systems that leverage sophisticated technology tools. There is a need to trianglulate information and data from more sources and evaluate risks deeper in the supply chain.
Procurement functions will need assistance meeting these high-level needs, and collaboration with suppliers will be key to success. Procurement will also depend on suppliers for innovations in products and services, environmental sustainability practices, and agile responsive systems that can meet changing consumer demands. All of this is to say that diverse suppliers will find many opportunities in the changing supply chain landscape. Most of the opportunities have technology at their core. It is crucial that innovative diverse suppliers bring their creativity to corporate customers who will be anxious and ready to innovate.
The one caveat is that there is no certainty as to how quickly the predicted changes will evolve. The pandemic did drive many diverse suppliers out of business, but that also means there are now gaps that need filling. As consumers and corporations address issues like social justice, equal opportunity, environmental sustainability, human rights, and other challenges, there will be a push to utilize more diverse suppliers in supply chains. It is our hope that many of the diverse entrepreneurs driven out of the marketplace or temporarily shut down by the pandemic will be able to restart in an even stronger position through knowledge of what procurement functions need and want. <