When the economy is in growth mode, there are plenty of resources and opportunities to go around. When inflation and recession take over, businesses are forced to revisit their priorities. One of the most important considerations a leadership team will make is how to support their closest supply partners without putting their own financial stability at risk.
Supplier diversity managers actively look for ways to support suppliers through difficult economic times. With the backing of their leadership team, a number of options are available. As with so many other supply-related efforts, the most important resource is data. Any plan should start with understanding as much as possible about their diverse suppliers through available data sources and reporting.
Companies that want to actively support their diverse suppliers through lean economic times should consider five things:
Not all diverse-owned businesses are small, and size is a significant determining factor in which companies will struggle in a down economy. Newer companies may also have difficulty, especially if they are fast-growth startups. These suppliers should be singled out for additional support to help them weather lean times.
Cash is king, and no one wants to borrow unnecessarily when interest rates are up. Procurement should check the payment terms in contracts and either ensure accounts payable is meeting those terms or consider shortening the payment window for diverse suppliers that are cash-strapped.
According to the 2021 State of Diverse Suppliers report, 75 percent of diverse suppliers have fewer than 50 employees, and 23 percent offer professional services. Less business can quickly translate into lost wages or layoffs. There may be opportunities to prepay for services at a discount to prevent workforce reductions at diverse-owned service providers.
Diverse-owned businesses may be tempted to let their certifications lapse to pay other bills. There is no sense in a closed company being certified, and most small businesses will try anything to stay afloat. Corporations can support the certification renewal process, either financially or from an expertise perspective, to help these suppliers keep their certifications and protect their diversity spend in the process.
Depending on what business or industry a company is in, diverse-owned suppliers and their employees may be a target consumer group for corporations. They will remember the brands that support them as well as the brands that do not, creating an opportunity to increase consumer loyalty by sticking to the plan.
Anyone can be an ally in good times, but it is the mission-driven leaders that emerge as uniquely impactful when challenges arise. Today’s economy isn’t making the drive to increase supplier diversity easier, but it is making it far more valuable to diversity leaders and the communities they support.