WHAT IS SUPPLY CHAIN TRANSPARENCY?
The term ‘supply chain transparency’ refers to start-to-finish visibility across all supply chain components and their environmental and human impact. It documents a product’s journey from raw material sourcing, to production, storage, and delivery – including the transportation links in between.
Simply put, supply chain transparency means knowing exactly what is happening at every stage of your supply chain.
Transparency also includes how you communicate supply chain details to your consumers. To achieve full transparency, businesses and brands must give truthful information about internal and external supply chain operations. Honest and open transparency requires information backed by facts, not statements to be taken at face value.
WHY ARE WE TALKING ABOUT IT NOW?
15 years ago, the concept of supply chain transparency was virtually unknown, yet today it commands the attention of mid-and senior-level managers across a broad range of companies and industries.
The dramatic rise of lockdown driven e-commerce, and the corresponding increase in movement of products around the globe, has highlighted the importance of supply chain transparency.
What started as a pandemic-driven trend is now a ubiquitous way of life – online shopping is here to stay. This increased use of e-commerce has created new consumer ‘wants and demands’ that in turn influence customers’ expectations. Of these, an increased focus on sustainability and a brand’s responsibility to the environment and society has emerged.
More than ever before, consumers are concerned about the quality, safety, and origin of the products they purchase. Global consumers cite sustainability and social responsibility as essential considerations when choosing which products to buy. The labour practices used in product production and environmental impact are also top of mind with consumers.
As consumers, we want to know where and how raw materials are being sourced, how, where and by whom a product is being made, what it’s being packaged in, and how it’s going to arrive at our front door. We’re far more likely to purchase brands that can prove beyond doubt that their supply chain is more ethical and sustainable than their competitors.
WHY ISN’T EVERYONE DOING IT?
So, if transparency is a growing business imperative, why aren’t more companies doing it and why is the transition to transparent supply chains so slow?
Firstly, supply chains were not designed to be transparent. Traditionally, companies and suppliers have feared that divulging too much information would undermine their competitive advantage or expose them to criticism. Secondly, relevant information such as details of upstream supply chain practices may not be collected or if it does exist, may be erroneous. Finally, the ROI for investing in transparency does not always satisfy near-term requirements.
WHAT ARE THE BENEFITS?
The return on efforts to improve supply chain transparency varies with each business and industry, but there are benefits that most companies can capture.
Perhaps the most obvious benefit is the ability to make a difference – it’s the right thing to do. Secondly, compliance with increasingly stringent regulations. And thirdly, transparent supply chains also reduce reputational risk and enhance your standing as a trustworthy operation.
We’ve also seen that businesses who invest in supply chain transparency are able to attract and retain talent more easily. Candidates want to understand that a business’s values align with theirs. If you’re able to demonstrate that you operate ethically and you care about the impact you have on society and the environment, your employer brand will be enhanced.
There are important operational benefits too. Gathering more detailed information on supply chain performance can help you identify opportunities for improvement and allow you to plan more effectively over the long term.
Companies that embrace digital traceability and use it to help create a supply chain strategy will see that the role of the value chain goes far beyond fulfilment. It’s a new competitive ace.
WAYS TO IMPROVE SUPPLY CHAIN TRANSPARENCY
Achieving supply chain transparency is not easy. Like supply chains themselves, gaining transparency is a complex, and costly process. But given the far-reaching benefits to brands, consumers, the environment – and society as a whole, we believe the challenge is worth it.
You’ll need to look beyond the materials provided by your tier-one suppliers and the first line of customers who purchase your goods. The broader value chain includes every supplier’s supplier and every customer’s customer. It’s also vital to meet rising consumer demands for speed and customisation, as well as stringent new regulations and evolving certifications and standards.
Managing this complexity can give you a powerful competitive edge. The ability to trace products throughout a value chain will allow leadership teams to transform operations and create new business models.
At the same time, traceability applications that span the value chain connect an ecosystem of partners that can spur additional value creation via increased visibility, collaboration, and system-wide innovation.
DATA TO INCREASE VISIBILITY
Full visibility depends on having access to data that is reliable, accurate, and shared across the entire supply chain. Actionable real-time data provides insight that can avoid potential risks and reveal opportunities for improvement.
This also includes data concerning your trading partners and the products that flow between them. Collecting this data ensures partners are complying with your transparency requirements and regulations. Companies that embrace digital traceability and use it to help create a supply chain strategy will see that the role of the value chain goes far beyond fulfilment. It’s a new competitive ace.
DEVELOP A POLICY, GAUGE RISKS AND SET GOALS
Identifying transparency standards and setting goals is the logical first step toward transparency. You must also look at potential regulatory risks, past disruptions, and supplier-related issues.
You’ll need to consider what kind of relationships and business agreements exist between your organisation and your suppliers. Once this is established, you must decide what information to make public. If there are relationships or contracts that are of concern, you’ll need to consider alternative suppliers, or business agreements to achieve your supply chain transparency goals.
It’s important to develop procedures to ensure that your supply chain is compliant with policies, international standards and local laws. Additionally, there should be regular check-ins to confirm that standards are being achieved in line with your goals – and your customers’ expectations. Check-ins should include, but not be limited to, factory audits with suppliers and co-manufacturers.
Ensuring you have clear policies and guidelines around how to work with suppliers that fail to meet your obligations and expectations is crucial. Remember, your suppliers’ operating standards and supply chain is essentially an extension of your own.
SUPPLY CHAIN TRANSPARENCY IS NO TREND
The demand for transparency is unlikely to diminish. As market trends and consumer demands shift toward greater transparency, businesses are increasingly expected to commit to complete visibility. Those that do can gain a competitive advantage, boost sales, and will be seen by consumers as drivers of positive change.
The forthcoming regulatory changes will likely mean that it’s not even optional – although at Hunter Campbell, we believe that doesn’t mean that building supply chain transparency can’t, or shouldn’t be motivated by the desire to do better for the people you’re working with – and the planet we share.
Supply chain transparency relies on creating a culture of continuous improvement within the organisation and across value chains. Today, it may not fall under anyone’s job description, but the chances are that it soon could.
Interestingly, we have found that supply chain professionals are increasingly asking more about a company’s supply chain, their ethics and their view and approach to transparency, visibility and the environment. Some of the most talented supply chain professionals are looking to work for companies who have a policy on supply chain transparency, modern slavery and the providence of their own suppliers
For more insights from our Supply Chain, Operations and Procurement recruitment specialists download our 2023 Market Insights: https://www.huntercampbell.co.nz/market-insights-downloads/