Transparency in Supply Chain: More Than a Buzzword
In supply chain management, “transparency” is a simple word with many implications.
The need for transparency has spurred business innovation in risk management and sustainability. There are immediate benefits for companies practicing transparency. For example, in the retail industry consumers increasingly demand to know where a product came from and how it was made. Apparel and footwear companies who publish supply chain information (in an industry notorious for labor rights violations) build trust and send the message that they don’t fear accountability (1). Firms can make claims about their supply chain, but only granular details lend credibility. Transparency alleviates the pressure of regulation and reporting requirements, and may protect a brand from supplier scandals (2). But there is much more to the practice. Procurement professionals are encouraged to think beyond short term implications and align transparent strategies with the long term company vision. This requires many considerations.
Transparency Goes Beyond Visibility
A transparent supply chain isn’t just a visible one, showing the origin of a product or service. Competitive advantage lies in actionable insights gained through the process of mapping out a firm’s supply chain ecosystem. When organizations expand their sourcing, the introduction of global business carries significant risk. Different legal jurisdictions, cultural norms, and business practices may all affect an organization’s supply chain (3). By learning from and acting on this information, a firm can mitigate risk. Transparency helps identify and prioritize these supplier risks. Firms can then create their own code of conduct, performance standards, and collaborate with higher-risk suppliers to achieve better business outcomes.
Technology Alone is Not Enough
Mapping a firm’s supply chain can be daunting, as most chains are complex with many moving pieces. A new wave of startups are tackling this challenge from different angles. Technology has emerged in specialized areas targeting labor exploitation, ethical sourcing, and manufacturing visibility. These new firms promise value add for an organization’s stakeholders and speak to their sense of corporate responsibility. RFID (radio-frequency identification) tags use electromagnetic fields to store information about a product. These commonly used inventory trackers may soon be replaced with blockchain technology, digital tokens that track each element of a product (4). All these tools can be helpful, but they can’t be solutions by themselves. Better organized and more accurate data is still data that requires analysis and a call to action. Organizations such as Nike and Intel, who have declared conflict-free sourcing and transparent supply chains, have spent years investing in action plans with simple technology tools (5).
Aiming for the Perfect Balance
Organizations have different stakeholders such as employees, customers, and suppliers. These constituents have priorities that may not align with each other. Many supplier partnerships revolve around proprietary business information. Successful supply chain transparency requires finding a sweet spot in communication that develops relationships and trust between both. Research indicates that the sweet spot requires much more communication than executives expect (6). Prioritizing transparency at the C-suite level is vital. The ability to map supplier tiers for products from raw materials to end delivery directly impacts consumer trust and sustainability performance.
Building a Strong Foundation
Supply chain integrity is determined by commitment to sustainability and a culture of transparency. Key practices for supply chain transparency begin with embracing sustainability as a driving influence for business decisions, reflected in the careful partnerships of vetted suppliers. This also requires creating a transparent supply chain culture at the executive level, and establishing processes that ensure traceability throughout the procurement process (7). Firms are encouraged to find their own balance to build trust between various stakeholders. These conversations begin exploring the benefits of a transparent supply chain.
At ConnXus, our innovative tools can help you achieve a transparent supply chain. TierTracker® has the ability to track and visualize your Tier 1 and Tier 2 supplier spend, helping you meet diversity reporting needs. The dashboard-based platform has robust, features including automatic reporting and interface customization. Our new ConnXus Economic Impact Reporting™ breaks down multi-tier spend data into an interactive, real-time overview of your suppliers’ impact on the United States economy, allowing you to analyze and improve your economic sustainability efforts. We believe Supply Chain Transparency Leads to Inclusivity™.