What is Meant by Supply Chain Transparency?
Ever since the 1904 publication of Upton Sinclair’s book, The Jungle, shed light on the atrocities going on behind the scenes in the meatpacking industry, people have grown more and more concerned about where their products are coming from, and how they are arriving. That incident of consumer outrage eventually resulted in both the Food and Drug Act and the Meat Inspection Act, and could arguably be placed at the origin of the concept of transparency as we know it today. Supply chain transparency refers to a company’s clearly stated disclosure of everything that happens, and all the conditions that are present, at every stage of the supply chain journey, from the resources used in manufacturing a product to its final destination of reaching the consumer. Marketing consultant Claire Kerr puts it this way: “Having a transparent supply chain means being able to see, demonstrate and trace a product—right from its suppliers of raw materials and components, through the manufacturing process, via the logistics of warehousing and distribution, until it reaches the end consumer. The aim with a transparent supply chain is to ensure that the products you supply adhere to certain quality, safety and ethics standards.” (https://balloonone.com).
To achieve transparency, a company must maintain a knowledge of all that happens upstream in the supply chain, and then communicate this data to their stakeholders, employees, and customers. Whereas visibility describes the internal process, transparency is primarily focused on external concerns, providing disclosures about raw material sourcing, environmental sustainability, quality and safety standards, and labor practices, to list just a few. Being upfront about its supply chain can enable a company to create and maintain dependable business relationships with suppliers and customers alike. A fully transparent supply chain communicates an image of trustworthiness, suggesting that the company is honest in all its business dealings. Nike has been a pioneer in supply chain transparency, starting with the publication of its supplier list, and continuing with even deeper insights about its supplier base. Other companies, such as Apple, with its Supplier Responsibility Progress Report, publish honest data, including indications of dips in performance, which can then be used as a catalyst for product improvement. (https://www.apple.com).
Why Supply Chain Transparency is Important
Perhaps the most compelling reason that supply chain transparency is so crucial in today’s marketplace is that consumers are demanding the practice. According to surveys conducted by Avetta, 86% of Americans consider transparency to be of prime importance, with 75% reporting a willingness to pay more for products from companies that guarantee total transparency. Interestingly enough, 80% of the consumers polled agreed that a company would be able to regain their trust if it were to admit to a mistake, resolve the issue, and do what it takes to be transparent in the future. (https://avetta.com). In the words of technical writer Megan Ray Nichols, “There was a time when customers cared little as to how a company or business sourced its products and resources. They didn’t think much about a brand’s economic and social impact. They cared even less about sustainability and environmental influence. Those days are gone. If you’re sourcing materials or resources in a way that has a negative impact, your customers will find out, and that will have a direct result on your performance.” (https://blog3ds.com). And that direct result will be a negative one.
As well as serving as a boon to its reputation among consumers, supply chain transparency can also increase a company’s channel efficiency and productivity, enhancing its ability to monitor the flow of products while maintaining greater control over its entire supply chain. Content specialist, Shelby Klingerman points out that “transparency in supply chain processes is a key component to achieving efficiency. As consumers apply similar weigh to product quality and order-fulfillment speed, efficiency is more important than ever.” (https://questoraclecommunity.org). Sharing information about supply chains does much to foster a sense of consumer trust and brand loyalty, creating an enduring base of customer advocates. Companies with high levels of transparency are also better equipped to build up a culture of trust that is more likely to attract suppliers and partners who embrace similar business principles, facilitating more open communications among them. These benefits can extend across entire industries by demonstrating the positive influence that comes from exercising integrity and responsible action, empowering businesses to become significant catalysts for change, whether in the area of environmental sustainability, fair labor, or in any number of other meaningful global concerns.
The Downside of Supply Chain Transparency
The positive benefits of supply chain transparency are increasingly more evident in today’s world, especially in light of the current climate of consumer expectations and demand. Nevertheless, the processes required to put in place and to maintain transparency are not always easy for companies to implement. Supply chain transparency depends upon factual data, rather than statements expected to be taken on faith. The use of blockchain, a method of creating a digital ledger that cannot be altered, provides a way for companies to provide access to their channels. Such methods can be expensive, however, and require resources in order to be maintained. Another drawback can be seen in the potential quagmire that come with any type of information-sharing. Although greater transparency can be achieved through various types of technology, communication manager, Adam Fisher explains that “those connecting digital supply chains will need to consider if and how to manage data access rights for users who are concerned with sharing too much data with competitors.” He goes on to say: “Where graded data access rights cannot be accommodated…this cultivates the potential for parties to be less willing to share valuable data with the supply chain.” (https://consumerhub.com).
It can be difficult for companies to initiate all the processes that come into play with the establishment of greater transparency, including even knowing where to start, which might entail accessing which channels pose the highest risk, and which ones are of primary concern to their customers. Once this is accomplished, it then becomes a matter of gaining corporate approval, within a business as well as with any partners or associates, all of which might entail strategic maneuvering. For a number of companies, serious gaps still exist in the supply chain trajectory, from the source all the way to the consumer, and it can be an arduous process to fill them in with relevant data. Although the energy required to address these factors may impede a company’s efficiency in the short term, the demonstrated probability of significantly enhanced future efficiency should keep its focus on the big picture.
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