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5 important benefits of supply chain transparency

November 12, 2021

Having transparency means a company knows exactly what happens at every step of its supply chain. The information about such activities within the supply chain operation is backed by hard data and is clearly communicated internally to the company’s stakeholders and externally to its end-consumers.

 

The demand for transparency

More recently, consumer demand and increasing government regulations have compelled companies to get a more thorough look and understanding of their supply chain and their partners.

In the last few decades, the fallout from companies who have made risky decisions especially in the field of human rights issues, conflict minerals, and environmental impact of their supply chain providers have been numerous. Among them are the Rana Plaza factory collapse in Bangladesh, accounts of forced labour in the seafood industry, and massive deforestation in Malaysia and Indonesia.

These have resulted in laws being enacted by countries concerning transparency, such as the California Transparency in Supply Chains Act, the U.S. Food Safety Modernization Act, and the response of the governments of Australia and United Kingdom on modern slavery and forced labour.

 

Why is supply chain transparency important? 

Serai-KPMG Report: Moving the Needle - Threading a Sustainable Future for Apparel
Serai-KPMG Report: Moving the Needle - Threading a Sustainable Future for Apparel

While most discussions about supply chain transparency are focused on those that directly deal with consumers, such as brands and retailers, there is more activity behind these, namely the multitude of suppliers who work together to create the backbone of global supply chains.

"Consumers want to understand how and where the products they are acquiring are made. Global issues such as climate imbalance and COVID-19 have accelerated this trend. Consumers and retailers alike are now making efforts to evaluate the impact of their purchasing on sustainability." Dinesh Virwani, Joint CEO, Epic Group

In a basic supply chain, sourcing is a key step in the process, and this is where most companies collaborate with suppliers to ensure that their procurement needs are met. Maintaining these partnerships is essential to help businesses adhere to their commitments of transparency, sustainability, and responsible sourcing.

There are certain areas of the supply chain management process that are covered by disclosures governing transparency. These include:

  • Sourcing of raw materials
  • Labour practices
  • Product quality and standards
  • Environmental sustainability and protection

The disclosure goes both ways. By choosing supply chain transparency, enterprises can build trust between suppliers, their subsidiary companies, and customers. Supply chain traceability solutions can consolidate all the information companies need from their chain partners into a comprehensive data framework that makes it easy to access and validate. A transparent supply chain envisages a business that is forthright and honest about its practices, and thus, trustworthy.

However, there is more to simply projecting an image of transparency to stakeholders, suppliers, and customers. Enacting genuine supply chain transparency requires fact-based information, and not simply motherhood statements.

As consumers become more aware and discerning about the brands they like and choose to support, they’re increasingly less likely to give the brand the benefit of the doubt if the brand refuses to be upfront about their products’ history. Data-driven transparency and supply chain visibility are keys to enable transparency.

Serai's Supply Chain Visibility Solution

What are the benefits of supply chain transparency? 

It’s worth noting that despite the urgent need for companies to implement complete transparency, many still hesitate to do so. Sharing confidential and detailed information to the public is not only daunting, but businesses balk at divulging too much of their sources and business practices as this might make them look less competitive, or even leave them open to criticism.

Implementing transparency in one’s supply chain will also demand additional time and resources to collate all the relevant information, verify its accuracy, and then analyse and interpret the data to create an accurate picture of what is being done, and what can be improved upon.

 

How do companies stand to benefit when they practice supply chain transparency?

 

1. Customer assurance and brand loyalty

Consumers are now more informed and self-aware than ever. They are also more conscious about knowing where their products come from and how they are made. They are willing to open their wallets to products and services that are guaranteed safe and of high quality, and more importantly, to brands whose sourcing processes and values are aligned with their own.

The decision to allow information about safety standards, production and sourcing practices, and supply chain ethics publicly available can encourage consumer trust and customer retention which is the gold standard in business. Customers become more trusting of the brand and the company, which translates to customer loyalty and repeat purchases.

Brand loyalty also encourages positive feedback and word-of-mouth advertising, especially on social media. Customers who feel empowered and informed about their purchases are more likely to post positive feedback on social media and share more information about why they recommend the product to friends, family, and colleagues.

 

2. Better and stronger business partnerships

It’s not only customer retention that can prove to be a huge benefit to enterprises practicing supply chain transparency. Doing the same can also mean maintaining or even improving existing business relationships.

The level of cooperation of suppliers throughout the supply chain network to adhere to a commitment of transparency ultimately affects the brand and retailers’ sourcing decisions. Companies will naturally choose to work with suppliers who meet the required transparency and sustainability certifications as opposed to those who remain tight-lipped about their sourcing ethics. Non-cooperative clients will also necessitate additional time and resources from the company to follow up and verify information, which will ultimately reflect poorly on the business.

 

Time is a valuable currency in business, and responsive suppliers who embrace transparency in their practices can immediately turn over information at their clients’ requests in real-time by using verified traceability solutions, thus saving time and money. These savings are then passed on to clients, which have a positive impact on the bottom line.

 

3. Improved industry practices and gain competitive advantage

Reaping the benefits of supply chain transparency is not limited to one business but creates a ripple effect across an entire industry. Companies who practice supply chain transparency are seen as pioneers and are viewed through a more positive lens than the rest, thanks to their social responsibility initiatives.

Enterprises who make a stand about disclosing their sourcing and production origins and ethics can effectively enact meaningful change. A joint effort by industry players and consumer welfare groups can help promote needed changes in business practices and standards.

 

4. Gaining investors and business partner approval

Supply chain transparency plays a huge role in the world of finance and investing. More and more investors are looking into companies’ performance regarding environmental and societal factors (ESG), and these factors into their investment decisions.

Suppliers who are more forthcoming and responsible about their environmental, societal and sustainability practices are much more likely to secure funding or get more favourable rates. Doing so also displays their ability to adapt to new requirements, and a demonstration of how they understand changing market trends.

 

5. Attract and retain talent, improve employee engagement

Customer loyalty isn’t the only objective companies should pursue. The present and future generation of employees are just as aware and knowledgeable about sustainability. Companies who promote and implement transparency, and other responsible initiatives are more likely to attract and retain talent as employees feel they are also stakeholders in the company’s mission as they share the same values.

An open and trustworthy work environment promotes employee engagement and motivation. Staff are self-driven to do more not only for the good of the company or its customers, but also for themselves and the rest of the partners in the supply chain, building a true sense of teamwork and togetherness.

 

What is the upstream supply chain? 

One key tactic to instituting transparency throughout the chain is through supply chain mapping. Tools like Traceability help companies collect supply chain information and demonstrate the relationships among the entities through the network through which a product or raw material flows.

Serai's Supply Chain Traceability Solution

Supply chain mapping involves the upstream and downstream process. The upstream supply chain looks at the supply side of the network, specifically the origin of a raw material or packaging suppliers in the supply chain process. In contrast, the downstream supply chain focuses on the relationship between the company and the end-user. The downstream aspect highlights the demand side of the supply chain towards the consumer.

 

How can supply chains increase transparency? 

A recent study by the Harvard Business Review stated that 90% of executives say increased business transparency leads to better decisions across the entire organisation, including supplier networks. Using a data-driven strategy to implement supply chain transparency allows companies to make better, more informed decisions and optimise processes for any partner companies that manage their supplier relationships.

Today, companies can leverage platform technology to manage their supply chain data. Such technology can reach suppliers instantly, program follow-ups, and implement data validation to verify data. Platform solutions like Visibility allows enterprises to harness external data into easy, shareable visualisations and insights about their partners, markets and industry, making risk management more manageable. Doing so can help companies meet their regulatory compliance requirements and maintain open, trustworthy supplier relationships.

Ultimately, supply chain transparency relies within an organisation’s drive to demand continuous improvement within itself and across its value chains. As consumer awareness continues to increase alongside the development of new technology, the demand for transparency will intensify. It is to the companies’ and organisations’ best interests to leverage this demand to become resilient.


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