Supply Chain Transparency is Changing the Way We Do Business
Until recently, knowing where a product came from was as simple as checking the label and had more to do with economic conservatism than the supply chain. This has changed in the last few decades, with consumers, governments, and companies demanding details about the systems and sources that deliver their goods. People have started to worry more about quality, safety, and the environmental and ethical impact of the products they consume.
But there is still broad and lasting confusion over what is a supply chain. So, what is a supply chain? And what are the impacts of a supply chain on business? And how can businesses leverage supply chains to benefit their consumers, workers, and products?
What is a Supply Chain?
In broad brush strokes, a supply chain is the source and process by which a company makes a product. Let’s explore what the supply chain looks like, why it’s valuable for businesses, and why it can add value to a product or brand.
A bad supply chain can destroy a business, and an opaque one can discredit a market. For example, imagine a toy manufacturer who sells their toys to a big toy company. That toy could be made from plastic from an unreliable source that uses child labour. Imagine the scandal if the provenance of the toys were shown to be supplied by children. There would be boycotts, scandals and re-shaping of the whole company. The scandal would have a lasting and detrimental impact on the brand and by extension, its sales. The company would have to take costly measures to resupply and reorder in a short amount of time.
Let’s look at the positives. Firstly, supply chains are complex. They are made up of many moving parts: sourcing, processing and logistics to branding and sales. Supply chains are everything that happens to create a product before you buy it.
Take the humble latte at your local coffee shop. The supply chain for the latte can be broken down into raw materials:
- Coffee beans (farmed in Costa Rica)
- Milk (from a dairy down the road)
- Plastic lid (made of plastic in Illinois)
- Paper cup (made of paper in Sacramento)
- Coffee machine (made in Naples)
- Milk steamer (made in Germany)
- Barista (University Student from Denmark)
Each of the items above requires a specific supply chain. The coffee bean is grown in one location, processed in another, ground in a third location, packaged and delivered from and to different locations and ends up in your Starbucks. By now, the coffee bean has been through the hands of at least five different companies, and there is no way your coffee shop can check if these companies are being as ethical, trustworthy or responsible with their methods, as they say they are.
A Product’s Origin is an Important Element for Consumer Choice
For many products the origin is an integral part of what the customer is into: Italian ice cream, French fashion, American burgers, Kobe beef, Halal meats, and organic foods. Consumers buy into the features, even if they can’t tell the difference between Italian ice cream and Mr. Whippy. But if we knew the provenance, the counterfeit would clearly be the choice to avoid.
So why is this important? Well for one, knowing your coffee is safe to drink is always a positive. But if we could guarantee that it was grown in a sustainable, slave free and non-contaminated way we would choose the option that guaranteed all of those things. I doubt anyone would want to drink a coffee they know harmed people or the planet, or was full of harmful chemicals. However, things are not as clear cut as they appear; just because a company knows who’s in its supply chain doesn’t make it transparent.
Supply Chain Visibility and Transparency
Simply put, supply chain visibility is when a company knows what’s going on in its supply chain. Supply chain transparency is when a company shares that knowledge with consumers and partners.
An important point to remember is just because your local coffee shop isn’t sharing its supply chain doesn’t mean it’s not transparent. The coffee shop may not have the information or be intentionally hiding anything.
The Business Case for Transparency
We now know what a supply chain is, and why it’s important. But what is the value when a business is transparent about their supply chains with customers?
Firstly, it means that your local coffee shop knows where the beans were grown, who grew them and how; they also know how the beans got from the producer to the grounds, the packaging and what’s in the packaging itself. The shop would also know how the beans got to the stores. They can guarantee that everyone was paid fairly, worked in good conditions, without damaging the environment. So they know they have acted correctly towards the people they work with and for.
Secondly, transparent supply chains mean stronger links with producers and logistics. Paying people well makes them more likely to want to do business with you. Whether it’s your coffee farmer or your barista, paying people fairly and treating them well means they want to stay with you and build a strong relationship. Companies that don’t treat their suppliers well run the risk of people jumping ship and looking for a better offer.
Lastly, our local coffee shop can tell their customers about their practices. This equates to an informed customer who can make a choice between products that are otherwise the same. Consumers can make a judgement on a product they know completely, and a product they don’t know. This means every brand can be evaluated based not only on its product and cost, but on its corporate ethics and how it treats people and the environment.
This process would transform a market. With customers making ethical choices and showing interest in the origins, authenticity, and impact of their consumption – the provenance and the supply chain become integral in the processes of companies. This gives businesses the push to capitalize on brand value and corporate social responsibility while transforming old markets, giving credibility to their products.
How Technology Tracks Transparency
Technologies like blockchain and RFiD can provide users with visibility into supply chains. Companies can also leverage this by anticipating risks and enhancing their own reputation versus less open competitors building consumer-based trust.
To recap, a visible supply chain means the company knows where their products are coming from, and a transparent supply chain means that information is given to consumers so they can make a choice based on as much information as possible. The benefits of a transparent supply chain are knowing the quality and standards of your products meet your expectations. It means less risk in your supply, so you can meet demand in a regular and consistent way. And, people know your products are exactly what you say they are. Businesses that have nothing to hide, are transparent.