Supply chain transparency 101: what you need to know
blogMarch 8, 2023
With transparent supply chains, manufacturers and retailers alike can meet demands for sustainability, resilience, and more.
What is supply chain transparency?
Supply chain transparency means knowing where and how all your products are made. It also means being able to communicate this information to both internal and external stakeholders. That could be your marketing team, your resellers and marketplaces, or your customers.
Proper supply chain transparency extends to every single part, process, and resource that goes into your supply chain. A growing number of supply chains these days involve resources and materials sourced from all over the world. These resources come from many different growers, producers, suppliers, and extractors. To achieve supply chain transparency, it is essential to know not only which resources are used in the supply chain but also how each resource is used.
But what does this mean in practice? Let’s look at the example of a simple blue T-shirt stocked by a leading fashion brand. Before it even reaches its first distribution center, the supply chain of this one T-shirt includes cotton farmers, dye manufacturers, and factory workers, to name but a few. But full transparency goes deeper than simply who is in the supply chain. It asks questions from every stage. For example, how is the cotton grown? What pesticides, if any, are used in the process? What are the ingredients of those pesticides? How is the cotton harvested? What are the labor conditions of the farm workers? How is the cotton transported? These are all questions a fashion brand needs to be able to answer for every single garment they sell.
Why do we need supply chain transparency?
Manufacturers and retailers often have complex supply chains, typically spanning multiple continents and large numbers of suppliers. These suppliers may have their own smaller suppliers, often with incredibly specialized processes, products, and knowledge. In practice, this means that the company at the top can often struggle to get oversight over the exact scale and size of its supply chain.
Many businesses are starting to rethink this approach to supply chains. If you don’t know what your supply chain looks like, can you be confident it is as resilient, ethical, and sustainable as it could be? With so many moving parts, it’s harder to make sure that your business isn’t contributing to irresponsible labor or environmental processes as part of your supply chain. You could be unwittingly contributing to exploitative labor practices, ecosystem degradation, or environmental malpractice. Not things you want your brand associated with.
With increasing inventory, dual sourcing, and more regionalized supply networks, the need for supply chain transparency has emerged as a key priority for businesses. But effective supply planning requires visibility and high-quality, consistent data. Without good data, a business’s ability to be agile when it comes to demand, inventory, capacity, supply, and finances will be seriously hindered.
Greater supply chain transparency means greater social impact
Driving supply chain sustainability requires strong working relationships with suppliers. And there could be a lot of them. Let’s go back to the example of a global clothing supply chain. There are farmers, fabric manufacturers, garment workers, sourcing and licensing agents as well as designers, distribution, marketing, and logistics. Supply chain transparency means knowing who each of these parties is. Not only that, you need to know what they do and how they do it. And, of course, you need to know what all this means for your products and customers.
Treating everyone fairly is an important part of establishing and maintaining good relationships. Achieving that requires collaboration and a bedrock of good data. When everyone is on the same page, it is easier to embed changes.
Many businesses are introducing supplier codes of conduct that make environmental or social commitments concrete and provide a clear benchmark to measure progress. Typical policies in these codes of conduct are those relating to labor standards, human rights practices, and ethical concerns.
Transparency increases supply chain resilience
Complex supply chains are a necessity for huge numbers of businesses, but they also represent a serious risk. Global disruptions like COVID-19 can upend the supply chain landscape overnight. While we might not be able to foresee pandemics and other disruptive events. However, there are ways businesses can strengthen their operations to protect against future disruptions.
Supply chain risks occur when vulnerabilities in a business’s operations interact with an unexpected event. Scenario planning can help companies create strategies to deal with these disruptions as they occur. But again this requires visibility over your supply chain and accurate up-to-date data.
Climate change, for example, is making extreme weather conditions more common, including heat waves that are more intense and longer lasting. Knowing how this will impact suppliers will be a crucial part of risk management in the years ahead. And with governments all over the world continuing to introduce new regulations around the wider environmental and social impacts of businesses, supply chain transparency could become necessary for full compliance too.
Transparency translates to better experiences
Customers are more concerned than ever about the ethics and sustainability of their products, and this is becoming an increasingly important factor for both B2B and B2C buying decisions. Brands that can credibly demonstrate their sustainability credentials and link them to a wider purpose are more trusted by consumers looking to reduce their own personal impact.
Greater supply chain transparency also translates into a win for compliance teams. Having a handle on supply chain data puts companies in the best position to respond to new and extended regulatory requirements. For example, in 2023 the European Union introduces its much-anticipated Digital Product Passport for all companies operating within the trading bloc. Companies that have a transparent supply chain will be able to respond to these tightening regulations. Companies that don’t face costly fines, and risk losing out on business.
Supply chain transparency is also increasingly important for internal reasons, too. Companies with a more resilient supply chain are a more attractive proposition for investors, particularly as we transition towards a more circular economy. This transparency can also play a part in talent recruitment, too. Applicants who place more importance on issues of sustainability and ethics are more likely to want to work for companies with transparent supply chains.
Supply chain transparency is impossible without data
The good news for manufacturers looking to get more oversight into their supply chains is that technology can help. Around the world, companies are automating processes, utilizing the latest in technology advancements to monitor every part of their operations in real time, and using data analytics to provide decision-makers with invaluable insight.
These technologies are not only helping businesses to streamline their operations and boost their profitability, but they are also helping to drive sustainability and open new revenue streams. A key technology in this push towards supply chain transparency is Product Information Management (PIM), a foundational solution for companies looking to consolidate product information from sourcing through to end-of-life and recycling.
Interested in learning more about supply chain transparency and how could impact your operations? Read our latest ebook, A new era of opportunity in manufacturing, for an invaluable look at the key drivers shaping the future of manufacturing sales. Want to know how the inriver PIM can help your shift towards supply chain transparency? Book a demo today and let one of our PIM experts explain the difference inriver can make to your supply chain management.