Supply chain transparency is an extremely important aspect of modern-day production. Companies that show they have nothing to hide are often the most well received by the general public. For instance, Chipotle, a fast-casual restaurant known for its use of healthy, locally sourced ingredients, has a sterling reputation because it advertises partly based on its supply chain transparency.
On the other hand, companies that aren't as well-received in the public eye are more cloak and dagger about their supply chains. More specifically, fast food restaurants that don't communicate what exactly is in their food, or how they manufacture it, typically have worse reputations. The financial detriment a poor reputation has on a company can be dramatic, but supply chain transparency is more than that. In fact, it goes beyond visibility and into the extended supply chain. A business must invest in supply chain management software, improve its visibility and then take action gained through this oversight to better manage risk in production.
Why is Transparency Important?
In addition to improving brand reputation, supply chain transparency also helps companies mitigate risk and make actionable and informed strategic decisions for future operations. Thanks in part to the proliferation of mobile and digital technology, manufacturers are better connected to the extended supply chain. That, in conjunction with the right data collection and supply chain logistics software, can greatly enhance oversight of an entire operation.
However, this progression in supply chain technology comes with a potential challenge. The ebb and flow of supply chain tech is that as production oversight improves, risks also emerge. Supply chains now span more legal jurisdictions, federal regulations and with different industries across a more globally connected manufacturing sector. Even cultural mores come into play when it comes to supply chain practices in a given country or region of the world. As such, supply chain transparency can help businesses not only identify risks early on, but also learn from prior mishaps and take actionable and responsible steps to ensure it doesn't happen again.
Supply chain sustainability can improve through transparency in this context as well. Different business marketplaces are fluid, and the ability to scale is important in today's digital age. A self-sustaining supply chain begins with transparency and investing in the right data collection tools. According to a recent PricewaterhouseCoopers study, 48 percent of respondents said transparency of sustainability and compliance requirements built into day-to-day responsibilities would drive significant improvement into the supply chain. A company can identify, prioritize and then preemptively predict where risks may emerge with the right systems, thus enhancing supply chain sustainability overall.
The end goal of creating a transparent supply chain is important today. However, it takes time and dedication to achieve that objective. Listed below are four steps businesses can take to reach supply chain transparency, per a recent Deloitte study:
- Find and prioritize risks: Since manufacturers are globally connected these days, the number of potential risks is growing. However, the systems and software to mitigate these risks also exists, making it easier for companies to identify where potential supply chain challenges may emerge. Deloitte says the first step in the process is to figure out where risks may emerge and then rank them in order of importance. While any risk is not necessarily a good thing, companies will know which risks are more costly or damaging to their supply chain based on their industry. From there, they can be categorized into four different categories: macroeconomic, extended value chain, operational and functional.
- Risk prediction: Given the collected information and once risks have been identified and categorized, manufacturers must then map out all supply chain endpoints. While some companies may have operations in other corners of the world, others may be more regionally focused. The moral of the story, regardless of business size, is to create some type of visual representation of where the largest and smallest volume of product flows. For example, an area with a higher volume of flow may be more high risk, so companies can predict what risks may occur down the road if they already identified and categorized supply chain risks. This type of transparency mapping can help companies identify risks that may not have been realized in the first place, as well as filling in information gaps, or where visibility is limited in the supply chain.
- Closing transparency gaps: Once risks are identified and prioritized and transparency maps are created, manufacturers must then gather insight to help fill information gaps. Things like quick surveys can shed a massive amount of light onto various aspects of the supply chain. Asking employees who work close to different areas of production will likely have the most informed and up-to-date insight. Supply chain software can also enhance the closing of these gaps, as more comprehensive and robust systems shed further light onto areas of the supply chain, creating value for the manufacturer and supplier down the supply chain stream.
- Oversee and manage: Closing these information gaps is critical to transparency, but a self-sustaining supply chain must take things a step further and learn from any new information it unearthed. Once the aforementioned steps have been taken, a company must develop a strategy for oversight and managing risks down the road. Supply chain software plays a critical role here, as it can dramatically help tracking and information management in terms of risk mitigation. Manufacturers that have all important business information in a centralized location can manipulate data easier and predict risks down the road. Collaboration between different parties in the supply chain can help reduce risk quicker and cheaper. Improved transparency in the supply chain can help production improve and lower risk overall.