Supply chain visibility and transparency

Supply chain visibility and transparency

Natalia Figas
December 30, 2020  | 4 min read

In 1906 an era of constant improvement and quality control started. Supply chain visibility and transparency are not only buzzwords but impactful ideas that change the world we live in every day.

Supply chain visibility and transparency are separate but complementary ideas. By acquiring data visibility creates the foundations for transparency, giving a company the possibility to run an ethical business. However, there is a fundamental difference between them – they focus on different information.

Visibility means to automatically gather and distribute essential data in real-time or had happened in the past with goods and shipments. The ideal situation is when the processed data goes to every stakeholder within the supply chain.

The means to acquire full visibility are track and trace technologies such as IoT devices, shipment software systems, codes, analytical tools etc.

And the outcome of visibility should be information needed to:

  • make progress (e.g., to ship faster),
  • balance things (e.g., to optimise costs of reverse logistics),
  • share precise ETA’s with customers,
  • get notifications about unwanted events (e.g., to get alerts when a fragile cargo falls from a pallet)
  • or eliminate critical issues (e.g., to know when production machinery has to be serviced).

On the other hand, supply chain transparency focuses on legal and ethical supply chain aspects. The essential part of transparency is to communicate both internally and externally about fair practices.

Supply chain visibility lets you see a particular activity with access to information at selected nodes. Transparency means you can see through all the nodes and evaluate the entire supply chain. Visibility assists market efficiency. Transparency assists strategy fulfilment and social responsibility.
- Dr Darren Prokop, Professor of Logistics College of Business & Public Policy University of Alaska Anchorage

How did transparency appear at all?

According to Deloitte, the first drivers for supply chain transparency were The Food and Drug Act and the Meat Inspection Act form 1906. Both jurisdictions started to obligate the US companies to prevent consumers from buying misbranded foods, drinks and drugs and eat meat packed in unsanitary conditions.

But not only the government have had companies' honesty on the radar.

The economic reasons to be transparent

Slowly, transparency have become a focus area for everyone. Consumers, NGOs, business partners, regulatory agencies and other entities in the supply chain are demanding an examination of things such as human rights, child labour, CSR policies, food fraud, animal welfare, sustainable sources or many others.

If companies did not meet the demands, they would lose clients clients, money and trust.

A research conducted by Cone Communications showed that together with increased transparency goes increased trust and positive image. The other important conclusion is that clients declare more loyalty to transparent brands.

csrexpectations

Source: 2017 Cone Communications CSR Study

Another research conducted by MIT Sloan School of Management proved that consumers may be willing to pay 2% to 10% more for goods from transparent companies (source).

In other words, those who do not share information about important production, shipment, processing or legal factors with their stakeholders, are regarded as less trustworthy and as a result they are less competitive.

The economic reason behind visibility

In the time of COVID-19, supply chain visibility has proved essential to weathering the crisis. However, a research done by Capgemini shows that only 90 of the 1,000 companies have the necessary levels of supply chain visibility (source).

And yet supply chain visibility is profitable too. Having visibility of your supply chain allows you to reduce costs, optimise processes, increase efficiency and, of course, increase transparency. How?

Real-time information about what is happening at each delivery point is the ability to eliminate various disruptions such as transportation failures and delays.

With location tracking devices integrated with a platform, you can trace the shipment route and react when you see any disturbing event.

trustedglobal_platform

Furthermore, IoT devices equipped with smart sensors alert you whenever the environment of the transported goods is inappropriate, e.g., when deep-frozen food is transported at a too high a temperature.

Other technologies, such as RFID, barcodes or QR codes, speed up the process of receiving goods into the warehouse and their correct identification, thanks to which you avoid costly organisational mistakes.

However, the list of benefits that comes from having supply chain visibility is much longer.

If you want your company to be transparent, you should be able to verify the reliability of the entities you work with. Blockchain technology is one of the options you can choose to control your business partners.

In the simplest terms, blockchain creates a timeline with successive events. By accurately recording these events, you know if your standards have been violated at any time. You can verify the details of production, shipping and distribution any time you need.

An example of use is the Italian winery Cantina Volpone, which provides its customers with fully transparent information about each bottle of wine purchased. It is also a smart way to boost customers’ satisfaction.

blockchain-vinery

Source: https://placidovolpone.it/blockchain-vini/

In “The tech compendium on supply chain visibility”, we devoted an entire chapter to describe major advantages of having visibility solutions at your company. Click here to read about:

  • Avoiding spoilage and quality loss
  • Preventing theft attempts
  • Predicting delays
  • Evaluation of logistics services vendors
  • Spotting inefficiencies and opportunities for improvement
  • Better customer experience with lower support cost

Levers of visibility and transparency

representative transparency levers

Source: Deloitte University Press | DUPress.com

The graph above shows what information you need to gain visibility and – as a result – have proper data to increase transparency. However, please remember that transparency means not only setting and verifying standards, but also sharing the knowledge about it with your stakeholders and reacting whenever needed.

Elements that will leverage visibility and transparency are:

  • Third-party services subscriptions to acquire due diligence data and secure alerts
  • Surveying your closest suppliers to have the knowledge about their practices and ethics
  • Certifications proper for your industry to prove your standards
  • Constant communication with frontline supplier’s employees to be aware of any disruptions
  • Analytic tools to derive new insights
  • Marking tools to product origin control
  • Real-time monitoring tools to actively react and optimise your supply chain
  • Collaboration settled with other important players

There are many ways to show transparency.

Great examples of transparent companies are Patagonia with its clear CSR policy and progress reports, One Degree Organic Foods, with its simple batch number tracker for any product they sell or Nike, with its manufacturing map delivering details on any manufacturer they collaborate with.

The summary

Supply chain visibility and transparency go hand in hand. Both ideas are economically reasonable and deliver great value for company and supply chain stakeholders such as government, clients or business partners.

One of the significant impacts they have on our world is that they create the culture of constant improvement, high quality and simple trust between supply chain links.

 

What value supply chain visibility adds to the business? Besides that it lays the foundations for agile management there are two more important benefits. Read about them here

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