Supply chain transparency remains a hot industry topic, which is why we created this Transparent Tuesday series. The topic covers a wide breadth of issues, and transparency projects are often associated with sustainability measures. However, initiatives such as cutting CO2 emissions, cracking down on poor working conditions or promoting the use of renewable energy sources are tough to achieve unless there is some level of transparency present across the entire value chain. Furthermore, risk aversion becomes guess work at best if opaqueness dominates the majority of processes and blankets supplier networks.
That being said, it becomes clear that this is not a chicken or egg dilemma – without transparency, expecting to fully achieve supply chain sustainability goals is unrealistic, and a company exposes itself to a plethora of risks. I would argue, if a company wants a sustainable supply chain it must first make significant strides toward more transparency across its network. This does not mean a company must publish a full list of all suppliers or reveal trade secrets, but for example, it must be able to produce this list of suppliers. Knowing your network is a great first step toward achieving transparency. I know this is easier said than done. I get that comment on almost every transparency piece I write. However, I believe it can be done. The following four “T’s” represent key aspects to the creation of transparent supply chain operations.
If you are a supply chain manager contemplating a transparency project, it is important to have top decision-makers on board. Transparent operations must be embedded in the core values of the company and there should be a recognized need in this area. In the end, supply chain transparency projects will cost money and time, and without the support from company leaders, there will be no budget. Everyone must be on board and committed to shedding more light on operating processes, both internal and external. The bottom line, the topic needs traction within the organization in order for a project to be successful.
The topic of trust applies to both internal operations as well as the external network of suppliers. On the internal side, it refers to interdepartmental relationships. If a production manager has zero trust in the purchasing department’s ability to order the right parts, relationships will be strained. A great way to develop cross-functional trust is for management to ensure all departments within the supply chain are working toward the same organizational goals. Transparency can be increased if all parties involved are working together in one actionable plan. A healthy team atmosphere will help pave a smooth road toward transparency.
When looking at external relationships, establishing trust with suppliers is key to increasing transparency. Trust must flow both ways. A supplier must be willing to have its buyers visit its facilities. Buyers must convey interest in their supplier base and provide incentives for compliance to core company values. Healthy relationships are the key to increasing transparency in supply chains, and as we know from our personal lives, trust plays a key role.
Training programs also serve as an excellent method to increasing transparency within a supplier network. Companies cannot expect their suppliers to act a certain way if they do not communicate these desired behaviors. But training goes beyond simply communicating their preferred actions and results. It is a hands-on approach to developing skills and best-practice processes. One way to build on the above mentioned trust factor is sharing knowledge through training.
A first-rate example of such a training program was published last year by Nestle as part of their efforts to clean up the seafood industry in Thailand. The company set several objectives to combat forced labor and laid out an action plan to reach those objectives. The action plan includes the creation of a “demonstration boat” or “university” where boat owners are instructed on best practice fishing behaviors and fair working standards. This hands-on training method allows Nestle to have a better understanding of where their products and raw materials originate, and can help lead to more sustainable business relationships in the long run. It will also help the company avoid future scandals, thus mitigating a significant risk. These types of training programs show that the topics of supply chain transparency and sustainability have traction within an organization.
I saved the best and perhaps most important topic for last. This “T” for technology leaves supply chain managers with few excuses if a company is caught in a supplier scandal. Tracking technology is available and highly sophisticated. It really comes down to traction again – is a company willing to invest in available technology to enable the tracing of raw materials along its supply chain? With today’s consumers demanding more information regarding the roots of their latest purchase, the answer should be yes. We have covered several of these tracing tools in the past, but examples include sourcemap, and even in-house applications such as Frosta’s solution I presented in my previous Transparent Tuesday article.
But transparency is much more than traceability. For example, today’s connected society allows for a much more detailed vetting process during the supplier selection phase. Electronic databases filled with supplier data are popping up in social media type settings where buyers can meet suppliers and obtain detailed performance information. Furthermore, today’s available technology can lead to more trust and better training programs as buyers halfway across the world can connect with their suppliers.
These four T’s can be used to increase transparency along the value chain. It is this newfound transparency that will allow companies to reach their sustainability and risk mitigation goals. Companies that are quick to jump onboard and commit to the latest C02 reduction programs had better understand the amount of transparency required to reach their goals. It is one thing to reduce in-house emissions. It is a whole different ballgame to try and convince suppliers to do the same. However, embedding the topic into the company’s core values, creating an atmosphere of trust, implementing training programs and the right technology will all help companies reach their sustainability goals as the level of transparency increases.
What tips do you have for creating transparency across the value chain?