Supply Chain Transparency: Why It Matters More Than Ever
From evermore demanding regulations to growing concerns about the ethical, safety and environmental impact of your suppliers, visibility across your supply chain—and the capacity to disclose critical data—is an increasingly important part of doing business.
Transparency consists of two distinct pillars, argues Alexis Bateman, who directs MIT Sustainable Supply Chains at the MIT Center for Transportation and Logistics:
Visibility—The ability to accurately and completely gather all important information from across all aspects of your supply chain.
Disclosure: The ability to share that information as needed, both within and beyond your enterprise.
The types of data into which you was visibility, and the level of detail required, will vary from industry to industry and business to business. It can range from that which is strictly required to meet regulatory requirements, all the way to voluntary standards you set to satisfy your own corporate values as well as to meet and exceed those of your customers.
Understand the risks and rewards of disclosure
Obviously, disclosure means accountability, and you must weigh decisions with care. However, there are an increasing number of good business reasons to move toward increased disclosure, according to Bateman.
Recruiting and retaining talent. Companies committed to ethical standards—and willing to back up their claims with transparent disclosure—are having increased success attracting top talent, especially among recent grads. This companies also tend to have lower employee turnover.
Increased investment. The amount of capital raised for ethical, or impact, investing is increasing. Such investors require increased disclosure of critical supply chain data. In return, business can gain increased access to vital capital.
Enhanced sales. While studies are still ongoing, it is possible that, done right, transparency and disclosure can have a positive impact on sales and customer loyalty.
Conduct a gap assessment
The road to transparency begins with what Bateman calls a “materiality assessment.” This involves defining the minimum data you should expect from your suppliers—and determining what information is already available to you.
Once this is complete, you can more easily define the gaps and how you can fill them.
Decide what to disclose
Disclosure of certain data is pre-determined by existing regulations. In other cases, disclosure is at your discretion. Therefore, you should need to clearly who should get access to which data, and the circumstances under which you want to grant access to these audiences.
Obviously, you must take into account concerns about security and/or proprietary concerns. You also must remember that you will face accountability for the data you do voluntarily disclose.
In short, this is a decision that must involved not only supply chain managers, but also your executives and marketing teams, since a great deal is potentially at stake. However, the potential rewards are increasingly worth the effort.