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transparency

The Definition of Transparency

As companies mature and the market changes, our understanding of crucial operating components of any industry has also grown. Supply chain transparency, in particular, has come a long way over the past twenty years. Transparency within the supply chain has gone from an unrecognized concept to a focus item for the C-Suite across a vast number of companies and industries. Given the current state of the market, it’s no small surprise either.

So in order to begin understanding transparency in the supply chain, we first need to define it.

Many, if not all, companies are facing increasing pressure from governments, consumers, non-profit / activist groups, and stakeholders to provide more information about their supply chain. Failure to do so could mean some serious damage to the company’s reputation. Slave or forced labor conditions, health and safety violations, animal exploitation, and child labor are all becoming hot button topics of the growing consumer conscience. While the reasons for explaining a higher need for transparency are clear, what is less clear is how to get there. Some companies are struggling to make a meaningful change to their operations to provide the much-needed levels of transparency.

As it is with most problems there is a lack of a clear and concise definition, according to an MIT study which conducted a survey of the apparel industry only to find wildly different results. So in order to begin understanding transparency in the supply chain, we first need to define it.

Understanding the Need Transparency

At its core, supply chain transparency is understanding what’s happening within the supply chain and being able to communicate that knowledge both within and outside the organization.

As we mentioned earlier, there is an increase in customer demand for insight into the supply chain, but it’s not without benefit. The researchers at the MIT Sloan School of Management found that consumers are willing to pay between 2 and 10 percent more for products produced by companies that have better supply chain visibility. The study showed that consumers place a higher value in a company that can prove the ethical treatment of their workers. What’s more is that this growing consumer base is seeking more information about product ingredients and materials, where the product is coming from, and the conditions in which it was produced.

As the demand for visibility continues to increase, so too will the potential fallout for companies that fail to provide it.

As the demand for visibility continues to increase, so too will the potential fallout for companies that fail to provide it. Over the last decade, there have been a number of scandals that have had a significant detrimental impact on company image and reputation. Slave labor in the Thai seafood industry and deforestation in Malaysia and Indonesia are ample examples of this.

The backlash created from these scandals has forced the creation of new transparency laws around the world. Australia the UK have created new regulations to combat forced labor. The state of California has also created supply chain transparency laws (California Transparency in Supply Chains Act.) The U.S. Food Safety Modernization Act is targeting food safety and ingredient fraud. There are also further regulations to come from the Netherlands and Switzerland, with other countries to follow suit.

What this means for companies is that a lack of supply chain transparency can stop operations dead in their tracks.

What this means for companies is that a lack of supply chain transparency can stop operations dead in their tracks. Something as simple as missing origin documents could cause a shipment to be either held up or even turned away at ports which can result in a costly delay throughout the entire supply chain.

So Why Aren’t All Companies on Board?

You would think that with the new levels of consumer consciousness and the growing global regulations that all companies would be scrambling to build transparency into their supply chains. Yet, there are many companies that are either slow to act or not act at all.

One reason for the delay is that the supply chain itself was never designed to allow for transparency. Manufacturers and suppliers alike fear to expose their sources as they might lose the edge against their competition. Another explanation for being slow to act is inaccurate data coming from upstream, assuming there is data to be had at all. Lastly, there’s also considerable concern about the ROI for investing in supply chain transparency.

Despite the challenges, there are plenty of reasons to get on board with supply chain transparency.

The Benefits of Supply Chain Transparency

The returns gained from efforts made on improving supply chain transparency will vary by business model and industry but overall there are a number of benefits that are applicable to most companies.

One of the most straightforward benefits is that increased transparency means keeping in compliance with the new regulations that are being enforced. Operational risks drop as a result as companies no longer have to worry about being able to get freight through customs.

There are also considerable benefits to a company image that come with higher levels of visibility. Consumer conscience is a huge market factor right now. Customers are happy knowing that their products are made with care and concern towards the environment and the people working to make their products. As a result, they’re willing to pay more, which can help offset potential higher supply chain costs. Additionally, consumer trust and satisfaction also rise, which creates stronger brand loyalty and a larger customer base.

Better visibility means better, more actionable data, which in turn can help drive a company’s growth and profitability.

Of course, there are also operational benefits to be had by utilizing a highly visible supply chain. Better visibility means better, more actionable data, which in turn can help drive a company’s growth and profitability. That data also highlights areas of improvement, meaning a company can run leaner, cleaner, and a whole lot greener.

This isn’t a trend in the sense that we’ll see it fall out of fashion any time soon. Supply chain transparency is becoming an industry standard and will continue to flourish. If your company isn’t working towards transparency, it might be time to get started. For more information on how BlueGrace can help give you the visibility you need to gain efficiency, feel free to contact us at 800.MY.SHIPPING or fill out the form below:

Survey Says: Visibility is the Main Goal

Digital supply chains are nothing new as far as the headlines are concerned. There is a lot of promise and potential for the new technology in terms of efficiency and easier adaptation to other advancements and solutions. Yet even with the knowledge of the many benefits associated with digital supply networks (DSN), many companies are only now beginning to embrace it.  

According to information from a new study, there is still a disconnect between the opinion of the digital supply chain and the actual implementation of it.  

The survey conducted by Deloitte and MAPI, included more than 200 different manufacturing organizations. They found that a little over half of the respondents believe that their investment and adoption of DSN or a digital supply chain solution maturity level is ‘above average’ when compared to their competitors. Yet of those respondents only 28 percent have actually started to implement their solutions.  

Visibility is the Main Goal 

Transparency represents one of the biggest potentials for efficiency gain in the industry.

Above all else, the survey shows the main reason why manufacturers are looking into a digital supply network; end to end transparency. Transparency represents one of the biggest potentials for efficiency gain in the industry. The survey also shows that of the respondents, only 6 percent have a process in place where every member of the organization can see everyone else’s data.   

“Stephen Laaper, principal, Deloitte Consulting LLP and co-author of the study, said: While enthusiasm is high and manufacturers realize the benefits of Digital Supply Networks, many companies struggle to identify the right technology landscape which will provide the most value when they are approaching a digital shift,” according to an article from The Manufacturer 

“As a result, many hold off with key aspects of their transformation, which in turn puts their transformation at too slow a place to avoid disruption,” Mr Laaper added. 

Understand the Impact and Value of DSNs 

Many industry executives believe that DSNs offer several advantages over the traditional, linear, supply chain but they don’t believe that implementation of this technology will have any significant or ‘game-changing’ impact. 56 percent of the respondents said that they believe that a digital supply chain would provide significant benefit to their company.  

While visibility is the main goal of DSN implementation, speed is another factory that manufacturers are interested in.

While visibility is the main goal of DSN implementation, speed is another factory that manufacturers are interested in. Over half of the respondents, 52 percent, cited a dramatic reduction in time needed to make strategic decisions as their top reason for implementation. 43 percent of respondents said they are looking for an optimization and efficiency boost. 

Digital supply chains and DSNs also offer an array of financial benefits that are of interest to manufacturers including but not limited to, increased sales efficiency, lower operating costs, and better pricing and margins.   

Challenges for Manufacturers 

Benefits of DNS are a draw for manufacturers, but implementation might be easier said than done. Talent in the industry will present a challenge for DNS implementation, both in finding new talent capable of working with the technology and training existing employees to work with it. This represents the top challenge for 30 percent of the survey respondents.  

Change, believe it or not, is another fairly substantial obstacle towards implementing digital solutions. For an industry that has remained more or less the same over the past several decades, over a third of those that responded (37 percent) said that overcoming that resistance to change would be the greatest challenge to a successful DNS implementation.  

All companies operate differently, thus their DSN implementations carry unique challenges based on the existing infrastructure, talent base, culture and technological requirements.

“John Miller, council director at MAPI, said: There is no one way to deploy a DSN. All companies operate differently, thus their DSN implementations carry unique challenges based on the existing infrastructure, talent base, culture and technological requirements.” 

As with any digitally based technology, cybersecurity will always be a concern, especially in the wake of the DDOS attacks and cyber virus attacks that hit major shipping industries last year. A fifth of the respondents said that data security risks are the reason they are reluctant to provide information to outside suppliers, which is crucial for many DNS systems. While blockchain technology might help to assuage these concerns, the technology is still too new for many manufacturers to consider at this stage.  

The Road Ahead 

There are a number of obstacles on the road for an industry-wide embrace of a digital supply chain. While some companies are starting to get their feet wet, there are many that are still hesitant to take the plunge. The survey shows that many executives can see the benefits of a DNS that can improve their business as a whole but are still nervous about the new technology.  

There is a cautionary tale to be told in this, according to MAPI’s John Miller. “Companies that are too conservative in their approach may wait too long before finally implementing initiatives that are too large and complex,” Miller said.  

“In the end, these companies risk being late to the game and implementing solutions whose value is hard to measure because of either the time it takes to show an improvement or the overall scale of the implementation.” 

The industry is changing, there’s no doubt about. The waves of disruptive technology are not only coming, but they are starting to pick up speed with how quickly they are devised, created, implemented, and revised.

The industry is changing, there’s no doubt about. The waves of disruptive technology are not only coming, but they are starting to pick up speed with how quickly they are devised, created, implemented, and revised. This is a welcome breath of fresh air for the industry, that has largely remained unchanged throughout the decades. Yet, while we can see the change as a good thing indeed, adapting to those changes will ultimately be one of the most difficult challenges for industry players. 

Determining which path to take will be an undertaking for sure, but one that has a high payoff in the end.

Getting a Head Start in the Tech Race

Companies that fail to embrace this new digital era will find themselves outpaced and outdated before too long, while companies that take the initiative now will have a head start in the tech race to come. BlueGrace Logistics offers complete, customized transportation management solutions that provide clients with the bandwidth to create transparency, operate efficiently, and drive direct cost reductions. For more information on how we can help give you the visibility you need to gain efficiency, feel free to contact us using the form below: