The crucial need for supply chain transparency in the logistics sector
In the wake of the coronavirus pandemic and reports about slave labour and human rights abuses; consumers are concerned about how their purchases impact their health, their communities, and the world at large. This is fuelling a trend of ‘conscious consumerism’, where people only want to affiliate themselves with brands that share their cultural and ideological values—particularly when it comes to ethics and sustainability issues.
As consumers’ appetite for brand transparency at local, national, and global levels is sharpening; this demands greater supply chain transparency to satisfy consumers’ interest in knowing where product materials were sourced, how the product was made, what values guided the production process, and more.
With companies compelled to develop and integrate transparency concerns into their products, services, and operations; this required them to both gain visibility into their supply chains and also disclose information to consumers.
In this article, we offer some clarity on the meaning of supply chain transparency, explain its importance to the logistics sector, and offer guidelines for implementing it into your business.
Defining supply chain transparency
We cannot talk about supply chain transparency without also explaining what supply chain visibility is. These two terms are often used interchangeably, however, they mean slightly different things.
While the term visibility focuses more on B2B data sharing within the supply chain to enable more effective collaboration, transactions processing, and problem-solving; the term transparency refers to the disclosure of information to parties within the supply chain and outside of it; such as with customers, prospects, stockholders, and regulatory agencies.
In other words, we could say that visibility is about gaining insight into the supply chain to drive greater efficiency, while transparency is about having accountability and ensuring that all regulatory, quality, safety, and ethical standards are met.
In essence, supply chain visibility and transparency are closely intertwined and interdependent—as you cannot have one without the other. For example, you can’t commit to sharing data that you don’t have visibility into. This means that, for companies to achieve transparency, they first need to put processes in place that would allow them to gain visibility into the supply chain—tracing materials and individual products from the point of origin to the manufacturer and the retailer.
Why supply chain transparency is important
By increasing supply chain transparency, companies can connect with consumers, build trust, achieve better visibility to all parts of the supply chain to drive improvements, and react faster and more effectively when problems occur.
While, in the past, the origins of a company’s products used to be pretty murky (and almost no one cared about it), today, the proliferation of technology, especially mobile devices, and the pervasive use of social media have heightened the risk of detectable company wrongdoings. It is now easier for them to be exposed to the public, news media, regulatory agencies, and nongovernmental organisations.
As a result, there have been numerous scandals over the last decade that have inflicted considerable damage on the reputation of companies. Some notable examples include slave labour in the Thai seafood industry, the deforestation in Malaysia and Indonesia, and the E. coli outbreak at Chipotle restaurants in 2015; where, due to a lack of supply chain visibility, the restaurant could not identify the source of the contamination.
These notorious fallouts have led to the release of new laws about transparency. These include the policing of conflict minerals (Dodd-Frank), forced labour (Australian and UK modern slavery acts and the California Transparency in Supply Chains Act), and food safety (U.S. Food Safety Modernization Act).
So, with companies under pressure from governments, consumers, NGOs, and other stakeholders to pull the curtain back on their supply chain, achieving transparency has never been more imperative than it is now. This is supported by the findings of an MIT study, which showed that consumers are willing to pay 2% to 10% more for products from companies that provide greater supply chain transparency.
Another survey by Sprout Social also found that:
- 85% of people say a business’ history of being transparent makes them more likely to give it a second chance after a bad experience.
- Nearly 9 in 10 people (85%) are more likely to stick by a business during a brand crisis if it has a history of being transparent.
- 89% of people say a business can regain their trust if it admits to a mistake and is transparent about the steps it will take to resolve the issue.
This means that as customers take a greater interest in the origins and authenticity of the things they buy, packaged goods companies need to provide consumers with tools to track provenance to build trust and credibility in their brand and avoid costly reputational risks.
How to achieve supply chain transparency in logistics
Transparency is a journey and it requires a multipronged approach. Initially, companies would need to make a fundamental shift in their mindset to understand and commit to supply chain transparency. Then, they would have to design new tracking methods, such as real-time networks, and introduce tools that enhance transparency and accountability across the supply chain.
Deloitte outlines a 4-step path to building supply chain transparency in any industry:
- Identifying and prioritising risk: Having in mind the sheer number of risks inherent in most supply chains today, it is easy to get overwhelmed by them. This is why it is important to determine which risks to focus on. Creating a comprehensive list at first and then gradually narrowing it down to specific high-priority areas is a great approach.
- Visualising risks: Once potential risks have been identified and prioritised, a productive next step is to visualise how your company’s products are flowing from one point to another. This type of visual representation reveals points of vulnerability where large volumes of products flow from particular suppliers into high-risk regions. By identifying and mapping the suppliers and business partners for a product or products, and isolating where visibility is most limited (“information gaps”), you can determine who might be able to help close those information gaps.
- Using transparency levers to close information gaps: After prioritising potential risk areas and highlighting information gaps, companies can use a number of transparency levers to help close those gaps.
- Managing and monitoring: Once a company settles on its approach to building a transparent supply chain, it is important to track and manage the resulting information. This could be done either through the use of simple spreadsheets containing different compliance and risk data; such as audit history, total spend, and geographic location; or through a more sophisticated, enterprise-wide system.
The role of Stoneridge in driving supply chain transparency
As we enter an era of increased public interest in supply chain transparency, it has never been more important for companies in the transportation industry to have access to accurate, real-time data; gaining increased visibility into everything, from fuel and freight expense to freight flows and capacity supply.
And, as companies’ commitment to their ethical promises, safety, and quality standards is being tested and scrutinised by the public, logistics organisations need to ensure that their drivers and fleets are following all necessary regulations to stay safe on the road. Otherwise, unethical and unsafe practices can not only reflect badly on the logistics company (and the companies that associate with said logistics company) but, worse, they can endanger lives and lead to serious accidents. And, often, potential breaches in driver hours’ regulations are a cause for concern within the logistics industry for this reason.
With achieving an optimal night’s sleep being an issue for long-haul drivers, as 27% sleep fewer than 6 hours a night and 34% say they have nodded-off while driving, adherence to driver hours regulations is vital to ensure drivers are well-rested and alert. Nearly 20% of deaths or serious injury on the roads are caused by drivers falling asleep at the wheel. If an accident like this were to involve a logistics vehicle, compliance and transparency that your company is being compliant would be essential to show that no unethical practises were taking place to have caused it. This is where tachographs, like the Stoneridge SE5000 Connekt, can be brought in to help with monitoring data surrounding driving time; guaranteeing that employers and drivers are staying compliant with Drivers’ Hours Regulations.
Our products can help companies better understand their broader transportation ecosystem and its impact on network operations—driving improvements across the board and ensuring that all the data is connected and accessible. For instance, our download tools, like the digiDL, allow the easy downloading of the drivers’ card data collected on their tachograph. Giving you the ability to manage real-time tachograph data from all vehicles in your fleet—no matter where they are in the world.
Also, to help you stay compliant, OPTAC3 Tachograph Analysis Software analyses the data collected and downloaded, and automatically checks the tachograph information against legislation—saving you time and hassle, and removing the risk of human error in identifying any non-compliance.
In short, with Stoneridge, you can collect and manage your fleet data to drive efficiencies with your supply chain, improve your bottom-line, adhere to key logistics regulations, and cultivate loyalty and positive brand perception through transparency.