What is Supply Chain Transparency?
Supply chain transparency is a relatively new concept that began gaining traction over the last decade. Achieving supply chain transparency requires two things- knowing the details of your upward supply chain and sharing that information both internally and externally. The concept applies to a wide range of industries and has been called on to solve global issues such as child labor and animal welfare. Transparency can also boost a company’s reputation and gain the trust of consumers and shareholders. Other benefits include improved efficiency, better quality control, and increased value to consumers.
1. Create a Policy
A transparency policy outlines standards for suppliers to meet and defines the goals a company hopes to achieve. To create a policy, first decide what specific issue(s) supply chain transparency will be addressing. For example:
- Is this a response to consumer outcry for transparency?
- Do you need to address supply shortages or specific vendor issues?
- Is this linked to sustainability efforts?
Use this information to help create the standards and expectations to be included in the policy. Decide if the transparency policy will be made public or kept as an internal resource.
2. Outline Your Supply Chain
Create a detailed list of all companies in your upward supply chain. Inform the supply chain about transparency efforts early in the process to encourage collaboration. It is important to evaluate your relationship with these suppliers along with their other business relationships and use that information to decide what supply chain details will be made public. The published list of suppliers should include company names and addresses. Details on the specific commodities that companies provide may need to be withheld depending on the policies of either company.
3. Audit Suppliers
Establish a procedure to verify that upward supply chain partners are following the transparency policy along with local and international laws. On-site audits at plants or factories are important to ensure compliance and should be completed by a third-party service provider. Be sure to define what steps will be taken if a supplier does not agree with or fails to adhere to the transparency policy. These steps are unique to each company, can vary based on the offense, and include actions like probationary periods or zero-tolerance policies. Ensure your supply chain partners are given ample time to understand and implement your standards prior to beginning the auditing process.
The need to better regulate operations, coupled with consumer support of the concept, has caused supply chain transparency to become critical for some businesses. As the concept continues to gain popularity many industries will find themselves implementing some degree of visibility or transparency.