The Supply Chain Transparency Business Guide: Optimizing Profit & Purpose
Supply Chain Transparency Guide
- Supply chain transparency can enable your business to financially and operationally optimize your value chain.
- Reliable data from every supply chain tier, to the first/last mile, is the backbone of transparent supply chains, so you can gain visibility of your operations and disclose accurate reports to stakeholders.
- Select a highly dependable and interoperable supply chain transparency software, such as BanQu, to leverage the data you have and capture the data you need across your value chain.
In the dynamic landscape of modern commerce, where global markets converge with the ever-evolving demands of consumers, harmonizing profitability with purpose can be daunting. Whether it involves cost reduction, precise inventory forecasting, or regenerative sourcing, simultaneously growing your business and protecting people and the planet can feel like a Herculean task. To top it off, most companies – even the largest players – don’t know where their raw materials originate and who and what they impact.
Supply chain transparency – to the first/last mile – emerges as the keystone to optimizing your value chain while demonstrating your commitment to sustainability. This comprehensive guide will teach you what a transparent supply chain looks like, how it can directly boost your bottom line while enhancing ethical sourcing, and what solutions are available to help you get started. Let’s dive in!
What Is Supply Chain Transparency?
Achieving a truly transparent supply chain requires a clear view of every tier within it – from distribution and production to the sourcing of raw materials. Supply chain transparency cannot be accomplished without supply chain visibility. Still, the key distinction between the two is visibility is what you understand within your company, while transparency is what you share with people outside your company. In other words, supply chain transparency means disclosing to stakeholders, such as consumers, investors, regulators, or suppliers, your product's history, quality, and sustainability to build trust and accountability.
The level of supply chain transparency for your company (i.e., the information you choose to disclose) depends on your industry, business objectives, and regulatory requirements. Throughout the world, regulations are mandating more stringent supply chain disclosure standards, including the European Union’s Regulation on deforestation-free products (EUDR), The California Transparency in Supply Chains Act, and the United Kingdom’s and Australia’s Modern Slavery Acts. Examples of disclosure requirements include but are not limited to:
- The geo-located farms or plantations where commodities are cultivated.
- Efforts to identify, assess, address, and prevent modern slavery, child labor, and human trafficking.
- Certification status in your industry (e.g., Roundtable on Sustainable Palm Oil).
- The quality and durability of raw materials.
Gone are the days of greenwashing without consequence. Recent greenwashing scandals, such as ExxonMobil’s faux commitment to mitigating climate change and Nestle’s empty circularity claims, show that the age-old motto of “fake it till you make it” clearly won’t stand in today’s business landscape. Your company needs complete supply chain transparency with indisputable evidence of ethical sourcing – backed by verifiable, source-level data. Otherwise, you risk losing brand reputation, supply chain disruptions, and litigation – all of which will cost time and money.
The Business Benefits of Transparency in Supply Chains
Now that we’ve provided an overview of supply chain transparency, the question remains: how does it benefit your business? Below are five ways procurement transparency can boost profitability while reducing loss:
- Cost Reduction: Source-level transparency can unlock value across your supply chain – from informing suppliers of the quality of ingredients and materials to auditors of deforestation-free status. Additionally, The deeper the visibility you have of your supply chain, the greater opportunity you have for identifying inefficiencies and reducing input costs and post-harvest losses.
- Risk Mitigation: Transparent supply chains allow for early identification of potential disruptions, enabling proactive problem-solving and risk mitigation. With real-time data on each supply chain tier, you can swiftly respond to any bottlenecks, quality issues, or non-compliant practices.
- Elevated Brand Reputation: When companies prioritize transparency, they earn a trustworthy reputation amongst stakeholders. This enhanced brand image yields a multitude of benefits, such as lowering employee turnover, strengthening supplier relationships, garnering favor from investors and business partners, and ultimately developing greater customer loyalty. Remarkably, research indicates that a mere 5% boost in customer retention can lead to a substantial profit increase ranging from 25% to 95%.
- Premium Pricing: Businesses that can substantiate the environmental and social responsibility of their products, be it through practices like regenerative sourcing or fair labor, are positioned to command a premium in the market. A noteworthy study conducted by MIT Sloan School of Management revealed that consumers may be willing to invest an additional 2% to 10% in products originating from companies dedicated to supply chain transparency.
- Regulatory Compliance: From costly shipment seizures to reputational damage to time-consuming litigation, the consequences of failing to adhere to regulatory demands can be extensive and multifaceted. Supply chain transparency facilitates and streamlines compliance – such as incorporating a digital product passport – reducing the risk of fines and legal issues.
How to Improve Your Supply Chain’s Transparency
Establishing supply chain transparency is not a quick fix; it's a strategic process that demands time and resources in the short run. However, the long-term advantages are more than worth the investment, as outlined earlier. To help you embark on your procurement transparency journey, consider the following five tips:
Map every supply chain tier – to the first/last mile
A vast majority of global supply chains are opaque beyond tiers three or four. Also known as the supply chain “black box” (see Figure 1), many brands, traders, and distributors do not know beyond the processor- or aggregator-level, limiting the visibility and understanding of their supply chain. Mapping every supply chain tier, extending beyond your direct suppliers to the indirect suppliers involved in your value chain (such as the farmers or waste pickers at the source), unlocks opportunities to maximize efficiency, productivity, and profitability and minimize loss, cost, and fraud.
Digitize upstream suppliers & eliminate data silos
Data is king when it comes to supply chain transparency and optimization. By digitizing upstream suppliers, such as the cooperatives or buyback centers at the first/last mile, you can capture better data and automate time-consuming manual operations. This will allow you to gain insights into supplier operations for reducing costs, enhancing efficiency, and securing your supply. Additionally, your value chain may contain many disparate systems that can make it difficult to access a single source of truth for data-driven decisions. Implementing highly interoperable software that can integrate with any of your existing supply chain systems will reduce the risk of data inconsistencies so you can keep your operations running smoothly and sustainably.
Capture primary, transaction-based data
Relying on high-level, aggregated data, such as public records or shipping information, does not provide the granularity to keep your supply chain transparent. Collecting original, primary data from source to shelf – connected to the asset’s transaction history – ensures data integrity, verification of your final product's compliance, and security against fraud or unsubstantiated claims.
Immutable chain of custody – tied to ESG data
To convey your product's sustainability to consumers and regulators, you must track its journey from raw material sourcing to distribution, including transportation and transformations. This traceability data should also link to key ESG metrics, such as deforestation-free status and fair wages for farmers, to prove your final product was not made with uncertified or non-compliant practices. Choosing a blockchain-based traceability solution, such as BanQu, will ensure your data is tamper-proof and immutable, reducing fraud and allowing for swift detection of discrepancies.
Real-time tracking for accurate reports
A truly transparent supply chain hinges on the availability of real-time data, providing a live view of the flow of goods and who and what they impact. Traditional spot audits are no longer sufficient, often lacking the depth and timely information needed for a comprehensive understanding of your supply chain. By tracking procurement and ESG data as materials and ingredients progress through your supply chain, you can ensure the generation of accurate, up-to-date internal and external reports – boosting trustworthy transparency.
Implement a digital product passport
Forward-thinking companies that integrate a digital product passport are not only empowering consumers to make informed purchases but are also elevating their brand reputation. By sharing comprehensive information on product attributes like durability, sustainability, and recyclability through QR codes or NFC tags, you can improve customer loyalty by showcasing your brand's unwavering commitment to responsible sourcing. Moreover, this approach provides a distinctive product experience, setting your offerings apart in the marketplace.
Transparent Supply Chain Example
Cervecería Nacional serves as a prominent real-world illustration of supply chain transparency. In an effort to stimulate the local Ecuadorian economy, this major brewing company has introduced Nuestra Siembra, a sustainable beer brand exclusively sourced with local ingredients. Each Nuestra Siembra bottle features a QR code for consumers to scan, providing access to local sourcing metrics. These details include the number of farmers registered, kilos purchased, and provinces impacted, as well as information on the included ingredients. This proactive approach by Cervecería Nacional has not only cultivated trust among its consumer base but also contributed to the betterment of Ecuador.
BanQu - The Leading Supply Chain Transparency Software
To be successful in your procurement transparency initiatives, you will need reliable supply chain transparency software that can push and pull data upstream and downstream for 360-degree visibility. BanQu is a supply chain traceability SaaS that helps companies capture the supply and ESG data needed to financially and operationally optimize your value chain - while proving sustainable or compliant sourcing - all in one place.
Our platform is completely device- and industry-agnostic, so you can capture primary, real-time data down to the farm or landfill your product originates – tied to the transaction history and chain of custody. Additionally, our open API facilitates seamless interoperability with your existing supply chain systems – with GDPR-compliant data storage protected by blockchain technology. So you can leverage the data you have, capture the data you need, and share accurate reports with stakeholders. Schedule a call today to kickstart your supply chain transparency journey!