Business supply chains can span states, countries, continents, and even the entire globe. From raw material sourcing to manufacturing to end-use, organizations are responsible for every step in their product’s supply chain.
But as the world changes, so do supply chain demands. These demands are high, and increased supply chain disruptions only add more pressure on businesses. This leaves many suppliers with unanswered questions.
From “What are the consequences of global conflicts?” to “What is payroll processing affecting with regards to labor shortage issues?” These questions aren’t going away. So how can businesses take better control of their supply chains?
The end-to-end management of supply chains is difficult without precise and real-time data. Increased supply chain visibility takes this data and uses it to optimize a product’s journey from raw materials to end-use.
Traceability and transparency are vital components of supply chain visibility, but it’s easy to mistake one for the other or even combine them into one slightly muddled concept.
In this article, we’ll define supply chain traceability and transparency and talk about the benefits of supply chain visibility on organizations and consumers.
What is supply chain traceability?
Supply chain traceability follows a product from start to finish. Right from the very beginning, when the product is in a state of raw material, to reaching the recipient at the other end. This includes:
- Raw material sourcing.
- Manufacturing.
- The labor required.
- Transportation.
- Regulations across various regions.
- Every port of call the product makes on its journey to the consumer.
Supply chain traceability provides real-time data on the sourcing, labor, and destination of every part, component, and product in the supply chain.
Why is it important?
To organizations
Having every part of the product life cycle tracked accurately and in real-time allows organizations better control over their supply chains.
If a stakeholder wishes to know what stage of manufacturing their product is at, that data is available. If there are issues along the supply chain, they can be located and dealt with.
Over the long term, traceability creates a more efficient, organized, and compliant supply chain.
To consumers
For consumers, a lack of supply chain traceability can cause unexpected issues.
- Safety standards slipping.
- Risk of product malfunction or toxicity.
- Products sourced unethically.
- Shortages of essential goods.
- Increased costs of essential goods.
Take the 2022 USA baby formula shortage as an example. In a tragic manufacturing failure, some batches of baby formula were contaminated with dangerous bacteria. It’s estimated that this failure led to five hospitalizations and two deaths in infants who consumed the formula.
The company responsible, Abbott Nutrition, recalled the contaminated batches. Coupled with supply chain stressors from the COVID-19 pandemic, baby formula shortages affected parents nationwide.
Forbes reported that:
“As with many products, baby formula has seen a shortage of the key ingredient—cow’s milk—which has seen a surge in demand both in the US and globally during the pandemic. There have also been shortages in packaging material, as well as labor to manufacture and distribute the product.”
Forbes also stated supply chain visibility as one of the main ways this issue could’ve been avoided.
This is just one example of how loosely controlled supply chains can lead to dangerous and even lethal contamination and shortages of vital supplies.
What is supply chain transparency?
Supply chain transparency is how stakeholders disclose and communicate important information across the supply chain. This includes sharing data amongst organizations, with regulatory agencies, and with consumers.
Supply chain transparency shines a light on the entire supply chain – from raw materials down to end-use. Where traceability tracks and records the product life cycle, transparency is about communicating that data to stakeholders.
Data like:
- Raw ingredients or product components.
- Where ingredients and components are sourced.
- Storage temperatures.
- Who precisely has handled the product.
- Where in the supply chain the product is.
- Transportation times.
- Working conditions.
The ability to record and share this data is essential to solving supply chain problems like compliance, reliability, ethical responsibility, and transparency.
Why is it important?
To organizations
Having high supply chain transparency allows stakeholders access to the data they need across the product life cycle. This means better organization and awareness across supply chains.
Transparency creates better trust between organizations since high visibility and data sharing keep everyone accountable. Any bad actors along the supply chain can be quickly weeded out.
Increased transparency also allows better compliance across global operations. Since every country’s laws and regulations vary, it can be difficult for organizations to keep on top of the nitty gritty. Supply chain transparency keeps regulation at the forefront.
To consumers
A recent study by the Food Industry Association and NielsonIQ on the subject of transparency in food manufacturing found that most consumers valued some form of transparency throughout the food supply chain.
The study included consumer concerns about ingredient sourcing, labor practices, and environmental sustainability–all things that can be improved by better supply chain transparency.
Benefits of supply chain traceability and transparency
Better organization
The main priority of supply chain traceability and transparency is to improve the overall supply chain organization.
Traceability creates accurate records of product data throughout the supply chain, and transparency means all stakeholders have access to that data. If someone needs an up-to-date record of product components, manufacturing timelines, or logistics, they will be readily available.
Without supply chain visibility, you’re essentially navigating a complicated web of systems without any sort of guide. Any minor disruption can cause lost time, resources, trust, and money. Any mistake can mean product delays, contamination, and unhappy customers.
With better supply chain organization, these disruptions happen a lot less.
Decreased costs
This increase in organization leads to less wastage, faster turnaround, and better financial management.
Having accurate and real-time supply chain analytics allows businesses to assess their supply chains for waste and inefficiency. Once these problems have been identified, it’s much easier to come up with a cost-saving solution.
Decreased waiting times
Disruptions can slow down a product’s journey, and transparency allows companies to analyze every step in their supply chain for lost time.
One example is the sportswear company Nike, which recently became a “changemaker” for its innovative solutions to dealing with increasing supply chain disruptions.
According to Retail Week, in 2019, they overhauled their entire supply chain process by investing heavily in automation. In doing so, they cut their order lead times from 60 days to just 10. They also cut production steps by 30% and labor by 50%.
Nike essentially saw the writing on the wall in terms of global unrest and took steps to shorten its supply chain.
More trust between businesses
A supply chain only works as well as its links. Each organization in the chain has to uphold its end of the bargain and trust that all the other organizations do the same.
When roadblocks appear and mistakes happen, organizations can lose trust in each other. Collaborations can fall apart.
Supply chain transparency and traceability allow stakeholders total visibility over the entire chain. If a party isn’t pulling its weight, the issue can be located. Genuine mistakes can be rectified without causing too much bad blood, and bad actors can be exposed.
More consumer trust
Increased supply chain visibility gives consumers more control.
Take order tracking, for example–an added bonus of supply chain visibility. We’d all like to spend less time waiting at home all day only for our packages to show up the moment we anxiously step into the shower at 9 p.m.
Most customers claim they would return to a brand that offered order tracking. It’s just one way that supply chain visibility helps the consumer, which in turn helps create customer loyalty for businesses. As well as practical considerations like order tracking, consumer trust comes from companies tackling social responsibility.
Consumer habits are changing. More than ever, consumers look for sustainability and social responsibility from businesses.
Reducing carbon footprint
More supply chain efficiency means less transportation, which means businesses can decrease their carbon footprint. Supply chain traceability also creates better solutions to sustainability, like eco-friendly packaging and ethically sourced materials.
Helping customers shop sustainably
Better visibility can cut supply chain costs, allowing businesses to transfer those savings straight on to the customer. Since a major roadblock for consumers wishing to shop sustainably is the “green premium,” this could allow more of us to focus on eco-friendly purchasing.
Ethical considerations
In the internet age, news about terrible labor conditions and environmental damage are unfortunately common.
The good news is that consumers care about these things, and they impact our purchasing decisions.
An example of this is the many controversies surrounding Nestle. Nestlé has mired itself in scandal as far back as 1974 with its shady practices concerning baby formula. More recently, Nestlé has been accused of causing draughts to vulnerable communities via water pumping, as well as the exploitation of child slave labor on its cacao plantations.
Nestlé has suffered multiple boycotts over the last 40 years, and today, Nestlé’s brand suffers from increasing consumer awareness.
Supply chain visibility gives consumers more power to support companies that take part in ethical business practices. Customers reward companies that are eco-friendly and socially aware. They are discerning and ask questions like “What does on demand pay mean?” or “What does Fairtrade actually mean?” to ensure workers, customers, and the planet are treated fairly.
In turn, companies that cause lasting damage to communities and the planet are pressured to change for the better.
Traceability and transparency: Vital elements in the modern supply chain
Businesses should strive for supply chain traceability and transparency. In this modern, global age, consumers are more and more aware of supply chain issues and the importance of traceability and transparency.
Organizations benefit from supply chain visibility through increased productivity, efficiency, and profit. And consumers can gain more control over their purchases, build better relationships with brands, and can ensure more sustainable habits.
