The growing discussion around supply chain transparency has been spurred by multiple factors, including labor and human rights abuses, product recalls, food contamination, climate change, and more recently, the global supply chain crisis.
Not only will a transparent supply chain help address these wider issues, but it can also provide several benefits to the company. The increased clarity reveals opportunities for continuous improvements, strengthens supplier relationships, and earns more customer loyalty and trust in the company.
What is supply chain transparency?
Supply chain transparency is when a company understands where and how its inventory is made and is able to communicate this to its external stakeholders.
The details of supply chain transparency are different for every company, but should always be founded on reliable data and a certain level of disclosure. For example, a company can practice transparency by communicating the following supply chain information:
- Quality control practices
- Workplace safety standards
- Fair labor practices
- Material sourcing practices
- Environmental impact and sustainability measures
- Social responsibility
- Energy consumption
Supply chain transparency vs. supply chain visibility
Supply chain transparency and supply chain visibility are two concepts that are naturally often confused with one another.
While both aim to add clarity to the supply chain process, the main difference is that supply chain transparency is intended for external parties, and visibility is for internal stakeholders.
Supply chain visibility is the company’s ability to track all the raw materials, components, and finished goods as they move along the supply chain, usually through an inventory management system like QuickBooks Enterprise.
The purpose of supply chain visibility is to help teams access useful data that improves decision-making for a more efficient supply chain. Supply chain visibility is what a company is actually able to know, and the goal is to get as close to 100% visibility as possible.
In contrast, supply chain transparency is what a company knows and decides to share with external stakeholders. Rather than providing information to benefit operations, transparency is more valued by customers and potential partners.
Supply chain transparency is only possible with supply chain visibility. When used in combination, the two can help strengthen both a company’s operations and position in the market.
Why customers think supply chain transparency is important
Instead of just looking for the lowest price or greatest convenience, customers also weigh a brand’s commitment to quality, sustainability, and efforts toward building a better work culture. Customers make their purchasing decision not just for the end product but as a way to support companies that align with their own values.
By shedding more light on your sourcing and production practices, it becomes easier for customers to trust your company and its products.
5 Benefits of supply chain transparency
The shift to a more transparent supply chain management requires commitment and possibly an overhaul of certain steps in your operations. However, in the long run, the benefits transparency creates within your company make it well worth the effort.
Customer trust and loyalty
A recent study by MIT Sloan reveals that “increasing supply chain visibility always strengthens consumer trust.” Knowing more about where and how a product was made can be the key differentiator that draws customers to your business.
Not only will sharing behind-the-scenes details foster familiarity between you and your customers, but it also creates a competitive advantage and gives them a reason to remain loyal and share your brand with others.
Strong supplier and partner relationships
Increasing transparency across the supply chain prompts you to learn more about your suppliers and how products are made, even before they reach company facilities. Better communication and understanding with the third-party providers you’re working with can improve supplier relationships.
In addition, being more transparent about the way you operate will attract companies with similar values and foster stronger partnerships in the future.
Optimized supply chain
When developing a transparent supply chain, you’ll often come across ways to optimize the general process. You start to identify supply chain risks and notice gaps that are otherwise easy to overlook without a dedicated evaluation system.
By examining each step of the end-to-end process and deciding whether it’s something you want to share with the public, you naturally start to look at your supply chain operations through a different lens and find new opportunities for optimization.
Better employee engagement
Supply chain transparency is a great step toward contributing to a company’s environmental, social, and governance (ESG) efforts.
Aside from being beneficial on its own, companies with strong ESG programs often see increased employee engagement that results in 14% higher productivity and businesses that are 23% more profitable than companies that don’t focus on these efforts.
Future-proof your business
Supply chain disruptions have become the new normal with manufacturers, retailers, and other product-based companies. Several countries have even begun revisiting their supply chain regulations, trading initiatives, child labor laws, and other codes of conduct.
For example, the European Commission plans to require select companies in the European Union to “conduct social and environmental due diligence in their supply chain.” Several countries, including Germany, Canada, Australia, Spain, and Belgium, are also introducing new due diligence laws.
By implementing transparency across the supply chain, especially for companies with global operations, you better prepare your company for these future regulatory changes.
How QuickBooks can support your transparency efforts
No matter how your company chooses to implement supply chain transparency, QuickBooks Enterprise offers reporting functionality that captures the data that matters. With over 200 built-in, customizable reports you’re able to see the data you want and easily communicate it effectively to company stakeholders. Plus, with custom user permissions, you can securely put these reports in the right hands with access to up to 40 users who can all work at the same time.
QuickBooks Enterprise also aggregates all your supplier and vendor information, tracking key metrics such as contact details, pricing data, delivery time, and real-time shortages.
Serial and lot numbers, together with mobile barcode scanning, are used to identify every item that passes through your warehouse. This allows you to perform quick searches and recall any defects that are tracked to specific lots rather than disrupting your entire inventory management process.
Final thoughts
Supply chain transparency has become a popular topic among product-focused companies of all sizes. While the actual application varies for every case, transparency always involves collecting reliable data and communicating the information to interested parties, whether it’s your customers or investors.
Learning more about how your company does business creates stronger ties with suppliers and business partners, and further reveals areas where processes can be improved.Supply chain transparency most importantly helps build trust in your company, which effectively leads to increased awareness and loyalty with customers.
