The Ethical Supply Chain: The Benefit and Cost of Transparency

Published : April 30, 2015

transparent-glass-phoneKnowing where your raw materials are sourced, who works on your finished products and even what routes those finished products take to the consumer is a function of your business. But until recently, it's been solely an internal one. With ecological, social and cultural consciousness on the rise with customers looking to shop, what was once a closed door is edging open in the name of consumer confidence. Is it worth it to potentially reveal sensitive data like fulfillment costs or processes to strengthen your customer relationships and brand identity? Let's take a look at some of the pros and cons.

1. Transparency Takes Effort and Capital

If you decide to take on transparency as a goal for future fulfillment processes, the cost and effort of implementing it must be carefully considered. For example, if you want to make certain data available—warehouse stock, for example—do you have a real time feed that can be trusted? If not, you may end up with unfulfilled customers and slumping sales numbers. Questions like these should be answered by your team prior to moving forward on transparency plans:

  • What type of information will you make available?
  • Is your marketing team prepared to benefit from revealing this information?
  • Will exposing this data give your competitors an edge?
  • Are the supply chain partners you'll be exposing trustworthy and on board with your plans?
  • Do you have a damage mitigation plan in place for potential transparency issues?

This effort also has an upside. It will, by its very nature, ferret out any potentially damaging corporate wrongdoing or underhanded dealing. Bribes, loss, theft and other corporate issues that hide in the shadows can't stand up to the scrutiny of the public eye, according to Kate Lee of Fronetics Strategic Advisors.

2. You Can Stay Ahead of the Curve

There's a lot to be said for consumer activism. It has, in many ways, revolutionized the way manufactured goods are brought to market and increased the legitimacy of higher price points for ethically-made products. With this in mind, it would be a disservice to classify the move towards transparency as one solely of complications and more complex fulfillment costs. Transparency is, in fact, helping to prepare businesses for the future. SAs consumers lobby in greater and greater numbers, laws and regulations requiring what was once an optional customer outreach initiative will become both mandatory and more rigid.

As Daniel Ball of Procurement Leaders further explains, stockholders are also demanding transparency to woo their investment dollars. Putting transparency in motion now may please both the government and your business' investors in one fell swoop—a rare crossroad indeed.

3. Valuable Mistakes Have Already Been Made

Supply chain transparency isn't a new concept, and that means there are large companies that have already made some very public stumbles that, in turn, make for excellent learning opportunities. Consider the case of McDonalds, which Steve New of the Harvard Business Review notes has suffered its share of reputational battle damage stemming from transparency. While those high-profile woes may cause some supply chain managers to clutch their cards closer to their chest, their wiser peers will use these misfortunes as a blueprint of what not to do, and how not to react, when transparency-related issues come to the surface.

Transparency has some very real, tangible benefits for a step that's often framed as psychological marketing tactic. While it won't necessarily reduce fulfillment costs or streamline workflow efficiency, it will help you get to know your business better than ever, and support it for an extended stay in the fickle environment of pubic favor.

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Topics: Supply Chain Logistics

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