7 Best Practices to Master Supply Chain Transparency in 2024

In today’s increasingly connected and socially conscious business landscape, supply chain transparency has not just become a buzzword that has gained considerable momentum but has also become a means of achieving competitive advantage. As customers, investors, and regulators demand more information on the ethical, environmental, and social impacts of business operations, companies need to focus on the supply chain as a key area for improvement. Improving supply chain transparency has become a top priority for executives in various sectors (Figure 1).

To help supply chain leaders make their end-to-end supply chains more transparent, this article explores:

• The concept of supply chain transparency
• Its importance in the current business environment
• 7 best practices to achieve true supply chain transparency

Figure 1. Top priorities of executives in the U.S.

Defining supply chain transparency

Supply chain transparency is the practice of openly sharing and disclosing information about a company’s supply chain processes and practices with internal and external stakeholders, including customers, investors, and regulators. It involves providing visibility into the origins, processing, transportation, and overall management of goods and services, focusing on the ethical, social, and environmental aspects of the supply chain.

Why is supply chain transparency important in today’s business environment

Achieving supply chain transparency has become increasingly crucial for several reasons. A recent study (Figure 2) identified the main motivations of executives in achieving supply chain sustainability.

1. Consumer awareness and expectations

With growing public awareness of sustainability and ethical issues, consumers now expect companies to take responsibility for their supply chain’s impacts. Transparent supply chains can foster trust and loyalty among customers, who are increasingly seeking to make informed purchasing decisions based on a company’s environmental and social performance.

2. Regulatory compliance

As governments worldwide introduce stricter regulations to address ESG (environmental, social, and governance) issues, businesses must maintain transparent supply chains to comply with these regulations and avoid penalties. Failing to meet regulatory requirements can lead to financial and reputational risks, as well as lost market opportunities.

3. Risk management

A transparent supply chain can help businesses identify and address potential risks, such as supplier disruptions, ethical lapses, or environmental concerns, before they escalate into crises. By closely monitoring the various elements of their supply chain, businesses can quickly detect and mitigate risks, protecting their brand reputation and ensuring business continuity.

Watch this Ted Talk to learn more about why supply chain transparency is crucial in the electronics industry:

4. Competitive advantage

Studies show that attaching ESG claims to any type of brand boosts growth (Figure 3). Companies that demonstrate commitment towards making their supply chain more transparent can and attach ESG claims to their brand can:

• Differentiate themselves from competitors
• Enhance their brand reputation
• Attract environmentally and socially conscious customers and investors 

In an increasingly competitive market, a transparent supply chain can serve as a unique selling point, helping businesses stand out and drive long-term growth.

Figure 3. Transparently making ESG claim boosts brand growth

You can also check our data-driven list of no-code supply chain software to find the right fit for your business.

7 best practices for achieving supply chain transparency

Building a supply chain that is truly transparent may be challenging since most supply chains have become multi-tiered (Figure 4). To help ease this challenging process, in this section, we highlight some best practices for making your supply chain more transparent.

Figure 4. Multi-Tier Supply Chain

1. Map and assess your supply chain

To achieve supply chain transparency, businesses must first map their entire supply chain, identifying all suppliers (Tier 1, 2, 3) and relevant stakeholders. This process should involve gathering detailed information on each supplier’s location, capacity, labor practices, environmental impact, and other relevant data.

According to a scale presented by Harvard Business Review (Figure 5), transparency in supply chains can be assessed by using two factors:

1. The scope of the supply chain refers to the depth of the interactions between different supply chain units
2. Every milestone achieved for complete supply chain transparency

Figure 5. Supply chain transparency measuring scale

2. Leverage integrated & interoperable supply chain applications

Accessing internal and external supplier information sources and integrating it across extended value chains can be difficult for businesses. Leveraging such supply chain applications significantly enhances transparency by enabling seamless data exchange and improved decision-making across various supply chain functions. 

These applications break down information silos, foster real-time collaboration, and provide comprehensive insights into the end-to-end supply chain.

When selecting supply chain solutions that are interoperable and can easily be integrated with the systems of other supply chain units, consider the following points:

• Choose software that can grow with your business and accommodate increasing data volume, supply network, and integration requirements.
• Ensure that the selected applications are compatible with your existing systems, allowing for smooth integration and data exchange without the need for extensive modifications.
• Opt for applications with intuitive user interfaces and features, making it easier for team members to navigate, understand, and use the tools effectively.

For data-driven lists to compare and contrast intelligent solutions, check out our supply chain & logistics hub.

3. Set clear goals and KPIs

Businesses should establish clear goals and key performance indicators (KPIs) to guide their supply chain transparency efforts. These goals should align with the company’s overall sustainability and ethical objectives and should be specific, measurable, achievable, relevant, and time-bound (SMART):

To learn more about supply chain KPIs, check out this quick read.

4. Collaborate with suppliers and stakeholders

Forging strong relationships with suppliers and other stakeholders is crucial for achieving supply chain transparency. This involves ongoing communication, collaboration, and information sharing to identify and address potential issues, improve practices, and drive continuous improvement.

For instance, a furniture retailer could work closely with its wood suppliers to: 

• Promote responsible forestry practices
• Engage in joint sustainability initiatives
• Ensure compliance with relevant certifications, such as the Forest Stewardship Council (FSC)¹

The retailer can then mention these practices on mediums such as the corporate website, social media, product packaging, etc., to improve transparency and brand image. 

5. Monitor and audit supplier performance

Regular monitoring and auditing of supplier performance helps ensure that they adhere to established sustainability and ethical standards. Businesses should implement a comprehensive supplier monitoring program, which may include self-assessments, third-party audits, and on-site inspections.

For instance, a cosmetic company could conduct regular audits of its raw material suppliers to verify compliance with cruelty-free, organic, and fair-trade standards. The company can then take corrective action as needed to address non-compliance.

To learn more about how to improve supplier relationship management, check out this quick read.

6. Utilize technology for enhanced visibility

Technological advancements, such as blockchain, internet of things (IoT), and AI, can play a vital role in enhancing supply chain transparency. These technologies can: 

• Help businesses efficiently track products and materials throughout the vast supply chain networks
• Monitor real-time performance data of multi-tier supply networks
• Detect potential issues early on or discrepancies in the data of other supply chain units.

Suppose a pharmaceutical implements a blockchain-based solution in its supply chain. That solution can enable it to:

• Trace the origins of the active ingredients sourced from different suppliers
• Ensure the integrity and quality of its products
• Reduce the threat of counterfeit drugs entering the supply chain

To learn more about how to improve supply chain visibility, check out this quick read.

7. Communicate transparency efforts to stakeholders

Transparent communication of supply chain practices and progress is essential to building trust among stakeholders. Companies should regularly disclose their supply chain sustainability and ethical performance through various channels, such as corporate sustainability reports, websites, and social media.

This can help encourage a culture of transparency across the vertical supply chain. 

Conclusion

Achieving supply chain transparency is no longer optional for businesses in today’s business environment. By embracing the best practices outlined in this article, companies can enhance visibility, build trust with stakeholders, and create a more sustainable, transparent, and responsible supply chain. 

This not only benefits the environment and society but also contributes to a company’s long-term success and competitive advantage.

Further reading

• Top 3 Ways To Improve Supply Chain Collaboration
• Top 4 Ways To Improve Supply Chain Resilience
• 5 Ways to Improve Supplier Relationship Management

If you need help finding a vendor or have any questions, feel free to contact us:

References

1. “Forest Stewardship Council® (FSC®)” Accessed: April 05, 2023