The concept of a supply chain was essentially unknown 15 years ago. Nowadays, textile companies are facing pressure from all angles: governments, consumers, NGOs, and other stakeholders to disclose information about their supply chains. Companies are becoming highly concerned with the fear of losing face by not meeting these demands. For example, fashion brands are facing more demand for supply chain information regarding workers’ conditions, animal welfare, child labor, and sourcing of sustainable materials. Companies have a duty to their customers to take appropriate measures to prevent the violation of human rights, and to identify and address any abuses that may occur. It is therefore essential for companies to adopt correct industry practices in order to live up to this responsibility. It is necessary to firstly define transparency within a supply chain context, as well as the extent to which companies ought to pursue it. What is Supply Chain Transparency? Consumers often lack verified information about how their apparel is made. Supply chain transparency calls for textile companies to thoroughly investigate what is happening in their supply chains and to disclose this knowledge both internally and externally. According to a study conducted by MIT Sloan School of Management, researchers found that consumers were willing to pay between 2% to 10% more for products from companies that provided greater supply chain transparency. In this study, consumers ranked highly information about materials, where products came from, and the conditions in which they were produced. Ideally, most companies should be at the Majority stage, meaning that they have a proper overview of their facilities. Many occupy the Early Majority stage, where they are auditing and monitoring direct suppliers for compliance. Fewer companies are identified within the Early Adopters stage, meaning that they engage with indirect suppliers. Innovators refer to companies that openly disclose information regarding their raw materials, a renowned example of this would be Patagonia.
Chart source: Alexis Bateman and Leonardo Bonanni
Without further ado, let’s examine five ways in which you can improve supply chain transparency for your brand or business:
1. Think Globally Whilst Acting Locally
This is both a geographical and strategic reference. It’s essential that companies consider global opportunities for procurement of goods, including the global needs of the corporation. Manufacturers need to take multiple factors into account to determine optimal levels of inventory within the stages of the supply chain process. This proves to be critical when also considering carbon emissions to ensure that the supply chain is more environmentally friendly. This can be done by locally optimizing your investments in critical resources into infrastructure, assets, and technology.
2. Assess Risks and Set Goals
A company may use multiple tools to complete this step. Firstly, it is necessary to assess impending risks from regulation, past disruptions, and supplier-related issues. Known as a materiality assessment, this step includes drawing up a plot of internal and external stakeholder interests. For example, a materiality assessment charts transparent product labeling and sustainable sourcing of raw materials as high interest goals. These fall at the intersection of stakeholder interests, and are a huge factor that impacts on the company’s success. Once the risks are identified, a company can more effectively set its goals.
3. Visualize Your Supply Chain
Once we’ve identified and prioritized the primary risks, the next step is to visualize the target supply chain. This will help us to gain a more thorough understanding of good flows, map suppliers and processes, as well as exposing existing information gaps. The collection of this data should help to align with the company’s objectives.
A useful tool used by businesses is the Open Apparel Registry (OAR). This is an open-source tool that maps garment facilities worldwide and assigns a unique ID number to each one. OAR is free to use for businesses to update and standardize facility names against the database, check affiliations of current and prospective facilities, and find credentials of potential suppliers.
4. Engage with Your Suppliers
Now that your business is armed with practical information, now is the time to engage with your supply chain. This step usually involves a program that is designed to outline the critical Key Performance Indicators (KPI’s) in mind. The goal is to address specific issues that dominate the sustainability space - such as environmental impacts, labor-related risks, risks at supplier sites, or uncertain sources of origin. The way to engage with your supply chain is ensured by supplier contact, collaboration, monitoring, and support.
This can be achieved by setting clear goals with your suppliers. You must ask yourself “What kind of relationship do I want with my suppliers?” Make sure you actively listen to them, to build a level of trust, and most importantly to avoid hidden agendas.
5. Disclose Information
Ultimately, brands and businesses set the level of disclosure they wish to establish. It is necessary to decide on how to meet the regulatory requirements and stakeholder demands, in addition to how this information will be communicated. This can range from divulging a code of conduct to sharing traceability information in the raw materials at the source of the supply chain.
These steps should be carried out continuously. To achieve transparency within the supply chain, progress and evaluation should be constantly monitored to ensure functionality and sustainability.
What Are the Benefits?
Showing consumers that a product is made from sustainable materials, guaranteeing quality and high value translates to bigger business benefits. The return on this investment varies with each business model, but the advantages are palpable.
Arguably, the most obvious benefit is compliance with strict regulation. Supply chains that are transparent benefit from a positive brand image and reduced reputational risk, overall enhancing the company’s standing as a trustworthy business.
Businesses that are transparent also attract and retain employees more easily than those that aren’t. For example, Nike and Patagonia benefit from high job application rates, as well as having a very low employee turnover rate thanks to their sustainable efforts and reputation as responsible companies.
Final Thoughts
All global apparel companies should periodically review and update their transparency protocols. These efforts must include expanding transparency and traceability to all aspects of the supply chain, including the manufacturing of yarn, fabric, and other inputs, and the production of raw materials like cotton.
By simply publishing factory names, street addresses, and other valuable information, global apparel companies are able to empower workers and advocate for human rights by alerting them to rights violations and other abuses in supplier factories. Supply chain transparency helps us to check for unauthorized subcontracting.