The Transparent Supply Chain

Sustainable business practices add risk to the supply chain.
The Transparent Supply Chain

COMPANIES CAN MAKE their supply chains more profitable if they follow six key practices that revolve around transparency, ac­ cording to a new study from the Haslam College of Business at the University of Tennessee, Knoxville. These practices include embracing sustainability as a major business driver, developing a culture of transparency, partnering with sustainable suppliers, ensuring traceability to enable transparency, finding their transparency "sweet spot," and employing outside auditing partners.

Companies that can't trace all the sources in their supply chains may find that they've been guilty of using slave or child labor, polluting waterways, using contaminated products, or including used to sustain fighting. However, if they divulge details about supplier partnerships, they sometimes give away proprietary business information. Thus, the report advises companies to find the "sweet spot'' in communications that ensures trust for both suppliers and consumers.
While marketing incentives often encourage transparency, the study notes that consumer demand for sustainability importance of partnering with sustainable suppliers and ensuring that product materials are traceable. Both strategies are prerequisites to increasing communications with the public.

"Consumers want to know where a product came from, all the way to the cashmere goat herd on the slopes of the Himalayas," says Mike Burnette, director of the Global Supply Chain Institute, who co-authored the study with John Bell, Diane Mollenkopf, and J. Scott Meline. Burnette warns that if a company is cited for safety or environmental violations and it cannot provide information about product sourcing, its brand could suffer from negative perceptions for years to come.

"Companies don't need to have their sustainability practices completely figured out," says Burnette." But it is important to establish and stick to a set of ideals and goals on which they communicate progress.”

"Creating a Transparent Supply Chain" is the third installment in the school's "Innovations in Supply Chain" series. To read the study, visit s/GSCI%2oTransparency%20WP-FIN%20copy.pdf.