Understanding Supply Chain Transparency and Its Impact on an Evolving Economy

Supply chains play an integral part in the interaction between businesses and their customers and suppliers.  Supply chains entail producing and distributing products or services to customers through collaborations with warehouses, vendors, producers, distribution centers, transportation companies, and retailers.  They consist of customer service, marketing, product development, logistics, operations, and sales.   

Supply chains enable businesses to operate more efficiently and remain competitive among their competitors.  For instance, organizations can improve customer service and satisfaction by reducing costs and product delivery delays.  As technological advances continue to materialize and transform the economy, the demand for the release of information ad transparency from members of society such as consumers and government entities intensifies.  The need and demand for supply chains to release and share information about food ingredients and safety, food and child labor, fraud, and the welfare of animals continue to increase. 

What is Supply Chain Transparency?

According to Leonardo Bonanni and Alexis Bateman’s 2019 Harvard Business Review article, supply chain transparency entails a businesses’ knowledge of and conveying the activities in supply chains externally and internally.  The consumers’ convenient access to various sources online and technology strongly influences their desire, want, and demand for supply chain transparency.  Researchers from MIT’s School of Management revealed that consumers perceive working conditions and the treatment of workers as valuable to them. They are willing to compensate businesses approximately two to ten percent more for products to obtain information from organizations relative to supply chain transparency.

Supply Chain Transparency: Pros vs. Cons

A primary advantage of supply chain transparency is its ability to increase channel efficiency.  For instance, supply chain transparency can improve the business’s credibility, minimize risks to their reputation, increase customer satisfaction and the customer’s trust, enhance their functional operations, time consumers, and eliminate unnecessary tasks and redundancy.  Furthermore, supply chain transparency can help minimize employee turnovers by attracting and preserving valuable, dedicated, and loyal employees.

Conversely, supply chain transparency can cause decreases in channel efficiencies, such as delays in the deliveries and shipments of goods and services due to a lack of communication, visibility, and proper documentation at borders or ports.  Channel inefficiencies can occur from miscommunication and reporting of inaccurate data collections and practices, lack of accountability with responsibilities and roles, and lack of understanding by businesses about producing goods and how they will reach the customer.  It can impact the reputation of an organization as well as its overall performance.

For instance, Abbott, a manufacturer of Similac, a well-known brand of infant formula since 1925, experienced a breakdown in their supply chain in the spring of 2021 that affected the distribution and created a shortage in supply of Similac Alimentum powder and ready-to-feed infant formula in Florida as well as several other states in the U.S. 

The lack of supply chain transparency, such as advanced communication from the manufacturer regarding the projected production and distribution issues, caused a tremendous and negative impact on several consumers, leaving several moms and families in need without a much-needed formula for their babies for a few weeks.  This impact resulted in confusion and chaos at distribution centers and food retailers. Several customers were irate and panicked from experiencing difficulties locating the formula for their infant and encountering a lack of information regarding its availability. 

This disruption also resulted in local agencies, medical professionals, and healthcare providers providing additional customer support in identifying alternative feeding solutions for the infant the supplemental nutrition program to assist in locating remaining formula available, if any, in the interim as the manufacturer resolved its supply chain issues.           

Key Takeaway

Establishing open communication and transparency throughout the supply chain assists businesses in building trust and credibility with their customers.

Increasing supply chain visibility will help businesses pinpoint specific supply chain areas that require improvement to lessen inefficiencies.

Increasing accountability in the supply chain aids businesses in ensuring the supply chain operates efficiently by improving employee work performance and enforcing accountability upon those who are responsible for overseeing production operations.

Businesses must evolve and be innovative and adapt to technological changes as they develop for the supply chain to be efficient and effective to improve production processes and performance.  

Supply chain transparency can increase channel efficiency by ensuring visibility, accountability, innovation, and the ability to evolve throughout various touchpoints, processes, areas, and interactions in the supply chain process as technological advances and changes emerge to meet consumer demands and operate efficiently, and effectively.  It can also help businesses gain a competitive edge over their competitors.  Supply chain transparency aids businesses in cultivating meaningful quality customer relationships and mutually beneficial exchange between the organization and its customers by developing credibility and trust to achieve optimal results.

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