Discussions about supply chain transparency almost always focus on the relationship between brands, retailers, and their consumers. In an era of increasing shopper interest in where and how products are made, consumer-facing businesses are seeking new ways to build trust and earn loyalty.
Suppliers are by no means immune from this wave of transparency. Recently, it was reported that PepsiCo dropped a palm oil supplier linked to human rights abuses—so the impact on suppliers and their business is real. But when suppliers don’t have any direct interactions with consumers, why is it so important for them to ensure their practices—and those of their sub-suppliers—are in line with consumer expectations? What is really in it for them?
Maintain and gain business
Businesses are starting to select suppliers more holistically. Logistics and cost remain important factors in the decision-making process; however, as consumers become more concerned with the quality, sustainability, social responsibility, and overall transparency of the products they buy, brands and retailers are looking for suppliers who can deliver on these factors. To maintain existing business, suppliers at all levels should adapt their supply chains to meet evolving consumer—and therefore customer—requirements.
Meeting the need for more ethical and transparent practices can also give suppliers an edge over their competition. Thanks to globalization, brands and retailers can work with vendors all over the world, so it is critical for suppliers to differentiate themselves. Further reducing costs or increasing product quality are no longer sufficient to distinguish businesses from their competitors. Implementing responsible sourcing methods, such as by gaining sustainability certifications, reducing water use, or improving working conditions in both own and sub-supplier facilities, provides suppliers with a new way to stand out from the crowd.
Be a company people want to work with
Due to increasing governmental regulations and market evolutions, brands and retailers are making more demands on their suppliers. They need their vendors to provide more information and more documentation about their supply chains, more quickly. Suppliers who prioritize building transparent, compliant, and socially responsible supply chains—and track this information in a clear and efficient manner—can provide their customers with the required information without delay, therefore distinguishing themselves as an easy vendor to work with.
Suppliers can also benefit by gaining greater supply chain visibility before being asked by a customer. By establishing a history of transparency, suppliers demonstrate to potential customers who seek to build responsible supply chains that they are ready and able to meet evolving demands.
Transparency versus privacy
Requests for supply chain transparency often spark concerns about privacy. Many suppliers are worried they will be asked to disclose too much information about their products, vendors, and supply chains. This is an understandable concern: the level of transparency that brands and retailers are asking for today is unprecedented compared to recent decades.
However, demonstrating a willingness to be more transparent—to any degree—can go a long way in increasing business and generating brand and retailer interest. Some visibility is always greater than no visibility. Hesitant suppliers can elect to share limited information, such as country of origin, while keeping sub-supplier names private. Businesses who are ready to disclose more information can share product composition, country of origin, supplier names, and facility data. The benefits that can be gained from being an open, collaborative partner (more business, better customer relationships) can outweigh the downsides of disclosing more information.
Preparing for the future
The market is transforming. Consumers want more information, and brands and retailers are taking steps to deliver. But they can’t do it alone: suppliers, from Tier 1 down to the source, are a critical part of achieving the degree of visibility consumers want. By understanding and responding to this trend toward transparency, suppliers can gain a competitive advantage, build better customer relationships, and gain new business in the years to come.