In 1904, Upton Sinclair spent two months in Chicago’s “Packingtown” uncovering horrific details about the meat-packing industry, which he portrayed in the classic book The Jungle. Public outrage over The Jungle prompted two new laws—the Food and Drug Act1 and the Meat Inspection Act2—that became early drivers of supply chain transparency in the United States.
More than a century later, companies continue to face scrutiny of their supply chain practices, including workers’ rights, product safety and integrity, and environmental responsibility. Evidence of this scrutiny in recent years is visible through a number of high-profile global events. Brands have been exposed. Coalitions have formed. And more stringent laws have been passed.3
Yet many companies struggle to achieve supply chain transparency. A recent study conducted at Stanford’s Graduate School of Business revealed that while most respondent companies have social and environmental systems in place for internal operations, less than a third have similar structures to monitor the practices of their immediate and extended supplier network.4
The dispersed nature of today’s supply chains creates increasing levels of risk for multinational businesses, making transparency both critical and complex. Without effective visibility into their supply chains, executives potentially have a significant blind spot in their enterprise risk management structure, from which substantial legal, financial, and reputational exposure could emerge.
Supply chain transparency isn’t easily achieved; it requires a solid foundation and continuous improvement over time. This article presents a practical four-step approach that companies can take to begin the process of building a transparent supply chain in the current global environment.
Why Transparency is an Imperative
In the past, considerable physical and temporal distance separated a supply chain’s upstream activities from the manufacturer and its downstream stakeholders. Now, the proliferation of technology, especially mobile devices, and the pervasive use of social media have brought upstream risks much closer to the eyes, ears, and voices of downstream stakeholders, including consumers, business customers, news media, regulatory agencies, and nongovernmental organizations.
At the same time, supply chain risks grow significantly as supply chains span more legal jurisdictions, different types of business practices, and widely varying cultural norms. In this context, transparency becomes the vital process of managing risks by accessing, learning from, and acting on supply chain information. By itself, transparency is an increasingly important capability for companies. But as part of a company’s broader attempts to build supply chain resilience—the ability to recover from and reduce the impact of key risk events5—transparency’s role is pivotal.
A Four-Step Process for Building Transparency
Even supply chain executives who understand the importance of transparency may struggle to prioritize activities and build a transparency process. For companies with traditional or non-traditional supply chains (see sidebar, “Risk and transparency in a non-traditional supply chain”), creating a high-level road map may help. A company can begin by identifying, prioritizing, and visualizing potential supply chain risks; then, it can use “transparency levers” to bridge information gaps; finally, it can move on to managing the insights gained from the process and monitoring the supply chain for additional insights going forward.