Supply chain transparency requires companies to know what is happening upstream in the supply chain and to communicate this knowledge both internally and externally (HBR). Although the concept was unknown 15 years ago, today supply chain transparency is more important than ever. Businesses are under high pressure from governments, consumers, NGOs, and other stakeholders to reveal more information about their supply chains, and the cost of their reputation if failing to meet these demands, can be high.
The main reason for the trend is because consumers demand transparency. In the wake of reports about slave labor, terrible working conditions, unsustainable materials being used for production, food contamination, and human rights abuses, consumers are concerned about how their purchases impact their health, their communities, and the world at large.
Today consumers want to know where and how the products are made, who makes them, under which conditions and what the values are of the company that sells them. For example, food companies are facing more demand for supply-chain-related information about ingredients, food fraud, animal welfare, and child labor. Following the expectations of consumers, regulatory requirements have now been introduced by the governments, such as California Transparency in Supply Chains Act and U.S. Food Safety Modernization Act.
What is more, consumers are willing to pay 2%-10% more for products associated with providing greater supply chain transparency, per research from the MIT Sloan School of Management.
The need for supply chain transparency is undeniable. Transparent supply chains become a great tool for marketing and for establishing trusting relationships with loyal customers.
Being open about how the product is made from beginning to end, and who the people behind the production process are goes a long way. Consumers love knowing the details and appreciate the readiness of businesses to always share more details. A mindful consumer is always curious about the following issues, so it is favorable to add details about the following:
The company Patagonia uses recycled polyester and organic cotton in their clothes to reduce their pollution impact and donates at least 1% of their sales to hundreds of environmentalists groups. In this 2017 YouGov Survey, it is stated that, "When it comes to being an ethical consumer, 69% of Patagonia customers (both current and former) say they like to look out for where their products are made or grown, while the same is true for 63% of the general public. 67% believe we should drive less to save the environment, and, at 54%, a slight majority make an effort to buy fair trade products." Another source stated that when Patagonia was transparent about one material being more sustainable than another, their sales went up 30% that year, promoting their customer loyalty.
Consumers care about human rights and working conditions now more than ever. Transparency about how employees are treated and which conditions they work in helps customers keep companies accountable. Transparency eliminates unfairness and inequality amongst employees.
There are many brands that care about human rights conditions now and choose to publicly list their suppliers and sources, from various countries, such as Sweden based H&M, that has a sustainable 100% recycled materials goal by 2030. They publicly post over 98% of their suppliers quarterly. Consumers trust them at a much higher rate than their competitor, Forever 21, that doesn't have fair working practices in place, other than US government regulations, nor do they use sustainable materials.
However, other United States companies have goals to achieve the best workplace environments for their employees, like Starbucks or Patagonia, or Osprey, a veteran run company based out of the state of Colorado, which are paid over the minimum wage. These are high end brands that are always in business especially during peak times like Black Friday, and people are willing to pay more than their competitors for the quality of the product and the lifestyle they provide to their employees and customers.
The hotel industry is an often overlooked facet of the supply chain, as they have to plan use of goods and procurement of food, use environmental precautions such as energy and water saving, and use sustainable products wherever possible. According to Travel Agent Central, a research study done by The Value Institute and The Center for Brand Values Communication and Research at California State University, Fullerton showed in the hotel industry the Marriott scored the highest for the brand that consumers trust the most. They measured the survey taken by over 1400 respondents, by Competence, Consistency, Connection, Candor and Concern, Loyalty, Advocacy and Satisfaction, all areas of brand transparency. The Marriott follows the policy of The Golden Rule, amongst its employees and customers, so that everyone is treated fairly.
There is a lot of information out there and if you ask a consumer if they have a preference on where their products are made, that is up to the individual. Depending on country, quality, manufacturer, product, and price, that could be domestic or foreign made. Whether the brand has a trustworthy, long standing reputation, is whether consumers keep coming back for more products.
In a poll done in the United States to reflect bringing jobs back to the US, only between 69-75% of people said they cared about employing their own citizens and only about 30% of people polled were willing to pay more.
According to Business Insider, consumers want to know how much care went into the layered gifts they have purchased. The Adidas x Parley shoe collection contributes to taking pollutants out of oceans and consumers find sustainability one of the most desired aspects of purchasing. In a CGS 2019 US Sustainability Survey, more than two-thirds of consumers are willing to pay more for sustainable goods. With the older the age group, the more likely, and the more money they were willing to pay for sustainability rose significantly. 35% said they were willing to pay 25% more specifically, and 50% of Gen-Z were willing to pay 50-100% more than other age groups.
With Supertrace software, companies can track and trace the whole production process and make it visible to the end consumer. All it takes for the company is to add details of each stage of the production process by sharing pictures, videos and possibly even stories from people making the products. The information is stored internally and can be communicated to consumers externally through QR codes. Once the consumer scans the QR code on the label or the packaging of the product, she can access all of the information added by the company.
Amazon is most recognizable for brand transparency and with the Amazon Effect, they are a tough competition. Starting as an online book retailer for new and used books and textbooks 26 years ago, they have branched out to every part of the retail industry, ensuring sellers use integrity in their sales with trustworthy comments about the status and condition of used products and confirming that with proper feedback and customer reviews. They have added many features like television shows, a self-publishing platform for self-published authors, and excellent customer service.
In the past years customer service quality has faltered a bit since they have outsourced the call centers. Historically they had better two-way communication. But the quality of products is very high and the shipping process is very transparent in their app, where the track and trace features are hard to beat.
Because of Amazon's astounding service and quality marketplace that really has it all, they have branched out internationally and have become a model business for the retail logistics industry in particular and have acquired other companies like Zappos.com that is now the largest online shoe retailer in the United States with Amazon's logistics services.
In addition to this trusted customer experience, they also have high transparency in regards to their working conditions. Amazon and Zappos employees have great pay, benefits, stock options, and are overall some of the happiest employees in the United States.
There is also a direct correlation between asking consumers for feedback and building a trusting relationship with them. Research shows that when feedback has been submitted and the customers have a clear view of the situation, there is a positive reflection in their trust and purchases because of transparency.
“By practicing transparency, we’ve found that we get much more feedback on our decisions. We try to take in all that feedback and make adjustments based on it. For example, when we shared our salary formula, a lot of people mentioned to us that we weren’t paying high enough salaries for people in the San Francisco Bay Area, so we made an adjustment to the formula. Now we’re in a much better position to attract new team members in the Bay Area”. - Joel Cascoigne, CEO & Founder of Buffer.
Sharing the beliefs and values of the company with consumers regarding their feedback is an important step in the trust building process. When companies add value with the transparency of their procedures not only regarding products but also about working conditions of staff, there is higher trust added value as well.
Consumers trust those brands more that listen to their feedback and act on it.
“If you want people to make the same decisions that you would make, but in a more scalable way, you have to give them the same information you have”. – Keith Rabois
In the UK in 2018, consumers were not pleased about the amount of plastic straws that the McDonald's chain was using so they made a paper straw making factory in Wales for a more biodegradable option. There was a campaign with half a million signatures and McDonald's responded enthusiastically to the request in this tweet. Now McDonald's is a more trusted brand in the UK after switching to a more biodegradable option in order to satisfy the customer demand.
Transparent supply chains allow business to build a relationship with consumers, sharing their values and details about the products they produce while receiving feedback about those products to respond with change. There advantages of a transparent supply chain lead to increased consumer trust for the business therefore better productivity, higher morale and heightened rapport. As transparency will be the biggest supply chain trend of 2021, Supertrace can help you get prepared and step up into a better business to customer relationship in the future.