Supply chain transparency is a concept that gained popularity in recent years. But what does it mean and what drives attention towards it?

What is Supply Chain Transparency?

Supply chain transparency requires two things from companies. First, they should be well aware of what is happening at every stage of its supply chain. Second, they need to successfully communicate this information both internally and externally.

Nowadays, more than ever before, companies are under pressure from their stakeholders, including governments, NGOs and consumers, to publicly share details about their supply chains. Since we, at Konsha, are serving as the liaison between brands and consumers, let’s talk about the pressure coming from clients.

What are consumers looking for?

According to a 2017 study by MIT, consumers are willing to pay up to 10% more for products coming from companies that are transparent about their supply chain.

On the other hand, a consumer behavior report published by research company Avery Dennison found that 60% of fashion buyers require more transparency about the products’ journey before making a decision whether to purchase them or not. In terms of geography, the study shows that more than 40% of consumers surveyed in the United States, more than 50% in Europe, and almost 70% in China say they want access to more information about clothes and accessories to make more informed choices.

Why is supply chain transparency so difficult?

But if supply chain transparency is so important to buyers why is the transition to more traceability so difficult and slow?

According to an article by the Harvard Business Review, one of the main reasons is that

“supply chains were not designed to be transparent”.

First of all, companies may fear that exposing too much information may hurt their competitive advantage. Additionally, some companies may not even collect such details or if they do, the data may be erroneous. Last but not least, for some enterprises transparency can be quite a luxury since the return on investment can be too high.

However, despite these hurdles, based on a theory originally introduced by Everett Rogers, transparency can be evaluated along two dimensions: supply chain scope and milestones on the path to complete transparency (see the chart below).

Nowadays, most companies are still in the majority or early majority stage. Despite that, we, at Konsha, believe that every small step matters and eventually becomes a difference.

What are the benefits of supply chain transparency?

From a regulatory point of view, one of the major advantages of supply chain transparency is compliance. This, on the other hand, can reduce reputational risk and increase consumers’ trust, loyalty and satisfaction. On the other hand, transparency can also help companies internally. As HBR notes, it can attract and retain employees for whom working for a responsible company is important. At the same time, collecting detailed information on supply chain performance facilitates companies in making strategic decisions in both the short- and the long-term.