For retailers and their customers, radical supply chain transparency can provide win-win results.
Why Retail Needs to Embrace Complete Supply Chain Transparency
Consumer mindsets are evolving at an accelerating pace.
While it wasn’t long ago that shoppers could be satisfied receiving the tiniest of details from a product’s journey before it came into their possession, years of unsustainable and unethical practices within retail supply chains have begun to tarnish the relationships between businesses and their customers.
Understandably, customers are increasingly demanding that the traditionally opaque supply chains that serve them are made more visible – and they’re using their wallets to back and promote these values. As a result, power has shifted, and unless retailers want to become obsolete, ignorance and dishonesty must be replaced with clarity and accountability.
Especially since — over the past 18 months — the pandemic has intensified this scrutiny, and it seems that now, for retailers to survive, they must relinquish their use of transparency as a novel marketing strategy and view it as a necessary process to be implemented into everything they do.
Transparency as a marketing tool is nothing new, businesses have been branding their performance as a method of storytelling that highlights their morality and pulls audiences in for a while now. Greenwashing, however, has become a concerning result of this trend, with companies picking and choosing what to report and positioning their activities in a positive light.
In fact, in the Business of Fashion’s and McKinsey & Company’s The State of Fashion 2020 report, almost 20% of executives claim that radical transparency is one of the top three themes impacting their business due to changing consumer desire for genuine and clear information.
What Does a Radically Transparent Supply Chain Look Like?
Radical transparency defines the complete disclosure of information at every link of a retailers supply chain. This includes everything from the sourcing of raw materials, water usage in textiles dying, factory working conditions, the environmental impact of goods distribution, and customer care instructions.
In the past few years, many organisations have led the charge regarding supply chain clarity. For example, in just the apparel sector exists Fashion revolution Eco-Age and Good on you – all of which currently hold fashion retailers accountable over the impact of their supply chains by taking different approaches to the promotion of reporting.
And reporting is the cornerstone of supply chain transparency, providing a window into the practice’s businesses abide by. H&M — leaders in supply chain transparency — are among many retailers who have aligned their manufacturing reporting with Transparency Pledge Reformation takes this a step further, making the environmental impact and traceability of their products public.
Yet, the widespread adoption of end-to-end supply chain clarity is limited and slow. While most businesses have begun to embed transparency into their internal operations and with direct suppliers, processes beyond their control – for the most part – remain opaque.
As a result, the companies that can trace their products’ raw materials are categorised as pioneers of supply chain transparency, whilst businesses that can track the activities of their indirect suppliers are ahead of the curve. Yet, for the majority of companies, moving towards full disclosure reporting can seem like an impossibly far milestone to reach. Nonetheless, it is one they must begin striving towards now.
Why Prioritise Transparency Now?
While many retailers readily look to improve their supply chain transparency, for many others, full-disclosure reporting is a practice being pressured upon them by both direct and indirect stakeholders. These different parties desire open and honest information for various reasons. Here we discuss the mindsets of these stakeholders and explore the reasons behind their demands for radical supply chain transparency:
The post-pandemic retail sector is filled with innovation that attracts the re-emerged consumer whose activism has been heightened by COVID-19. Multiple lockdowns had given the world time to re-evaluate its values, especially when last year, there was no good excuse to look away from societal issues that took the world stage, such as climate emergencies, poor factory conditions, and racial injustice. As a result, contemporary consumers are more scrutinising now than ever before and want the businesses they shop with to take accountability when problems within their internal operations are uncovered.
Sustainable and Ethical Practice:
It is arguably customers who drive retail’s interest for heightened clarity through their passion for advocating brands with sustainable products and ethical operations. In fact, 64% of shoppers look for ethical or sustainable features when making a purchase, and according to researchers at MIT Sloan School of Management, they may be willing to pay 2% to 10% more for products from companies that provide greater supply chain transparency.
In being able to see the impact of their purchases more clearly, customers are not only able to build trust with a retailer but become more assured that their own behaviours align with the values they hold.
Customer-centricity is key to post-pandemic supply chain success as demand for goods becomes increasingly uncertain and erratically patterned. The growth of omnichannel means that shoppers expect retailers to cater to them at the physical and digital touchpoints they more fluidly move between in the wake of the pandemic.
By improving the transparency of their supply chains, retailers could much more readily provide the services created by the omnichannel shopping experience, such as real-time inventory visibility and same-day delivery fuelled by digitisation.
Employees are core stakeholders that the shift towards transparency would most impact. Making their working environments unambiguous and their everyday tasks clear to external audiences allows employees, customers and investors to hold retailers accountable in a public domain.
Welfare: According to Anti-Slavery International, there are 16 million people trapped in forced labour within the supply chains of businesses that supply our goods and services. Supply chain transparency is a small step to providing workers more protection over workplace conditions, wages, and personal agency, helping mitigate the risk of external suppliers taking advantage of labour in the sector.
As a result, by enhancing supply chain transparency, businesses are able to track the social impact of their operations and shine a light on grey areas within their own chains that they may not have complete control over.
Last year, Boohoo lost more than 1.5 billion euros in market value after it was uncovered that workers manufacturing their products earned less than minimum wage in poor working conditions. So making it clear that now more than ever, customers aligning their purchases with their values will have a tangible impact on revenue.
Return on Investment: For investors, the intrinsic link between supply chain controversy and loss in market value is a concerning risk. For example, violations in ESG practices were estimated to have erased almost half a trillion dollars’ worth of value from public companies from 2015 to 2019. ESG stands for environment, social and governance. All three domains increasingly feed into an investors decision to back a company beyond financial projections.
So, with investors progressively looking to work with businesses that have a positive impact, transparency is a firm method of proving compliance with every step of the EGS chain that can easily be mapped to the supply chain.
Transparency and Visibility: One Cannot Exist Without the Other
Now that we have made a case for supply chain transparency, there is still the question of how these typically tangled and murky operations can become crystal clear when only 13% of retail executives currently describe having end-to-end visibility.
Although often and mistakenly interchanged for one another, transparency and visibility are two separate concepts when it comes to supply chains, but for retailers, one cannot exist without the other. Therefore, if retailers are to make their supply chains more transparent, they must first be made more visible.
Implementing RFID technology can help provide retailers with unparalleled inventory tracking. By tracing stock at item-level from the factory to warehouse to shop floor, RFID can help retailers improve sustainable and ethical practices within their operations in the following ways:
Post-Purchase Care: By recording raw materials, RFID can assist retailers in tracking the origins of their products and enables them to have a longer life by tracing their composition and helping owners care for their items better.
Carbon Footprint Tracking: RFID technology can follow inventory at item-level at every step of their journey, allowing businesses to calculate the environmental impact of every individual product and correctly offset it.
Workload Easing: RFID also helps retailers ease the strain of workload within factories and distribution centres by taking the place of manual tasks such as stocktake and locating lost items.
Excess Inventory: Limiting the risk of waste products, RFID can help retailers monitor stock and manage future orders with these insights by distributing inventory to locations with high demand or designing a new collection whilst avoiding the features of underperforming products.
Manufacturing Conditions and Compliance: Tracking products back to their production source allows stakeholders to hold retailers accountable if the working conditions and practices of their internal and external factories are below standards.
Implementing Radical Change
Although organisational resistance to change is weakening, according to a recent survey by Accenture, 94% of experts said there is still no obvious effort to align the organisation’s culture with the goals of the change they intended to create. Yet the fact is, supply chains need to become radically more transparent, whether retail wants to embrace it or not.
The pandemic has exemplified change as an uncomfortable yet vital feature of business survival, and technology has been the great enabler for catalysing operational honesty and transparent reporting. But there is still much more to be done. End-to-end transparency is still a rarity, and retailers will need to push forward to experience the benefits of stakeholder satisfaction.
Book a consultation with Detego today to discover how RFID can help your organisation implement lasting and radical change through increased visibility.
Cloud-hosted RFID software
The digital supply chain
Detego’s RFID-based warehouse software enables retailers to automate and dramatically improve their receiving, picking/packing and shipping processes in factories and/or distribution centres. These steps are vital parts of an end-to-end RFID solution, providing full visibility across the entire supply chain.