By Ben Wilde
Better supply chain visibility is what you need to safeguard your brand. Trends ranging from globalisation and social media to rising consumer demand for responsibly and sustainably produced goods have transformed the role of the supply chain. Your supply chain today is very much an extension of your brand – with the power to bolster or harm your reputation. Even the most celebrated brands are vulnerable.
Among many well-known brands, there have been cases of harsh working conditions in overseas factories, fires and other safety hazards that have injured or killed thousands of people, and environmental spills or lapses that have caused significant damage to habitats and communities.
Suppliers’ poor workplace conditions and flawed environmental practices can directly or indirectly impact even the strongest brands, which is why environmentally and socially responsible sourcing has become a priority.
Unfortunate headlines often underscore the limits to a traditional approach to supply chain management built solely on spot audits by third parties. With frequent audits, it’s not uncommon to reflect polished results within a limited time period instead of standard operating procedures adopted in everyday reality. What’s more, the factories themselves can be left out of the loop. They may not see the results of the questionnaires or audits to which they submit, leaving no opportunity for systemic improvement. In the wrong context, audits can be hoops to jump through instead of management tools for improvement.
Many brands are progressing toward a different kind of supplier partnership that goes beyond auditing and instead focusses on empowerment. These changes are leading to some remarkable bottom line benefits for all stakeholders – brands, supplier, workers and responsible consumers.
From Monitoring to Motivating
The advantages of a more transparent and empowering relationship with supply chain partners are compelling. First, you will be able to improve the performance of your company’s supply chain. Increased transparency over your supply chain will allow you to identify problem areas such as inefficient and wasteful operations. Once these problem areas are identified and corrected, your supply chain will be more competitive.
Second, you will manage to reduce risks that can jeopardise your business. Your business may be sustainable, but what if your supplier was found to be using child labour? Your company’s association with this supplier can drive customers away from your business. A transparent and empowering relationship with supply chain partners will help you vet your current suppliers to ensure that they do not engage in unsustainable or unethical business practices.
Third, the quality of your products will improve. The elimination of inefficient and wasteful operations in your supply chain means that your products will become conformant with existing quality standards. Better-quality products, in turn, will increase your bottom line.
So how can you actively promote sustainable social, environmental and management practices in your supply chain? From water stewardship to fair pay-to-quality ratios, what are the steps you can take to add visibility and gain control of supplier activities that impact your brand image?
The first step is often to create stronger connections with your suppliers – both figuratively and technologically, by creating conduits for a continual flow of data.
Real Return On Investment(ROI)
For brands, shifting to an enhanced approach to supply chain management is a path to risk reduction as well as new insight – real business intelligence that uncovers important correlations and opportunities.
Reinvesting some of the costs of an audit-only system in supplier collaboration systems and benchmarking can have meaningful payoffs. Information gathered can reveal how investments in one part of a sustainable system affect others. You just need to ask the right questions. How do worker welfare and worker sentiment impact factory output? How does excessive overtime contribute to wastefulness and product defects? What is the correlation between worker satisfaction and business KPIs?
Especially when data is combined across factories and analysed holistically, the insights can be powerful. Applying data has shown how increasing worker compensation can often be more than offset by reductions in absenteeism and related costs.
Businesses have also been able to quantify the benefits of sustainability measures, such as how purchasing more expensive but less hazardous dyes can dramatically reduce dye consumption and overall costs. These types of hidden correlations are routinely uncovered and substantiated when brands invest in improved and collaborative data gathering with their suppliers.
With empirical data on hand, the benefits of sustainability and quality measures can be quantified – giving both factories and retailers a business case for further investment in worker and environmental welfare, and the means to measure it.
Best Practices for Collecting and Standardising Supply Chain Data
Putting systems in place for continual data gathering and process management can be complex, in part because the answer isn’t always more technology. The key is to think creatively and flexibly about the best ways to capture supply chain data given the diverse resources available to your suppliers.
• Automate measurement. From carbon emissions to water quality, waste and chemical consumption, automating data capture can be an efficient and valid way to create a path to improvement. Data capture software can collect and consolidate supply chain data from various sources and in different formats into a uniform set. Consequently, they facilitate the fast and accurate monitoring of supply chain data. Companies can then use this data to improve their operations.
In the textile community, brands have worked with suppliers to replace unsustainable water quality testing programs by installing relatively inexpensive water quality sensors. The sensors provide real-time data to the factories so that changes in pH or temperature can be monitored and addressed in real time. Factories then have visibility to fix problems immediately, protecting both the environment and their compliance status. The brand has real-time, verifiable data they can stand behind with confidence.
• Simplify the process for suppliers. The less burdensome it is for your factory partners to capture data, the greater the chance you will receive more and better information for analysis. Be flexible and provide multiple options for responders to submit information into a common system. Some facilities are reliant on fax machines and paper scans, while some will want to put it all in a spreadsheet to send. Others can fully integrate their resource planning systems with a brand’s cross-supplier system. Give factories options to best suit their capabilities. To successfully execute this best practice, invest in a database that: 1) supports data in various formats; 2) allows both manual and automated uploads; 3) allows supplier-brand communication; and 4) provides full visibility into uploaded data. This database will make it more convenient for your factory partners to capture and upload data. In addition, you will be able to easily find out if your factory partners are observing safe and sustainable business practices. This knowledge will then help you make more sustainable procurement choices.
• Engage workers where they are. The mechanisms for collecting fair factory data, for example, should remind, engage and encourage feedback in ways that align with worker needs. Text messages/SMS can be a smart way to connect with workers and survey groups in real time, requiring minimal effort from respondents and providing data that is timely, fresh and direct.
• Localise at every step. Limiting your processes to English can be a huge barrier to getting the insight you need. Brands need native speakers on the ground in order to train, educate and engage workers and managers on the systems you put in place.
Can Advanced Digital Solutions Help?
Advanced digital solutions can help brands’ supply chains become more visible, as well as improve their supply chain methodologies. Businesses can maximise the full potential of advanced digital solutions in supply chain management by doing the following:
• Resource management. Brands can use digital solutions to monitor their consumption of resources such as energy and water. These solutions collect and analyse data regarding a brand’s resource use. As a result, brands can recognise patterns in their resource consumption and come up with conservation measures based on these patterns if necessary. Conserved resources, in turn, lead to greater savings and improved bottom lines.
• Carbon emissions reduction. Reducing carbon emissions is an excellent way for a brand to demonstrate its commitment to sustainability. But exactly how much carbon does a brand emit? A digital solution can answer this question by specifying a brand’s carbon emissions in various terms (e.g., per year, per month, per employee, per unit of product). A brand can then use this information to develop carbon emissions reduction targets and strategies. Because these targets and strategies are based on actual carbon emissions amounts, their effectiveness is assured.
• Supply chain reporting. Another way for a brand to demonstrate its commitment to sustainability is by creating a supply chain report. But for some brands, creating a supply chain report involves gathering supply chain data from different branches across the globe. Moreover, such data will probably come in different formats. A digital solution can make the task of creating a supply chain report less tedious and time-consuming by serving as a database for supply chain data in various formats. Employees from the brand’s branches can simply upload their supply chain data in the database, and those in charge of writing the supply chain report can retrieve the data.
• When buying from suppliers. Aside from advertisements and suppliers’ claims of sustainability, how else can brands be assured that the products that they are buying are indeed sustainable? A digital solution can address this issue by providing full disclosure, functioning as a database containing the sustainability information of suppliers’ products. A brand can use the database to check the sustainability compliance levels of a product or supplier. If they are not satisfied with the sustainability compliance levels of its product or supplier of choice, then it can use the database to look for more sustainable alternatives.
• When evaluating the sustainability performance of existing suppliers. Unsustainable suppliers can put the reputation of even the most sustainable brand at risk. A brand can use a digital solution to safeguard its business reputation from unsustainable suppliers. A digital solution can accurately measure and interpret data such as suppliers’ working conditions and their environmental performance. With this information in hand, a brand can work with its suppliers to improve their supply chains, thus ensuring that its reputation is secure.
When brands and their suppliers come together for change, the benefits can be remarkable.
In 2013, ethical trade consultants Impactt launched the Benefits for Business and Workers (BBW) programme, which brought together garment buyers from top retailers with 70+ garment factories and the UK government.
The programme offered training to increase productivity while offering better wages to workers, resulting in productivity gains of up to 26% and average factory cost savings of more than £40,000.
In addition, twenty leading brands have committed to the ZDHC Roadmap to Zero Programme, an initiative designed to minimise the hazardous chemical impacts of textile production. A pilot programme was run by five ZDHC brands, in collaboration with suppliers in five countries, to test the feasibility of collecting and reporting chemical purchase information to establish data standards across the supply base.
Spot-checks and periodic audits will remain a valuable and vital part of supply chain management. Shifting more emphasis toward partnership and empowerment, however, will deliver greater ROI. With a continuous stream of authentic social and environmental data from suppliers, brands have a rolling history to work with that is more transparent, less open to falsification, and valuable from a BI perspective. Putting these systems in place requires investment in your partners, cultural change and process adaptation, and the outcome is likely to be lower costs, lower risk and a more efficient use of your sustainability budget.
The article was originally published in SDC Executive.[/ms-protect-content]
About the Author
Ben Wilde is a Director at ADEC Innovations. A business and economics graduate with a decade’s worth of experience in the data and document management industry, Ben leads the design and delivery of technology solutions aimed towards managing large volumes of corporate responsibility and operations data.
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