Supply Chain Transparency Matters to Consumers

If you were to ask 10 people their thoughts on the term “supply chain,” you’d likely get 10 different answers as to what it truly means. Businessdictionary.com defines supply chain as:

Entire network of entities, directly or indirectly interlinked and interdependent in serving the same consumer or customer. It comprises of vendors that supply raw material, producers who convert the material into products, warehouses that store, distribution centers that deliver to the retailers, and retailers who bring the product to the ultimate user. Supply chains underlie value-chains because, without them, no producer has the ability to give customers what they want, when and where they want, at the price they want….

While this definition is pretty all-encompassing, it doesn’t reflect any individual interpretation, nor the important value-based considerations of critical importance to today’s natural product consumers. Historically, supply chain management has been an internal consideration set, the stuff of hours of sitting around conference tables, but now supply chain responsibility has taken on an entirely different filter; a company needs to shift its perspective to a lens that accurately displays it as viewed “by the consumer.” This introduces terms such as “transparency” and “ethical sourcing.” In this new decision-making paradigm, supply chain decisions are now more impacted by expectations throughout the supply chain process than simply by upper management finance reviews and quarterly reports. And rather than be left exclusively to manufacturers, it’s critical for natural product retailers to have a focus on what their supply chain looks like. After all, their consumers expect them to be making stocking decisions based on this information.

An important realization for your team: Every positive change is important to the end goal, and the ability to change the world is not as important as the desire to improve the world. It’s the small steps of change that lead to great advancements.

The basic question of “do consumers care about ethical sourcing?” has been affirmatively answered in many recent studies. Mintel data shows 56% of U.S. consumers stop buying from companies they believe are unethical.[1] Nielsen data shows 24% of global consumers are “conscious considerers” who are seeking brand loyalty based on a criterion involving the brand’s ability to resonate with the consumer’s lives and ideals.[2] More often, consumers are more willing to pay extra for an ideal value than settle on an ideal price. Researchers at MIT Sloan School of Management found that consumers may be willing to pay 2% to 10% more for products from companies that provide greater supply chain transparency.[3] Consumers, especially natural products consumers, are seeking compelling and consistent messaging from marketers to maintain brand loyalty.

If you have nothing to hide, there is no reason not to be transparent.

~Mohamed ElBaradei

The ability to discern and inform supply chain transparency follows a path more similar to genealogy than merely a process of purchase order reviews. Family history and context was developed based on a limited level of knowledge of the family tree based upon the availability of family stories and limited surviving documents and records. Today, the internet provides an abundance of resources so that you can quickly dig into personal lineage dating back hundreds of years. This same access to a trove of records and detail, and the ability to determine material origins, is quickly becoming the case for supply chain transparency. Questions can now be raised, by you or your consumer, and answered in a rapid and verifiable manner. This is a huge cultural shift, dramatically changing the balance of power. The first commitment by any marketer to supply chain transparency in this environment is the realization of its importance to the retailer and consumers. It’s an imperative for developing customer trust. Transparency is the action which gains the asset of trust.

Related: UNPA Expands Partnerships to Advance Industry Transparency
 Raley’s Introduces New Shelf Guide and Label Transparency Tool

The process of supply chain transparency can be simplified to S.O.U.R.C. E.

  • Supply chain culture as defined by your team.
  • Organize and define your Supply Chain Information Value team.
  • Understand the resources available to develop the most complete understanding of all aspects of supply chain transparency.
  • Research the resources available to provide both the current potential supply chain positions and decisions.
  • Communicate a clear and concise message defining your supply chain position and goals to your internal and external stakeholders.
  • Educate your entire team to proactively think in terms of supply chain transparency as it is defined internally. Further educate your consumers as to why you believe your policy is important and provide evidence and updates on your commitment to work towards improvement.

Supply chain culture is an important first step to determining the direction of any supply chain transparency program. Best-in-class examples of defining and committing to supply chain culture usually include companies like Patagonia, Nike, Bigelow Tea, all Certified B Corporations standards. B Labs has devised a scorecard to allow companies to achieve this certification. The certification indicates the ability and commitment to assess, develop and communicate the certified organization’s activity supporting the social and environmental performance of balancing profit and purpose. There are other value-driven companies approaching this cultural imperative with different approaches. The key is to make the cultural conversation a company priority. An important realization for your team, as you analyze potential suppliers and brands, will be that every positive change is important to the end goal and that the ability to change the world is not as important as the desire to improve the world. It’s the small steps of change that lead to great advancements, but no giant leap of change to society has ever occurred without small incremental individual changes happening first. Manage expectations of results and impact and celebrate the successes as they occur.

Organize and define your Supply Chain Information Team, as the decisions regarding what and how to prioritize your initiatives must be a team-approved effort with maximum buy-in from your team. A time and resource commitment should be defined in addition to the messaging and priorities. This team must be appropriately empowered to do the work necessary to investigate the brands.

Understand the resources you have to develop and validate both the need and the plan for your supply chain transparency initiatives. While the internet is now the easiest and most convenient asset, relationships and communications—with your vendors, your brands, and their vendors—is an important element of transparency to utilize.

Research your supply chain process and practices from start to finish. Look for both successes and opportunities for supply chain improvement. Take a look at the B Corporation Assessment and the companies that have received certification. Also look externally and within your industry for examples of other company initiatives and successes. Amazon Elements Supplements has many components of a supply chain transparency measurement: Contract manufacturer test results by lot number and country of ingredient origin are all offered through a QR portal on each bottle, in addition to extra information on the website.

Communicate your supply chain expectations to your internal team and your vendors. Self-reported audits are a common vehicle for communicating and gaining information supporting your supply chain transparency initiatives. Sharing this audit indicates an expectation of measurement and improvement across your supply chain. It keeps it all top of mind.

Educate both your employees and your customers on both your successes and your aspirations. Patagonia is considered by many to be the gold standard for supply chain transparency. The Supply Chain Footprint Chronicles® remarks on Patagonia’s successes as well as failures and commit to improvement:

Related: 10 Trends in Raw Materials

A Shell Game in the Dark (Patagonia Shell Game)

It is remarkably hard to reduce the environmental impact associated with our technical gear, especially our shells. Unlike other products we make, a shell is a lifesaving piece of equipment that absolutely must perform in the world’s worst weather. Unfortunately, to meet that standard of functionality we rely on fossil fuels. While Patagonia continually searches for alternative materials and processes, our environmental ambitions still outstrip current shell technology.

This transparency has seemed to serve Patagonia positively without the need to be perfect.

Supply chain transparency is clearly becoming an issue today’s more educated customer is paying more attention to and for. Supply chain transparency research and education is not only a positive action for your customers but also your employees and our global community. Define your expectations and research your own practices and vendors. Research and communicate your findings to provide the most accurate and transparent supply chain picture possible. Remember, it is not as important to be perfect as it is to try to be better.

A focus on measuring the ‘source’ criteria for supply chain measurement will likely improve both your practices and outcomes as it relates to customer expectations and ultimately, loyalty. Your attention to this will be appreciated and the time spent on supply chain transparency will provide a better work environment, engagement, followed by better customer lifetime spend and other important business metrics.

 

[1] https://www.mintel.com/press-centre/social-and-lifestyle/56-of-americans-stop-buying-from-brands-they-believe-are-unethical

[2] https://www.nielsen.com/us/en/insights/article/2019/battle-of-the-brands-consumer-disloyalty-is-sweeping-the-globe/

[3] https://pubsonline.informs.org/doi/10.1287/msom.2017.0685

 

Note: The views and opinions expressed here are those of the author(s) and contributor(s) and do not necessarily reflect those of the publisher and editors of WholeFoods Magazine.

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Scott Steinford, Founder, Trust Transparency Center
Scott Steinford has built a career of leading, learning and mentoring. Through immersion in many aspects of the supplement and pharmaceutical industry Scott has worked to redefine and improve business practices within the healthcare industry with an emphasis on transparency. His experience ranges from entry level to CEO and positions include organizations representing ingredient supplier, ingredient manufacturer, retail brand, private equity, M&A due diligence expert and trade organizations. Scott has a Pre-Law Bachelor’s Degree from the University of Texas at Arlington and a Master’s of Science Degree in Law from Champlain College. Scott currently is Executive Director for the CoQ10 Association and President of the Natural Algae Astaxanthin Association (NAXA) and Managing Partner of Trust Transparency Center; a boutique consulting organization dedicated to assisting companies seeking to improve both their internal and external trust transparency. Scott’s prior experience includes CEO of Doctor’s Best and maintained a pivotal role with a variety of ingredient manufacturers including Eisai, Kaneka and was a founder of ZMC-USA.

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