Digital supply chain management

How Supply Chain Transparency Builds a More Sustainable and Resilient Supply Chain

By Sam Wallis, Product Marketing Manager, Tradeshift

Transparency with your suppliers, and your larger supply chain can uncover gaps and opportunities that contribute to your company’s sustainability. Most companies set out to do the right thing. But the complexity and disconnected nature of modern supply chains can make it very difficult for organizations to isolate and address polluting or unethical behaviors lurking deep within their extended supply chains. Keep reading this blog to understand the value of transparency in your supply chain and sustainability, or more specifically, having knowledge about participants in your supply chain and their active role in the value chain.

 

What is Supply Chain Transparency?

At its core, transparency in the supply chain is defined as knowledge about participants in the supply chain and their active role in the value chain. Basically, it is the ability to build up a clear and accurate picture of both the makeup and behaviors of every supplier your business deals with, either directly or indirectly.

A recent study by McKinsey claims that the average consumer company’s supply chain accounts for more than 80% of carbon emissions. Achieving full transparency across the entire supply chain ecosystem is, therefore, a prerequisite for any large organization wishing to present a full, accurate, and credible picture of their ESG credentials.

 

BONUS: Digitization enhances your visibility into your supply chain — with greater visibility into data and transaction records, digitization creates a more complete supply chain built around adding value to your relationships and operations.

 

How Does Supply Chain Transparency Contribute to Sustainability?

Many of the challenges preventing large organizations from achieving supply chain transparency stem from a need for more reliable data. Despite rapid advances in technology, the way businesses conduct trade remains heavily paper-based. This makes it difficult to track the provenance of goods and materials. One study by Deloitte found 65% of organizations have limited or no visibility of their supply chain below tier-one suppliers.

Digitalizing the relationships across supply chains will go a long way to giving businesses the kind of transparency they need to ensure their best intentions are matched by best practices. Making that digital connection across the entire supply chain ecosystem means that all parties can benefit from increased access to data.

Organizations at the apex of supply chains can be far more proactive in understanding and vetting the sustainability credentials of their extended supply chain. Increased transparency also means suppliers can also make a virtue of strong ESG data in order to secure contracts and business opportunities from customers who are actively looking to enhance their own credentials in this space.

 

Getting Started

There is growing acceptance among C-Suite and Executives of the need to digitize relationships across the supply chain in order to reach their transparency goals. Picking the right technology partner is a critical first step on this journey.

The global nature of modern supply chains means that relationships between businesses have evolved from one-to-one, linear engagements into complex ecosystems of interconnectivity between buyers and suppliers spanning the globe.

Traditional ‘hub and spoke’ software models that rely on a series of time-consuming and expensive 1:1 connections between a buyer and a supplier have failed to keep pace. Many smaller suppliers are also reluctant to connect to systems they regard as an additional layer of the complex and time-consuming processes they have to navigate just to get paid. As a result, large organizations are left with huge blindspots beyond a very small segment of the very largest tier-one suppliers.

True digital networks like Tradeshift are structured a lot more like a social network. Once a buyer or a seller joins the Tradeshift network, it’s relatively simple to connect with any other business on the platform.

Consequently, while the traditional business hub and spoke software applications can only ever aspire to provide transparency across a tiny fraction of the supply chain ecosystem, Tradeshift’s global network provides unprecedented connectivity and transparency between buyers and sellers throughout the entire supply chain – not just their Tier 1 suppliers, but their suppliers’ suppliers and beyond.

Once that digital foundation is in place, you can then digitize virtually any aspect of the relationship, from invoicing to purchasing, risk assessment of suppliers, and carbon footprint calculations.

Organizations interested in gaining a clearer picture of the ESG credentials across their supply chain can gain an enormous amount of valuable information from vendor metadata. Metadata includes things like the date and time when the message was received, the channel that processed the message, information about the sender of the message, and more. In this case, the metadata and messages analyzed relate to payment communications with suppliers.

Having access to metadata makes identification easier, boosts collaboration through traceability, makes it easier to discover valuable data, and helps to make sense of complicated datasets. Tradeshift partners such as Normative can help turn this data into ready-to-use, actionable insight on scope 3 carbon emissions across the supply chain

Actionable steps you can take to start providing supplier transparency:

 

    • Conduct regular audits of your supply chain
    • Leverage third parties with expertise in SC sourcing validation like Normative or FRDM

 

 

BONUS: Future of Supply Chain: Consolidation Layer

Consumers, regulators, and investors are placing the ESG credentials of large organizations and their suppliers under increasing scrutiny. Large organizations are also waking up to the fact that maintaining solid ESG credentials has strong links to the supply chain resilience measures they are looking to enact in the wake of the pandemic.

As the only true two-sided network for B2B buyers and sellers, Tradeshift is in a unique position to help organizations achieve 100% transparency across their entire ecosystem of trading relationships.

Our solutions streamline your processes, invoices, orders, and conversations all in one spot – our robust platform.

All parties can easily view data, update important information when needed, and track order progress. Knowing how integral supplier transparency is for a strong supply chain, Tradeshift bakes transparency into the process, creating a resilient process that is both agile and sustainable.

Building sustainable and resilient supply chains has never been more critical—or achievable. Find out more about ensuring your supply chain is agile, flexible, and sustainable by looking at our ESG dedicated page.

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