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Supply chain transparency: Technology, partnership and progress

Compliance is mostly voluntary for suppliers, and brand owners don't have to disclose everything. Data collection is mostly manual. But cloud links help, and IoT holds promise.

Consumers increasingly expect companies to demonstrate their products are ethically sourced and production methods uphold human rights and environmental guidelines.

Tech vendors have responded to this push for supply chain transparency with tools for gathering and disclosing information about suppliers' methods and materials. But significant gaps still exist in the long chain from field to consumer. Much of the process relies on voluntary surveys, manual data entry and the honesty of suppliers.

 "There's a ton of gaps," said Alexis Bateman, director of MIT's Sustainable Supply Chains initiative -- gaps in what's collected at each site, which itself depends on the information that brand-name companies choose to reveal about factors such as total emissions or labor practices at overseas factories.

"That needs to be collected at each supplier, whatever tier they're at, and that's a very manual process," Bateman said.

APIs and other data exchange technologies are in the works, and niche software vendors help companies manage supply chain transparency and share information on their websites. While companies sometimes do so under pain of penalty from regulations such as the California Transparency in Supply Chains Act and the U.K. Modern Slavery Act, the biggest driver is consumer demand, according to several experts.

That complex data collection makes supply chain transparency elusive for even the wealthiest manufacturers and retailers.

Traceability and transparency are not off-the-shelf solutions that you can deliver at a scalable level.
Andrew StevensSupply chain analyst, Gartner
Andrew StevensAndrew Stevens

"You can be talking about potentially requiring levels of connectivity across thousands of different suppliers, many of whom are probably not at the same levels of digital maturity as the brand owner," said Andrew Stevens, a Gartner supply chain analyst. "Traceability and transparency are not off-the-shelf solutions that you can deliver at a scalable level."

Supply chain transparency based on technology and partnership

Supply chain transparency has two components: supply chain visibility and disclosure, Bateman said. Visibility is data about every link in the supply chain. Disclosure is communicating that information to internal and external stakeholders.

Food and beverage companies and major retailers have invested heavily in technologies and processes that provide farm-to-fork governance and transparency. Suppliers upload information to smartphone apps and web portals, and consumers can often access some of it through barcodes on the product. Apparel is another industry where consumer transparency demands are high. Companies such as Nike, Patagonia and VF Corporation, maker of The North Face and Timberland, have high-profile disclosure initiatives.

Alexis BatemanAlexis Bateman

Most of the vendors in supply chain transparency provide some combination of cloud connectivity between suppliers and brand owners, a compliance methodology and databases, and content management for sharing the information. The front end is often a map with data visualization technology for pulling up information about individual farms and factories.

Competitors include Elevate, Qima, Source Intelligence, Sourcemap, SupplyShift and Transparency-One.

Frédéric DanielFrédéric Daniel

As to the latter, the software package is meant to create a secure social network that links all of the players within any given supply chain, said Frédéric Daniel, CTO of Transparency-One.

The French supermarket chain Intermarché manages 5,000-plus SKUs and thousands of suppliers on Transparency-One, Daniel said. U.S. retailer Macy's uses it, in part, to disclose its use of conflict materials -- minerals and other resources deemed to contribute to conflict somewhere in the world.

Confidentiality is essential so brand owners trust that suppliers won't leak product plans to competitors, he said.

Audit services play key role

A number of supplier audit options exist and serve an important role in boosting supply chain transparency.

Companies that specialize in collecting and verifying supplier information -- a process called a social compliance audit -- are important middlemen and frequent partners of software vendors, though some vendors, such as supplier audit vendor Qima, do their own audits. Transparency-One, for example, partnered with SGS, a 94,000-employee provider of inspection and verification, to run call centers to help suppliers onto its network.

Other organizations offer methodologies and key performance indicators (KPIs).

For example, The Sustainability Consortium (TSC) is a nonprofit based at Arizona State University and the University of Arkansas that has worked with retailer Walmart to develop a methodology called Thesis, said Erika Ferrin, senior director of marketing, communication and development. The methodology guides companies to improve the sustainability performance of their consumer products suppliers.

Thesis captures sustainability information and KPIs for around 90% of the products for sale in a Walmart store, and other retailers use the platform, she said.

Compliance is voluntary, and there is no process for verifying answers, Ferrin said.

"No retailer to date has required suppliers to fill out our index," she said. "It's all done through encouragement and choice."

In 2019, TSC moved away from its cloud-based SAP Product Stewardship Network (PSN) and partnered with cloud software vendor SupplyShift to host Thesis. The PSN process was mostly one-way, with retailers sending questions to suppliers. With the SupplyShift software and partnership, suppliers can enter their information first and get more frequent feedback from the retailers.

Collecting the information nevertheless remains challenging, according to Ferrin.

"Some suppliers have to go to thousands of facilities to get greenhouse gas emission numbers or go down to the farm level," she said. "The biggest issue with the system is less the platform itself and more the flow of the data up and down the supply chain."

Small companies lack the resources for collecting data and submitting information for organic certifications and other requirements.

"It's not necessarily that they don't understand how the technology works," she said. "It's more finding the time to do it."

Large companies might have to dig down five or six levels to reach factory or field.

Completing the questions demands a huge amount of time and resources, Ferrin said.

"A large manufacturer can have our set of questions and, within the [SupplyShift] system, can send it down to their suppliers, who can send it down to their suppliers," she said. "It's like a cascading question system."

For-profit EcoVadis does similar work as TSC but in more industries, Ferrin said. Other important players are nonprofits that help farmers and ranchers export their data for certification, such as Field to Market, Sustainable Agriculture Initiative Platform, SureHarvest and Trust In Food.

Supply chain visibility comes first

Improving visibility is the goal of many supply chain management tools, and track-and-trace capability -- knowing where a good has been and where it is going -- is a big part of it.

Track and trace is well developed for final products because companies have invested in making sure they get to customers on time, Bateman said. But things get murky when you move upstream in the supply chain. "There's no single solution," she said.

Some retailers and food manufacturers are turning to blockchain, a digital transaction log meant to boost visibility in a data chain, for better food traceability. Blockchain could also help ensure that a worker's statement of hours and working conditions makes it to the top of the supply chain.

But blockchain is not a miracle technology.

Blockchain is promising as an information system that lets any partner in the supply chain enter information, Bateman said. It also offers control over who can access it and how information is verified.

Whether blockchain offers a good database that is well set up and managed still remains to be seen, she said.

Another critical issue when it comes to blockchain is that information does not magically enter the chain.

When it comes to deploying blockchain for batch-level traceability, the devil is in the details, Daniel said. (The Transparency-One platform has a blockchain option.) The actual process of tracing products is complex because the amounts at each stage from farmer to process manufacturer are different. For example, a farmer has a field that yields a ton of wheat, but trucks carry five tons, silos hold 20 tons and flour makers and bakers use much smaller batches.

"Do I stop my production line when I'm finishing one bag of flour in order to be sure that I never mix it with another bag from somebody else?" Daniel asked.

Blockchain is not the only tool with potential. Supply chain transparency vendors are developing other tools to boost automation with IoT sensors, but a comprehensive approach remains elusive.

"I don't think it's ever going to be a sort of direct application or module that you could perhaps deploy from existing functionality," Stevens said.

A range of emerging technologies with the ability to capture, store, consolidate and communicate data, especially newer track-and-trace and serialization products, could be foundational, he said.

But that requires partnership.

A main challenge is providing auto discovery that lets suppliers opt in and accept a connection with the proper security and privacy between supply chain tiers, Daniel said.

"Honestly, this is a challenge of tomorrow because the challenge today is the people deciding to work together."

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