The 5 Levels Of Supply Chain Transparency

As the story goes, the meatpacking districts of Chicago were one of the first recorded drivers, towards the need, for supply chain transparency. The Jungle, authored by Upton Sinclair, outraged the American public in 1904, after Sinclair’s depiction of the harsh realities of the meat industry at the turn of the 20th century. The book sparked consumer concern, which prompted the Food and Drug Act and the Meat Inspection Act (Linich 2016).

One could even argue supply chain transparency — at it’s origin — is a byproduct of consumer concerns, materialized within poor production, social and/or environmental quality.

Still, today, supply chain transparency holds a prominent position in concerns for consumer and business, alike. Transparency has become an organizational effort in business, as it can impact various aspects of a value chain, if neglected; not solely supply chain management.

In 2018, the definition of supply chain transparency is very different than it was over a century ago, and the means for obtaining transparency are a bit more accessible than they were in 1904. Barcoding and Blockchain technology weren’t really within reach for the innovators of the early 1900’s.

Time and technology have shifted expectations, and formed a consensus: 

What was once a luxury has become an imperative.

As mentioned the definition of supply chain transparency has undergone a shift, and that shift has brought elasticity to the terminology. For this reason, I thought it’d be a fun exercise to put a new name on supply chain transparency, rather than a typical sweeping-generalized definition.

There are nuances in the field, and dues to be paid to the great ingenuity that has driven it so far forwards.

With that, I bring you:

The 5 Levels of Supply Chain Transparency

The 5 levels at a glance

Level 1: Branding Transparency

Branding supply chain transparency is a strategy that has graced our world since the invention of the branded supply chain.

“Branding your supply chain means using your supply chain as a vehicle for your brand story to inspire loyalty and secure profits in the long term” (Mee 2015).

Here-in-lies the first level of supply chain transparency, which — in fact — doesn’t hold any true transparency whatsoever.

Parallel with a lot of circulating business jargon, ‘supply chain transparency’ has become a buzzword with a certain sex appeal, to the sustainability crusaders of our time.

Branding a supply chain as ‘transparent’ can increase stakeholder happiness, minimize consumer concern and align an organization with positive social and environmental values. While these are all very positive things, branding transparency without taking the measures to actualize transparency — within strategies and actions — is detrimental to the consumer-to-business shared value.

New York University’s Stern Center for Business and Human Rights published a report in 2017, which displayed just how damaging branded supply chain transparency can be for the business world.

“The report analyzed 12 leading ESG (Environmental, Social, Governace) frameworks, including those from Dow Jones, Bloomberg, and others, that investors and the public often look to for guidance on companies’ business practices. Its conclusion was that, while these frameworks provide a valuable service, many are falling short in their evaluations of companies’ social performance, which the authors define as the effects that a business’s operations have on the labor and other rights of the communities it touches” (Bain 2017).

To further this disillusion of actualizing supply chain transparency and sustainability, the report found that at least 60% of the ESG frameworks examined didn’t entirely take supply chain activities into consideration. And, as anyone interested in sustainability knows, supply chain activities remain one of the areas most damning to human and labor rights issues.

Explore how to drive supplier ESG & Sustainability with smart SRM solutions.

Level 2: Strategic Transparency

Strategic transparency is more of an organizational acceptance rather than anything else.

Getting shareholders, management, stakeholders, suppliers, agents-traders, and other parties active in supply chain activities — on the same page —  is challenging; if not impossible. But, when supply chain transparency is implemented at a strategic level, it holds opportunity for true structural-impact on an organization and it’s supply chain.

Focusing in on issues, such as transparency, is a focus that cannot dwindle or divert from the chosen course. Supply chain transparency is an all-in strategy, requiring harmonious agreement of various moving parties.

Strategic transparency is contingent upon the gathering of existing data, and building a knowledge base for existing supply chain activities and suppliers. Without this insight into supply chain activities, an organization has no bearings for the direction of future strategies regarding the transparency of their supply chain.

Learn more about how to succeed with Goals & Procurement Strategy Management here.

Level 3: Physical-Digital Transparency

In a world of technological abundance, it’d be silly not to take advantage within supply chain management.

Supply chain transparency becomes a bit more real at level 3: physical-digital transparency. What I mean by physical-digital transparency is a bit self-explanatory within it’s naming, but I’ll clarify.

Physical-digital is, simply, the connection between intelligent physical product tracking methods, and the cloud. This includes IoT-esque technology, for all of you acronym lovers out there.

There are a plethora of examples of physical-digital utilization — for the sake of supply chain transparency —  but I’ll just highlight two of my favorites.

RFID Tags:

Radio-frequency identification (RFID) tags, are — arguably — one of the major shifts in supply chain transparency, as we know today. In a Harvard Business Review article from 2010, the RFID tag technology was introduced to the masses, explaining that the grain-sized tag could be implemented in or on products to improve the traceability and visibility throughout the product lifecycle. Pretty much, RFID technology allows one to track a chicken — half way around the world — from the comfort of your headquarters (New 2010). 

Blockchain:

Blockchain technology can, too, be utilized as a means of improving supply chain transparency. Decentralized tagging methodology is the name of the game when it comes to blockchain. Where RFID tags are very useful for product-level transparency, blockchain could be equally useful for material-level. “By “tagging” a digital token to a good or material using blockchain, a business may soon be able to see the origin of the raw cotton used in its t-shirts or the metals used in its cell phones” (Newlands 2017).

Level 4: On-Site Transparency

Transparency into supply chain activities doesn’t get more transparent than level 4.

On-site transparency is supply chain activities such as in factory governance, training or auditing. Trust and training are two of the four T’s to supply chain transparency, as developed by David Weaver.

There is no better way to train a supplier actor than being on-site with that supplier. Engagement and presence — to an on-site supplier location — by a buying entity, should inherently build trust between both parties.

“Companies cannot expect their suppliers to act a certain way if they do not communicate these desired behaviors” (Weaver 2016).

Governance, while sometimes seen as a tedious element of supply chain transparency, is a necessary element. Suppliers, regardless of their compliance, utilization of technological traceability or level of communication must be held to the same standards of quality —  your organization expects to deliver to customers. Quality of production is one thing, but quality under time-of-production is another element that cannot be sidestepped: human rights, worker rights, labor rights, working conditions, environmental impact etc. . 

People and planet, both, are dependent upon the actions that occur within on-site supply chain transparency.

Read more about how to increase ROI on your on-site visits with smart Supplier Audit Management here.

Level 5: Consumer-Stamped Transparency

The last level of transparency is open for interpretation.

Why?

Because, it’s completely contingent upon you, and I: Consumers.

Supply chain transparency lives on a broad spectrum, as you can now deduce as an educated reader. With that said, it’s up to us to determine the fifth level of transparency.

We are the gatekeepers to the stamping of brand-approval. Without our stamp, supply chain transparency is merely a half-baked marketing tactic.

Collectively, consumers must demand transparency into the supply chains of the brands they support. Let’s not just be satisfied with the tracking information of a product purchased online. Let’s take this a step further.

True supply chain transparency entails visibility and traceability, not only on the product or retail level, but also at the supplier level, the raw material level, and the worker level.

I don’t want to just know where my product is made. I want to know the environmental impact that product has on our planet. I want to know the quality of life of the people who made it.

Consumer-stamped transparency isn’t, solely, a matter of supply chain visualization, it’s a matter of humanitarianism.

FAQ: Supply chain transparency

What is supply chain transparency?

Supply chain transparency is knowing what happens across your supply chain – suppliers, materials, working conditions, environmental impact – and being able to share that knowledge credibly with regulators, customers and consumers.

Why is supply chain transparency important?

Three reasons: regulation (CSDDD, CSRD, EUDR and Digital Product Passports make transparency a legal requirement), risk (you can't manage disruptions or compliance issues you can't see), and trust (consumers and B2B buyers increasingly choose verified transparency over marketing claims).

What is the difference between transparency and traceability?

Traceability is the ability to follow a product or material through the supply chain. Transparency is broader: it includes traceability but also covers supplier practices, conditions and impacts – and the willingness to share that information externally.

How do you measure supply chain transparency?

Common measures include the share of spend covered by mapped suppliers, tier-2+ visibility rates, audit coverage, share of products with origin data, and completeness of supplier ESG assessments. The five-level model works well as a maturity benchmark.

What technologies improve supply chain transparency?

SRM platforms for supplier data and assessments, RFID/IoT for product tracking, blockchain and Digital Product Passports for material origins, and risk monitoring tools that combine internal data with external signals.

Wondering which level your supply chain is on – and how to reach the next one? Explore Kodiak Hub's SRM platform for supplier assessments, audits, risk monitoring and the data foundation transparency is built on.