Importance of Transparency in Modern Supply Chains

Transparency in modern supply chains efficiency, risk management, and customer trust.

Transparency in modern supply chains is necessary to establish credibility between suppliers, manufacturers, distributors, and consumers. Modern supply chains are a framework of resources, stakeholders, and technology that improves the operational efficiency of supply chains, enhances agility, and offers greater flexibility and cost savings. With the evolving needs of consumers, the modern supply chain has acknowledged the demand for supply chain visibility to allow stakeholders and consumers to track the lifecycle of goods, products and services across the supply chain. It ensures adherence to ethical practices, conforms to regulations and promotes sustainable shipping. Let us learn more about transparency in modern supply chains. 

What are modern supply chains? 

The supply chain is a framework that balances the supply and demand of goods, raw materials, and services across the globe. The supply chain is managed by a dynamic network of organizations, individuals, suppliers, resources, and activities. The network is utilized to manufacture, sell, and distribute goods across the supply chain to cater to people’s growing demands. Modern supply chains evolve traditional chains, focusing on fulfilling consumer expectations and needs. Driven by technological integration in shipping, modern supply chains are adopting a globalized approach to filter the rising needs for faster, optimized and efficient shipping processes, keeping the quality of goods in mind.  

In short, modern supply chains are networks of resources, technology, and people formulated to create and circulate goods and services. Their work is to streamline the operations of the supply chain using technology and data-driven decisions. All the supply chain processes, from order, invoicing, procurement of goods, packing, logistics, transportation, and distribution of goods to end customers, are managed to improve operational efficiency and customer satisfaction.  

What is the difference between traditional and modern supply chains? 

Modern supply chains have recently evolved from traditional supply chains. Let us learn about the differences between modern and traditional supply chains. 

  1. Goal – Traditional supply chains were built to cater to production needs and formulate strategies to boost the coordination between various supply chain activities that can improve production and provision. It follows a linear cycle from the supplier to the end customer, crossing producer, distributor and retailer. On the other hand, modern supply chains have evolved to prioritize sustainability in the supply chain and cater to customer needs. Integrated supply chain management helps in improving the efficiency of modern supply chains. 
  2. Use of technology – As per its name, traditional supply chains do not use logistics management tools and depend on communication between organizations and people for seamless working. It uses documentation and involves intense paperwork for billing, invoices and receipts. Modern supply chains continuously integrate newer technologies to optimize and streamline supply chain processes. Electronic data interchange (EDI) facilitates the documentation of orders from businesses in the supply chain without paper, as all processes are managed using the Internet. 
  3. Outreach – Traditional supply chains have less outreach than modern ones, where technology has made them available to the global market. While traditional supply chains cater to local markets, modern chains can access international markets for resourcing and other purposes. 
  4. Adaptability – Traditional supply chains are less adaptable and flexible when exposed to an influx of demands or disruptions in the supply chain. In comparison, modern supply chains are more agile and flexible. They respond quickly to market fluctuations and unexpected disruptions. 
  5. Cost-effective – Traditional supply chain focuses on reducing cost investment by improving the operational efficiency in the manufacturing and shipping process. Modern supply chains focus on the quality of goods and services reaching the customer and, at the same time, aim to optimize cost investment. 

What is modern supply chain transparency? 

Transparency in modern supply chains refers to working on supply chain visibility where all stakeholders, including the organisation, businesses, individuals and service providers, can track the lifecycle of assets and goods inside the supply chain. Transparency in the supply chain is promoted by sharing real-time, factual and valid information among all key shareholders. The communication process is simplified, and complete disclosure about the status of goods, including their manufacturing, production, sourcing and distribution, is made visible. Modern supply chain management works on collecting accurate and valid data from all sources to offer flexible supply chain transparency. 

For example, in the case of traditional supply chains, customers or stakeholders have little or no knowledge about the status of their shipments in the supply chain. They had to place their orders and then vaguely wait to receive their shipment. Since modern supply chains promote transparency, customers, organizations and stakeholders can easily track and monitor the status of their shipment anywhere in the supply chain. The lifecycle of goods, from outsourcing raw materials to manufacturing, packaging, documentation, and transportation to the supplier or distributor, can be tracked using various digital tools such as blockchain technology. Transparency in modern supply chains fosters customer satisfaction and offers reliable shipping. 

What is the primary goal of supply chain transparency? 

Supply chain transparency is essential for various reasons. Let us learn more about the importance of modern supply chain transparency. 

  1. Compliance with regulatory standards – International trade requires strict compliance with regulatory standards. Modern supply chains offer transparency. Open information sharing by companies allows shippers to conform to regulatory standards and showcases the commitment of organizations to meet legal obligations and carry shipping under industry-specific guidelines. 
  2. Builds credibility – Supply chain transparency allows businesses to be more open about their supply chain activities, such as sourcing, manufacturing process, and other operations. This helps establish trust and credibility with consumers, investors, and other stakeholders.  
  3. Ensure ethical shipping practices – If businesses in the modern supply chain are asked to maintain transparency, they will be more conscious of ethical and legal manufacturing practices. Carrying out business operations in a socially responsible manner includes following fair labor practices, human rights, and adherence to green shipping practices. Transparency promotes accountability and makes businesses liable to stakeholders and consumers in case of any offences. 
  4. Risk mitigation – One of the primary benefits of modern supply chain transparency is that it allows businesses to identify and mitigate risks timely and effectively. Uncertainties in the supply chain, such as disruptions, geopolitical events, and environmental concerns, can hamper the continuity of supply chain operations. Technology can help identify and mitigate potential risks. 
  5. Meeting consumer expectations – Modern consumers are more concerned about product quality. Most purchase decisions are based on the business’s contribution to environmental sustainability, shipping time, demand for accurate time information, and ethical sourcing. 

How to Achieve Supply Chain Transparency? 

  1. Promoting clear communications – Effective communication between all stakeholders is essential. Businesses must establish communication channels that relay real-time information to all suppliers, manufacturers, logistics providers, and customers involved in the shipping business. Open communication prevents misunderstanding and illegal activities to facilitate seamless legal trade. 
  2. Using technology – Modern supply chains extensively integrate technology to automate processes and gather real-time data. Container tracking technology such as IoT and RFID helps track goods and containers in their shipping process. Blockchain technology helps track the lifecycle of assets. 
  3. Auditing performance – Stakeholders in the supply chain must identify the key performance indicators and assess the metrics to evaluate their suppliers periodically. Regular audits help assess suppliers and manufacturers to establish strict control and push them to follow ethical practices. 
  4. Standardize data reporting – Different businesses have different data reporting and information sharing methods, which may differ across the global supply chain. So, by establishing a standard format and channel for data formats and reports, businesses can easily understand and analyze the metrics, leading to better operational efficiency. 

Transparency in modern supply chains is essential because it helps comply with regulatory standards, builds trust and credibility, mitigates risks, and meets consumer expectations. 

LOTUS Containers is a shipping container service provider in Germany that offers container leasing services across the globe. We have partnered with more than 300+ container depots to cater to clients across the global supply chain.

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