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Transparency as a success factor: These are the advantages of a transparent supply chain

by Editorial Office

Supply chain disruptions, cyber threats, and the need to implement environmental and sustainability standards are challenges that logistics managers are currently facing. A transparent supply chain is proving to be a key success factor and offers companies profitable advantages.

Benefit #1: Increasing resilience within the supply chain

  • Minimizing supply chain disruptions

The Corona pandemic and the Ever Given disaster have once again clearly demonstrated the vulnerability of modern supply chains – with economic consequences: Global disruptions cost companies an average of $184 million per year. This is the conclusion of the international study “Intero’s Annual Global Supply Chain Report”. According to the report, more than half (51 percent) of global supply chains have been affected by the Corona pandemic in the past two years, and 89 percent of the 900 IT and procurement decision-makers surveyed report disruptions in production. For almost all respondents (94 percent), sales have developed negatively as a result. 83 percent of respondents also fear that their company’s image may have been damaged.

  • Supply chain transparency through AI deployment and real-time monitoring

In view of this development, the establishment of resilient supply networks has become a critical feature for success. Cost efficiency is no longer the sole factor in assessing excellent supply chain planning: it is not only the cheapest route that determines future viability, but increasingly also the most resilient one. Dual or multi-source solutions can avoid disruptions, but they increase the complexity of the supply chain. In such highly interconnected supply chains, real-time IT-based monitoring promotes agility. Modern supply chain management and AI control generate transparency and thus the possibility of responding to disruptions in a targeted manner. In this way, companies remain agile in their processes and can quickly react to external influences.

Benefit #2: Driving efficiency in the supply chain

  • Optimizing supply chain costs

Even though supply chain resilience is becoming increasingly important, efficiency remains the main objective of every company. Not least because manufacturing and logistics costs are reflected in prices for end consumers. An efficient supply chain is and will therefore remain a decisive competitive advantage. Among other things, reliable inventory management is a major pillar of economic efficiency. Fluctuations in demand require flexible adjustment, starting with the procurement of raw materials and continuing through production to transport and warehousing.

  • Transparency through agile goods management and intelligent SCM

Excessive inventories tie up capital unnecessarily; in the worst case, they even lead to the economically and ecologically irresponsible destruction of products. Supply bottlenecks, on the other hand, annoy corporate partners, retailers and end customers.

Optimal management of these processes can only be achieved through an agile organization, detailed monitoring, and a permanent flow of information between all links in the supply chain. Further, transparency, measurability and traceability are important keys for identifying cost drivers – and taking countermeasures. Intelligent supply chain management, for example through the use of cloud-based SCM software, provides sustainable and measurable support for corporate success.

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Benefit #3: Increasing sustainability

  • Sustainability as an indicator of sales growth – demand is rising

The sustainable alignment of the supply chain is maturing into a significant competitive factor. Demand for socially and ecologically produced goods is stronger than ever before. This is also confirmed by a survey among 5,000 consumers in Germany, Austria and Switzerland conducted by the management and strategy consultancy McKinsey in December 2020. According to the survey, more than three-quarters (78 percent) of German consumers pay attention to sustainability when making purchases. 42 percent of those surveyed would like to see more information about sustainability on goods. In addition to the carbon footprint of the goods, this also includes questions about nature conservation and the working conditions under which the products were created.

Companies have also recognized the relevance of sustainable management: Almost three quarters (74 percent) of the logistics managers surveyed for the 15th Hermes Barometer believe that companies need to integrate environmental and social criteria into their target systems and decisions to ensure long-term competitiveness. Added to this is a recent legal requirement: the Supply Chain Act, which was passed in July 2021 and will come into force gradually from January 2023, obliging companies to achieve far-reaching compliance in environmental and social factors in the areas of procurement, manufacturing and logistics.

  • Supply chain transparency strengthens influence and credibility

When it comes to implementing the new rules, companies still face one hurdle in particular: For the majority of decision-makers surveyed for the Hermes Barometer, the possibilities for sustainable supply chain design seem to be limited at the company boundaries. 61 percent of respondents agreed with the statement that they have only moderate influence on the behavior of their suppliers and almost no influence at all on the behavior of downstream companies. For many companies, this makes the realization of a “green supply chain” more difficult. The development of innovative “green supply chain management” can provide a remedy: Optimized data flows, controlled communication and process-related real-time mapping do not only increase transparency. It also increases the opportunities to influence other participants in the supply chain. An ongoing analysis of the green footprint shows the company where it stands in terms of sustainability and where there is still potential to be leveraged. This makes it easier to comply with voluntary commitments and external guidelines. A positive side effect is that an improved information policy and more precise product labeling strengthen consumer trust. Transparency leads to sustainability and thus to real competitive advantages in a competitive environment.

Benefit #4: Reducing CO2 emissions

  • Promoting environmental sustainability

When it comes to CO2 emissions, the McKinsey consumer survey is quite precise: 67 percent of respondents want the lowest possible carbon dioxide emissions in production and transport. Further, according to the Hermes Barometer on green supply chain management (INTERNAL LINK /publications/barometer/hermes-barometer-green-supply-chain-management/ ), awareness is also growing among logistics managers: 84 percent of respondents said that growing environmental awareness will be a significant driver of change in the supply chain in the coming years. As a result, around half of respondents (56 percent) have set ambitious targets to reduce emissions.

  • Supply chain transparency promotes holistic CO2 reduction

Likewise, transparent processes are mandatory when it comes to reducing CO2 emissions within the supply chain. Successful supply chain management should always include transparent and detailed traceability as well as AI-driven data monitoring. This gives companies the opportunity to monitor their CO2 emissions both holistically and selectively, to promote effective reduction and to support downstream companies with targeted measures.

Benefit #5: Enhancing IT security

  • Preventing cyber incidents

In the area of IT security, transparency is crucial: The physical supply chain can no longer be separated from the digital supply chain in a networked Logistics 4.0 environment. In recent years, and especially in the wake of increased digitization efforts during the pandemic, ransomware attacks on the supply chains of large companies and their associated network partners in particular have become more frequent. Studies show billions in losses for companies worldwide. Extortionist attacks and other activities of cyber criminals thus lead to an intensified threat situation for the supply network, to which logistics managers should react within the framework of holistic supply chain risk management.

  • Transparent supply chain management protects against cyber attacks

Along the digital supply chain, too, companies are well advised to use sophisticated supply chain management in order to make all workflows, processes and links in the supply chain both visible and traceable. Through transparency and real-time data measurement, responsible parties can identify irregularities more quickly and thus limit the risk of serious breaches and high losses.

Leveraging the benefits of a transparent supply chain

The relevance of a transparent supply chain is increasing: This is also confirmed by the 13th Hermes Barometer on the topic of “Transparency in the Supply Chain”. According to the barometer, just under half (47 percent) of the 200 logistics managers surveyed believe that the Corona pandemic has increased the importance of a transparent supply chain.
The benefits in terms of efficiency, resilience and security are just as clear as the value for the sustainable and CO2-optimized design of the supply chain and thus the long-term future and competitiveness of companies. Decision-makers whose supply chain still has blind spots are well advised to increase the transparency of their processes with the help of digital tools such as cloud-based SCM software – and thus successfully assert themselves on the market in the long term.

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