Organizations across the world are changing at breakneck speed, and so is the thought process of the customer. A decade ago, factors about the product’s origin and delivery systems were hardly given a second thought and almost no one was concerned about the supply chain as long as the product reached the end consumer.
This has changed over time, and everyone from the consumer to the company is now worried about different aspects of the supply chain. Customers now seek information and are inquisitive about the sources and systems that are involved in the delivery of their products. This evolving and changing consumer patterns have forced companies to think beyond the distributors.
It could ideally be argued that the transparency in the supply chain originated as a virtual side-effect of consumer concerns emerging from repeated incidences of counterfeit and poor-quality products. It is crucial to understand that the lack of transparency is equally challenging (and costly) for organizations, if not more. So, what has changed suddenly that forced organizations to start thinking beyond the opaque wall?
The Opaque Wall
Supply chains until now were the least of the concerns for the consumers. Even businesses were comfortable in having a limited view of their own sourcing methods and policies. The status quo about the source of good and their pathways were never questioned. This has led to a situation where even the top organizations are unaware of the fate of their products once it leaves the company-operated warehouses.
The various nodes across the supply chain are disconnected giving rise to a situation that does not work out best for the brand. In such cases, manufacturers have no means to control or track what happens to the product during the last mile of the supply chain. Once the product leaves the company warehouse, the company has no control over the product or the information that it receives about the progress of the product down the supply chain.
A distributor may not report the stocks back to the company leading to shortages at the retailers’ end. In another scenario, the distributor could be promoting one brand for better commissions by hoarding other brands. Since the brand does not know the product details in the last leg of the supply chain, it also does have any control over the products that are returned. Companies also do not get the consumer data which could have otherwise helped the brand streamline their marketing activities.
The opaque wall beyond the warehouse gives rise to problems that not only cripple the supply chain but also has the potential to hamper the very existence of the organization. Let us look at some of the common problems:
1. Maintaining Quality of Product: Since your organization has practically no knowledge of what happens to your product in the last leg of the supply chain, it is impossible to maintain the quality of the product. This is especially true if your supply chain deals with perishable and edible products.
2. Lack of Traceability: As we have already discussed, the lack of traceability is a significant issue that can have severe ramifications on your organization. This can lead to counterfeit products entering your supply chain, weakening of consumer trust in your company, and eventually impacting your sales and profits.
3. Lack of Communication: The lack of traceability does not affect just the organization but also leads to a lack of communication between various stakeholders involved in the supply chain. Poor communication leads to miscommunication and mistrust between various stakeholders which includes the customers too.
4. Rising Costs: To optimize and reduce the cost of your supply chain, it is essential for you to know your complete supply chain. Once you can track your entire supply chain, you can make improvements that could help in the overall reduction in costs.
5. Inventory Management: With the increasing number of SKUs and decreasing the time of delivery, inventory management has already become a difficult task for organizations across industries. The lack of knowledge of the entire supply chain is bound to complicate inventory management further leading to wastages, shortages, and disappointed end-users.
Although the concept of supply chain transparency is quite old, it is fast becoming an exceedingly significant attribute in the current global market. Through achieving transparency in the supply chain, businesses can effectively secure their reputation and establish trust by divulging information pertaining to the entire journey of the product.
Why Is It Crucial?
Enterprises have begun to realize that transparency in business is now more of an organizational effort and if neglected, can potentially affect multiple aspects of a value chain and not just the management of their supply chain. Sharing detailed information with the end-users and all the stakeholders involved in the supply chain has several benefits. It establishes a strong connection between businesses and consumers, builds trust, helps businesses react faster and more effectively, especially during any snags. Increasing transparency also aids in driving improvements as corporations can attain greater visibility across the supply chain.
By exercising transparency in the systems, stakeholders such as consumers, supervisory regulators, investors, and business leaders can voluntarily eradicate the opacity prevalent in the impervious supply chains of the past. Although the origin of a product is a quality that is imperceptible and not easily verifiable, it is an indispensable factor for many consumer purchases. For several products, this intangible trait is prioritized by consumers and an essential feature compared to available alternatives.
For instance, in almost all cases, an ethically manufactured item feels and looks indistinguishable from its sweatshop substitute, yet buyers care about its authenticity and integrity which is an undeniable fact. From the basic visual standpoint, there may not be a way to identify and distinguish food items like kosher, halal, and organic food items from their lesser alternatives, but they have clear distinctions from buyers’ perspective, thereby influencing their buying decisions.
An opaque supply chain can lead to massive risks arising due to instances of fraudulent product returns, management of inventory, counterfeiting, and lack of knowledge about the customer buying patterns resulting from lack of monitoring and tracking of end-user data.
Manufacturers can reduce these risks by working directly with retailers, eliminating opacity, and ensuring reduced oversight in the entire network. Closing hidden risks and information gaps by connecting the disconnected manufacturer, warehouse, distributor and retailer node is the only way forward.
To improve effectiveness and manage the expenditures in the supply chain, top logistics providers are regularly seeking new means through constant analysis. The incorporation of technology and transparency levers such as third-party data, collaboration across stakeholders, and real-time monitoring abilities have the potential to further strengthen the supply chain.
Product serialization is an effective way to track your product until it reaches the end-user. This also allows your customers to simply scan the QR code using any open source and check the authenticity as well as the journey of the product through the supply chain. This increases the trust customers have on the product and the organization.
At O4S, we employ machine learning technology to generate random Unique Identification (UID) codes for each product manufactured by a particular brand. This UID is then affixed to each product via a fully automated setup in the manufacturing facility using carriers like Encrypted QR Code, Optical Codes or NFC tags.
Additionally, retailer and distributor loyalty programs are an effective method to ensure that all the stakeholders are incentivized to share the data with your organization. With Gynger, O4S’s Trade Promotion Management Platform, you can instantly distribute the rewards using our software. This will result in instant gratification for the retailers, consumers, and distributors thereby increasing the efficiency of the loyalty management program.
Reward programs and loyalty schemes, if well-implemented could potentially result in a huge amount of data coming back to your organization. The information gleaned from these crucial insights into customer spending habits can be utilized in altering and suitably modifying marketing strategies.
It is important to bear in mind that is possible to achieve a robust and stable supply chain while reducing cost and mitigating the risks. Effective management and innovative technology can help your organization optimize the supply chain to meet the changing delivery standards. Adapting to newer technologies is the first step towards revamping the supply chain and staying ahead of the competition.