When your brand is on the line, gaining visibility and control of your supply chain.
Trends ranging from globalization to social media, to rising consumer demand for responsibly and sustainably produced goods have transformed the role of the supply chain. Your supply chain today is very much an extension of your brand – with the power to bolster or harm your reputation. Even the most praised brands are susceptible.
Across many well-known brands, there are cases over the past several years of harsh working conditions in overseas factories, fires and other safety hazards that have injured or killed thousands of people, and environmental spills or lapses that have caused significant damage to habitats and communities.
Suppliers’ poor workplace conditions and flawed environmental practices can directly or indirectly impact even the strongest brands, which is why environmentally and socially responsible sourcing has become a priority.
Tragic headlines underscore the limits to a traditional approach to supply chain management built solely on spot audits by third parties. With frequent audits, it’s not uncommon for results to reflect one polished moment in time vs. standard operating procedures. What’s more, the factories themselves can be left out of the loop. They may not see the results of the questionnaires or audits to which they submit, leaving no opportunity for systemic improvement. In the wrong context, audits can be hoops to jump through instead of management tools.
Many brands are progressing toward a different kind of supplier partnership that goes beyond auditing and focuses on empowerment. These changes are leading to some remarkable bottom-line benefits for all stakeholders – brands, supplier, workers and the socially- and environmentally minded public.
From Monitoring to Motivating
The advantages of a more transparent and empowering relationship with supply chain partners are compelling. The challenge is how to actually get there. How can you actively promote sustainable social, environmental and management practices in your supply chain? From water stewardship to fair pay to quality ratios, what are the steps you can take to add visibility and gain control of supplier activities that impact your brand image?
The first step is often to create stronger connections with your suppliers – both figurative and technological, with conduits for a continual flow of data.
Real ROI
For brands, shifting to an enhanced approach to supply chain management is a path to risk reduction, as well as a path to new insight – real business intelligence that uncovers important correlations and opportunities.
Reinvesting some of the costs of an audit-only system in supplier collaboration systems and benchmarking can have meaningful payoffs. Information gathered can reveal how investments in one part of a sustainable system affect others. How do worker welfare and worker sentiment impact factory output? How does excessive overtime contribute to waste and defects? What is the correlation between worker satisfaction and business KPIs?
Especially when data is combined across factories and analyzed holistically, the insights can be powerful. Applying data has shown how increasing worker compensation can often be more than offset by reductions in absenteeism and related costs. Businesses have also been able to quantify the benefits of sustainability measures, such as how purchasing more expensive but less hazardous dyes dramatically reduced dye consumption and overall costs. These types of hidden correlations are routinely uncovered and substantiated when brands invest in improved and collaborative data gathering with their suppliers.
With empirical data on hand, the benefits of sustainability and quality measures can be quantified – giving both factories and retailers a business case for further investment in worker and environmental welfare, and the means to measure it.
Best Practices for Collecting and Standardizing Supply Chain Data
Putting systems in place for continual data gathering and process management can be complex, in part because the answer isn’t always more technology. The key is to think creatively and flexibly about the best ways to capture data given the diverse resources available to your suppliers.
- Automate measurement. From carbon emissions to water quality, waste and chemical consumption, automating data capture can be an efficient and valid way to create a path to improvement. In the textile community, brands have worked with suppliers to replace unsustainable water quality testing programs by installing relatively inexpensive water quality sensors. The sensors provide real-time data to the factories so that changes in pH or temperature can be monitored and addressed in real-time. Factories then have visibility to fix problems immediately, protecting both the environment and their compliance status. The brand has real-time, verifiable data they can stand behind with confidence.
- Simplify the process for suppliers. The less burdensome it is for your factory partners to capture data, the greater the change you will receive more and better information for analysis. Be flexible and provide multiple options for responders to submit information into a common system. Some facilities are reliant on fax machines and paper scans, others will want to put it all in a spreadsheet to send, and some can fully integrate their resource planning systems with a brand’s cross-supplier system. Give factories options to best suit their capabilities.
- Engage workers where they are. The mechanisms for collecting fair factory data, for example, should remind, engage and encourage feedback in ways that align with worker needs. Text message/SMS can be a smart way to connect with workers and survey groups in real-time, requiring minimal effort from respondents and providing data that is timely, fresh and direct.
- Localize at every step. Limiting your processes to English can be a huge barrier to getting the insight you need. Brands need native speakers on the ground to train, educate and engage workers and managers on the systems you put in place.
Success Stories
When brands and their suppliers come together for change, the benefits can be remarkable.
In 2013, ethical trade consultants Impactt launched the Benefits for Business and Workers (BBW) program, which brought together garment buyers from top retailers with 70+ garment factories and the UK government.
The program offered training to increase productivity while offering better wages to workers, resulting in productivity gains of up to 26% and average factory cost savings of more than £40,000.
In addition, twenty leading brands have committed to the ZDHC Roadmap to Zero Programme, an initiative designed to minimize the hazardous chemical impacts of textile production. A pilot program was run by five ZDHC brands, in collaboration with suppliers in five countries, to test the feasibility of collecting and reporting on chemical purchase information to establish data standards across the supply base.
Verification Plus
Spot-checks and periodic audits will remain a valuable and vital part of supply chain management. Shifting more emphasis toward partnership and empowerment, however, will deliver greater ROI. With a continuous stream of authentic social and environmental data from suppliers, brands have a rolling history to work with that is more transparent, less open to falsification, and valuable from a BI perspective. Putting these systems in place requires investment in your partners, cultural changes and process adaptation, and the outcome is likely to be lower costs, lower risk, and a more efficient use of your sustainability budget.
Ben Wilde is a director at ADEC Innovations, a leader in advancing sustainable practices around the world and helping organizations grow and operate responsibly.
