Supply chains have the power to determine whether a venture will be successful or not.
Get the supply chain right, and companies can compete with confidence. Get it wrong, and the risks and costs can mount up quickly.
If the supply chain is vulnerable to disruption, this can cause difficulties for companies that rely on them. For example, manufacturers rely on their supply chain to deliver raw materials for production as well as to push the finished goods out to the marketplace. Therefore, manufacturers benefit from stability and reliability in the supply chain.
Another issue that companies must be aware of in the supply chain is ethical behaviour.
Working with supply chain partners that adhere to high ethical standards is crucial across many fronts, including company reputation and the quality, timeliness, and reliability of materials received.
Consumers are increasingly voting with their feet when it comes to businesses that don’t demonstrate strong ethical behaviours and more than half are willing to pay a premium for services from companies promoting social responsibility.
This can be related to environmental sustainability, anti-slavery, or quality and reliability. The supply chain plays an increasingly-important role in a brand’s ability to build trust with consumers.
A Harvard Business Review study showed that retailers with a high level of trust in the manufacturer generated 78 percent more sales than those with a lower level.
However, recent research by the Economist Intelligence Unit has uncovered significant issues in how multinational firms manage the ethical performance of their supply chains.
Ethical breaches and corruption
Less than one-third were found to address issues such as ethical breaches or supply chain corruption.
Addressing these breaches isn’t just about corporate social responsibility, although that does play a significant role. This is especially true when it’s considered how often human rights abuses are found at some level of the supply chain.
Companies must play their part in stamping out this activity. Failing to do so will result in negative publicity and loss of consumer trust.
However, demanding ethical behaviour throughout the supply chain also strengthens the reliability of the supply chain, which determines operational success. For example, if the raw materials are delivered late or are poor quality, the finished product will suffer. If supply chains provide tainted materials that affect the finished product, from contaminated food ingredients to inferior steel, the company has to face consequences.
How blockchain is helping to increase visibility
To maintain quality, and to build and sustain consumer trust, manufacturers must gain more visibility into the supply chain, and act immediately on finding out about any potential ethical violations.
An emerging technology called blockchain is helping manufacturers increase visibility into the supply chain. Originally developed to underpin digital currencies such as Bitcoin, blockchain refers to a distributed ledger where a list of transactions is stored in multiple participating servers, rather than on a central transaction server.
The distributed nature of the technology makes it inherently secure because it’s tamper-proof. No one can fraudulently change the transactions because they’re locked down – any attempt to do so would be automatically detected.
Blockchain can be used to increase visibility throughout the supply chain, decrease administrative costs, and improve traceability. This overcomes some of the key challenges that manufacturers have encountered in trying to manage their supply chain, especially as supply chain networks become more complex and less integrated.
More manufacturers now adopting blockchain technology
Blockchain provides an immutable record of events without requiring a central authority.
Many companies are already using blockchain for various applications. A recent global study showed that manufacturers are adopting blockchain technology in droves, with 74 percent of respondents either in the experimentation or the production phase of blockchain development.
Blockchain is being used to trace where products come from and to check if the products are linked to forced labour, corruption, or other ethical violations. This is also helpful for tracking tainted products back to their source.
To really leverage blockchain, manufacturers need to integrate it with their enterprise resource planning (ERP) solution.
Used as a plugin tool, blockchain can help expand analytical possibilities and give manufacturers a more comprehensive view of the business to enable more accurate decision-making.
This approach can help bring improved visibility and clarity to operations, supporting business growth and ethical performance.
Terri Hiskey is vice president, product marketing, manufacturing, Epicor Software