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Supply Chain Transparency: The Modern Metric

Supply Chain Transparency: The Modern Metric

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In a very topical interview, our Editor talks to Yussef Bictash, Operations Manager at REISS, about true supply chain transparency and the importance of building a strong working relationship with specialist third-parties.

Ben Hanson: For a premium apparel brand, how important is supply chain management?  We hear it called the yardstick by which retailers and brands are measured.

Yussef Bictash: As you know, with what has happened around the world in the past year, the emphasis has definitely shifted in the way a retailer regards their supply chain. It’s no longer just about tracking the order lifecycle of a product; we are now putting what I call the ‘secondary’ supply chain to the forefront of our way of work.

Let me explain that point.  If you’d asked me 5 years ago what the supply chain meant to me, you would have got a very different answer to the one I’m giving today.  At that time, it would have primarily focused on things like gold seal fabrication, trim orders, approvals, transit times and freight haulage.

Today the emphasis is different.  Those things are still as vital as ever, but the elements that have come to the fore have been factories (and other suppliers) and the way they treat their employees.  This includes working conditions, living wages, public holidays, reasonable capacity, and much more.

And while this side of things is definitely a work in progress, we are doing our utmost to move in the right direction.

BH: And how much of that work do you feel the average customer is aware of?  It seems to me that consumers are increasingly factoring the ethical and practical aspects of retailers’ and brands global operations into their purchasing decisions.  They shop with a conscience, in effect, and expect retailers to make products with a conscience, too.

 

YB: You’ll always find a mix.  There are consumers who care and consumer who don’t, but what’s certain is that the more we become engulfed in the social media frenzy, the more the consumer becomes aware of his or her own social responsibility when it comes to shopping.

You only have to look at the way the press have reported on certain retailers’ involvement with recent disasters to see the way that supply chain practices are coming to mainstream attention.  For example, the perception of Angora changed entirely when PETA aired a video showing the cruelty with which rabbits were treated by a Chinese supplier.  And likewise, look at the issues Northface were faced with when it became apparent that some of their down had been sourced without their knowledge.

BH: Taking account of the complexities of international working, if a shopper does want to know where and by whom the products they like were made, how easy is it to source that information?

YB: At the moment, retailers and brands can keep track of consumer perception using customer services and social media.  Plenty of companies already collect this information for trend analysis purposes, but it can be equally useful for providing them with insight into how their sourcing and manufacturing processes are thought of by the general public.

When it comes to actually collecting the right sort of information about suppliers, this is something retail (particularly apparel) has been building towards since the industry went global and offshore manufacturing became the norm.  For a retailer who trades in multiple territories and manufactures in many more, true supply chain transparency is a must-have.  Today it’s not enough for retailers to know where their supply chain partners are based – they have to know their true capacities, ethical and environmental standards.

But while that sort of insight is a must-have, not everybody has it.  This has created a differentiating point for those who do, who advertise on their websites and other marketing materials that they’re “brand responsible”.

BH: What barriers might stand in your way when it comes to getting hold of the data that would allow a retailer or brand to claim to be “brand responsible”?  The most immediate one that I can think of is sub-contracting; I might commission products from one factory, and be none the wiser that they are in fact getting another, non-compliant operation to handle the work.

YB: That is a big issue.  It’s related to the broader problem of trying to ensure that your supplier is accurately responding to your requests for information, and in sufficient detail.

In the past, I’ve found that a generalised fear exists amongst suppliers.  They worry that by providing too much information and being too transparent, they may find themselves out of work.  This isn’t limited to the factories themselves, either.  You have to remember that a lot of factories are represented by agents who have a lot to lose if they’re found to be non-compliant themselves, or to be working with factories that fall short of standards.

Some companies also trust suppliers and agents to self-audit, and you can imagine the difficulties this brings with it.  Sub-contractor relationships might be ignored, and the information provided may be unreliable or sugar-coated so that the agent in question stands a better chance of holding onto your business.

And even if you decide you can trust that kind of information, getting it into a usable state can be a different matter entirely.  Some are written in local languages without translations, making it difficult for a UK or US retailer, for example, to make use of the data.

This is becoming less prevalent today, though, and more and more factories are volunteering to undergo external audits.  And in cases where they are found to be lacking, these factories are working with their customers (the retailers and brands) to meet the standards required by their due diligence.

This is an interesting dynamic, because it’s intended to build genuine trust in place of the misinformed and perhaps naïve trust that has characterised both sides of the relationship to date.

BH: As you said earlier, are a number of large companies (as well as smaller or boutique brands) who use that kind of informed trust to their advantage.  With complete insight into their factories and sourcing practices, brands like Everlane can trade with confidence.  Is this something you see becoming more prominent in the future?

YB:  Yes, definitely.  Take a look at the websites of big brands and smaller organisations alike, and you’ll find that most have corporate responsibility or ethical statements designed to show consumers that they take transparency seriously.

BH: Beyond just putting it on their website, what steps can a retailer or brand take to reach that level, where they can actually claim true supply chain transparency?  It can’t be as simple as a routine factory audit.

YB: No, but it can definitely begin with one. 

The best way is to look at the work of retailers who have started their own ethical think-tanks to properly target the issue.  Most of these will work in some capacity with organisations like Made-by, Unchosen, The Ethical Fashion Form, Labour Behind The Label, or Segura Systems – all of which are designed to help retailers and brands set the agenda, and demonstrate through practice how it can be sustained through new ways of working and technology.

BH: This all goes beyond the court of public opinion and advisory councils, of course.  Regulatory bodies and guidance like REACH, OHSA, and the Higg Index (from the Sustainable Apparel Coalition) have been created to either mandate or encourage supply chain transparency and compliance.  Do you think legislation will continue to grow?  And if so, how will those companies who are prepared stand to benefit?

YB: I think 2014 will be the year of compliance.  New European laws are going to require businesses to report on their policies regarding social, financial and environmental supply chain risks.

I read a quote from Jerome Chaplier (who’s coordinator of the European Coaltion for Corporate Justice), where he explained the cross-industry impact of legislation and specifically mentioned the apparel industry: “A large oil company will have to report on its oil spills and the health risks from gas flaring […] or a listed clothing retailer will have to consider the risks in its supply chain.”

And once this becomes a reality, it’ll change the view that the industry as a whole has of compliance.  It won’t just be seen as a point of differentiation for those who care, but rather an absolutely need for every organisation involved in the retail industry.

BH: If I, as a sourcing or supply chain manager, did discover that one of my supply chain partners had breached our ethical policy in some way, what would be the right thing to do about it?  My gut reaction might be to cease working with that factory to avoid damaging my reputation, but Walmart, for example, have a policy of working with supply chain partners instead, to bring them up to standard.

YB: I could see why you’d react that way, and even I’d be tempted to say “yes, let’s stop working with them immediately”.  But how will the factory owners and agents ever learn?

The media spotlight is resting firmly on us as retailers, and although the pressure is certainly on to stop working with suppliers who are deemed unethical, I believe that if we simply walk away, those suppliers’ conditions may never change.  If anything, a retailer’s responsibility is to promote change.

BH: How important do you feel technology is when it comes to achieving the level of insight and transparency that today’s consumers and regulators demand?

YB: For me, technology is the key.  I believe that in the very near future we’ll see an increase in the number of production tracking technologies being deployed alongside (and integrated with) the enterprise-level tools of ERP and PLM.

BH: Finally, we’ve talked about this from a business perspective, but I’m interested to get your personal opinion as well.  Do you feel as though it’s practical and desirable for retailers and brands to make sure their entire extended supply chain is environmentally sustainable and paying a living wage?

YB: My personal feeling is that this is a difficult project to tackle for an organisation of any size, and one fraught with problems.  I believe that building a strong working relationship with a specialist third-party is needed.

I also fear for the smaller retailer, who doesn’t have the buying power of a competitor with 200+ stores.  These businesses don’t have the luxury of “demanding” information from their suppliers, which is what has lead to the poorly-founded notion of “trust” in a lot of cases.

I recently saw another great quote that read: “content builds relationships; relationships are built on trust; and trust drives revenue”.  I believe this really sums the issue up: retailers are beginning to realise the power of the information they can glean from and promote via social media and the press, and the smartest ones are using this to create supply chain visibility, empower their consumers, and reinforce their brands.

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