Looking For An Answer To The Supply Chain Data Black Hole

Typically companies invest primarily in optimizing their supply chains for cost savings and risk reduction while sustainability and social responsibility have not been key considerations in the growth of supply chain management. To add in new key indicator categories will mean retrofitting a core business function‒a daunting, expensive, and unclear goal. But is that the right way to look at the problem?

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December 12, 2015
LinkedIn

Supply chain management is a big deal. A company has a vision, a plan, a product they can bring to market. Their product needs to be able to deliver on their brand promise, meet consumer demand, and generate the appropriate returns to their investors. Typically, companies invest primarily in optimizing their supply chains for cost savings and risk reduction to achieve these goals. Sustainability and social responsibility have not been key considerations in the growth of supply chain management. To add in new key indicator categories will mean retrofitting a core business function‒a daunting, expensive, and unclear goal. But is that the right way to look at the problem?

Let us review, very briefly, the very low expectations that we have for transparency in supply chains today. The typical auditing and data collection model for multinational brands depends largely on self-reported data. Once collected, the data is the property of the brand, and is not shared beyond that individual company. In-person audits typically involve one person going to one factory once every year or two and providing a report that stays within the company that hired the auditor. This process is built on a company culture that is resistant to transparency, and the data silos it creates are mind-boggling.

The truth is, we have the means to actively monitor and improve supply chains. It isn’t a black hole: there are multiple points of output and input across the supply chain. And once this intelligence is combined by sharing, the visibility will be unprecedented.

It has been 10 years since I first started talking about supply chain transparency, and I still hear the same excuses. We discuss supply chains like we do the California weather, checking in daily, noting minor differences, discussing micro-climates – it’s ridiculous. The truth is, we have the means to actively monitor and improve supply chains. It isn’t a black hole: there are multiple points of output and input across the supply chain. And once this intelligence is combined by sharing, the visibility will be unprecedented. We must raise our expectations for our auditing and the quality of data collection and sharing. The current perception that transparency is a binary, share everything, or share nothing, is a deeply impoverished view of data management.

Think it won’t work? Consider the credit industry. Our entire banking system is predicated on the ability to engage in business with qualified individuals or companies. As an individual is identified to be a riskier investment, the lending entity identifies a rate that will mitigate the risk of engaging with that individual. Most importantly, by sharing this data all banks are able to perform the same risk mitigation. The same could one day be true of supply chain engagements.

We see the same mutually beneficial key data sets in supply chain management that have allowed banks to share information critical to the industry’s success. Managers want to know the prevailing wage within their industry so that they can benchmark their process against that standard. In addition to the industry standard, there is a need for localized understandings of sustainable, living wages by region. With such a large overlap in interests, the model of hiring one inspector per brand does not meet the needs of the industry. To move forward, we must begin to see changes in the ways that companies share information. Whether that is through a database, regular reporting, shared auditing, or a yet unidentified process is unclear, but the fact is that technology can be used to facilitate the exchange of information, and investing in clearer communications throughout the supply chain is a key step in moving this process forward.

Kohl Gill is the CEO and Founder of LaborVoices, follow him on Twitter, and LinkedIn.  

Disclaimer: LaborVoices intends to enter the Partnership for Freedom’s Rethink Supply Chains challenge led by Humanity United, a member of KnowTheChain. 

This piece appears as part of KnowTheChain’s blog series on the intersection of technology and supply chain transparency. Follow the discussion at: http://bit.ly/1kPLLw8.

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