Manufacturers today face increasingly complex challenges, from economic instability to compliance pressures and heightened global competition.
Most recently, they have come under scrutiny with regard to their ethical and sustainability practices, with consumers paying closer attention to how organizations source, manufacture and distribute goods. According to an Accenture survey, more than half of consumers would pay more for products designed to be reused or recycled, bringing sustainable practices to the fore.
In response to this shift, organizations have taken a number of steps to change the way they operate, such as embracing greener, more sustainable ways of working, and even expanding their focus on deploying corporate social responsibility initiatives. They’re shining the spotlight specifically on ethical sourcing.
As in many industry sectors, technology has a major role to play in developing more ethical and responsible sourcing of parts or raw materials. It enables organizations to ensure transparency of information about all suppliers, through systems that capture and manage information across the supply chain. Here, then, are six steps they should take to successfully build ethical and sustainable supply chains.
Identify Trustworthy Suppliers
Before embarking on an ethical-supply chain strategy, organizations must first locate trading partners who share the same ethical practices. They can search for potential partners based on specific criteria — for example, whether the business in question maintains sustainable working practices, uses conflict-free minerals in its products, or engages in fair labor practices. It’s imperative that companies be able to trust the partners they work with, to ensure ethical working practices across the end-to-end supply chain.
Secure Trading-Partner Relationships
Once a supplier has been selected, it’s important to secure the supplier’s interaction with your organization. This helps to increase trust and minimize risk across trading-partner relationships. It can be done using an identity and access management platform for assigning a digital identity to trading partners across the business ecosystem.
In the process, you can ensure that external suppliers, business partners and contractors have secure access to the internal systems they need based on their roles within the ecosystem, including logistics, warehouse management, inventory and enterprise systems, as well as data.
Digitize Your Supply Chain
Upon securing the desired trading partners, companies must then connect them electronically to business operations, in order to establish a digital supply chain.
Ideally, this would take place in a cloud-based, data-integration environment, which allows the supply chain platform to scale in line with changing consumer demands and fluctuating market conditions. Embracing a digital supply chain also helps to prevent the falsification of manual, paper-based supply-chain documents, and therefore indirectly reduces the amount of counterfeit parts entering the supply chain, especially in the aftermarket sector.
Monitor Shipment Provenance
The key to building trust and protecting the reputation of an organization is knowing the source of all the parts that make up a product. Leveraging the internet of things (IoT), organizations can improve supply-chain visibility by tracking both the movement and condition of shipments. IoT sensors measure the temperature of frozen or perishable goods, shock levels as fragile goods are moved, and the location of expensive items via the global positioning system (GPS). In doing so, shippers can help to ensure against spoilage, damage and theft.
While IoT on its own can bring a slew of benefits to organizations, combining it with other advanced technologies such as blockchain can take it a step further. With blockchain, organizations can ensure greater traceability by capturing the source and retaining the provenance of goods as they flow through the supply chain.
For example, if a fire breaks out in a vehicle and the source is found to be the wire harness, a potential government-mandated recall might require the identity of all suppliers who were involved with its manufacture. If poor-quality gold was used in the connectors fitted to the wire harness, evidence in the blockchain can immediately identify where the gold came from — even the mine from which it originated.
While blockchain stands to transform ethical sourcing practices, organizations are still at the early stages of learning about the technology and how it can impact the way they do business. It will be a few years before blockchain finds its way into every business process.
Manage Supplier Communities
Ethical practices need to be managed in a continuous manner, and companies must think about how they can improve day-to-day collaboration within their supply chains to achieve this. Effective collaboration with trading partners helps to drive greater adoption and adherence to ethical sourcing practices.
Companies should ensure they have up-to-date contact details for each participant in the supply chain. Collaboration platforms can help to encourage this. After all, it’s difficult to collaborate with suppliers if key contact details such as e-mail addresses or phone numbers are missing. By regularly surveying supplier communities, companies can uncover interesting insights into how the supply chain is performing, and what level of ethical practices is being achieved.
Gather Ethical Insights
For many organizations, monitoring the performance of trading partners and truly understanding the ethical “pulse” of supply chains remains a key challenge. To this end, advanced analytics, artificial intelligence and machine learning tools offer a helpful solution, providing a wealth of insights into day-to-day processes. In fact, AI stands to transform future operations, providing a means of ensuring that supply chains meet ethical standards, and applying measurable outcomes that can be applied to every trading partner across the chain.
Through the use of advanced AI dashboards, organizations will be able to consistently monitor the ethical performance of trading partners. They’ll use the information to make strategic business decisions such as renewing supply contracts with high-performing suppliers, or terminating those with underperformers.
Mark Morley is director of strategic product marketing at OpenText's Business Network.
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