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The Tangible ROI of a Transparent, Traceable Supply Chain

As supply chain authentication becomes a larger part of the apparel industry’s ongoing conversation about sustainability, traceability as a practice has captured the attention of brands and shoppers.

It’s key to meeting ambitious sustainability goals and can improve brand revenues by giving apparel companies end-to-end data on their supply chains. It has also gained traction among consumers, who see it as a way to avoid counterfeit product and verify the value of luxury purchases.

Still, some apparel retailers are reluctant to approach traceability or don’t know how to address it with their supply chain partners.

Stephane Boivin, CEO of supply chain visibility and quality assurance platform Pivot88, spoke to Sourcing Journal about why traceability must start early in the process, how it’s lagging in adoption, and just how necessary it is for verifying sustainable production practices.

Sourcing Journal: From your perspective, what’s driving the industry toward becoming more transparent?

Stephane Boivin: It all starts with traceability. We always talk about transparency, but what leads to that is traceability at the factory level, and transparency, in turn, leads to sustainability. It really is a sequence. A great example: we’re working with some clients who are digitizing their production process with QR codes, and now, we can talk material, we can talk process, from cutting to bundling to assembly to sewing. It gives the brand transparency in every area, and that starts the chain. Obviously, there are different levels….The way we digitize enables companies to extend transparency all the way to the consumer, but it’s the brand’s call whether to do that or not. Traceability is also going to tell you if you’re complying with regulatory bodies. Cost is a factor, too. Everybody’s been talking for years about the capabilities of RFID, but it’s still a cost problem. Now, QR codes are an example of one thing that’s more affordable for many brands and driving them towards transparency.

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SJ: For companies striving to achieve transparency, how do they need to change their approach to suppliers and factories?

SB: We’ve been going through this question with some partner factories recently. It’s important to keep in mind that factories get nervous when it comes to traceability. You need to make sure to find the right partner to start with from a pure compliance standpoint and do a CSR audit from the beginning. I was in Bangladesh two weeks ago, and I can tell you this: factories are willing to give transparency, but need to understand why and what needs to be transparent. If you walk into a factory and say ‘I need to use this QR code to track this information,’ they’ll get nervous. Go in prepared to handle change management. And remember, it’s a two-way street. The factory will ask the brand, ‘We’re transparent with you, can you be transparent with us?’ Brands need to be clear on things like order volume coming the factory’s way, or what long-term projects are coming down the pipeline. The brand has to be ready…when factories ask brands to be transparent, it’s a tougher question, from the brand’s perspective.

SJ: Can you have transparency without traceability in apparel?

SB: In my view, if you want true transparency, you want traceability. You can have the CSR, the compliance verified by a third-party inspection, but compliance doesn’t automatically create true transparency. Without traceability, it’s very hard to really see what’s going on, so I don’t see how you could get true transparency. However, I don’t think consumers always understand the difference. There’s a big difference between giving you a CSR report and tracing your product from raw material to shelf. Consumers are definitely more aware today than two or three years ago. 

SJ: What are the biggest hurdles to transparency today?

SB: Putting it on the agenda of companies. A lot of big brands are still defining themselves in sustainability: what’s their roadmap look like? What decisions will bring sustainable pathways to the company? A lot of brands worry there’s no ROI. They have trouble understanding what’s going to be the payback for the brand. Is it really demanded by clients across the apparel sector, yes, but is it No. 1 on the agenda? Not yet. It’s coming, it’s starting, but it’s a choice, and there are many projects on a brand’s agenda.

SJ: Do you think there are any major misconceptions about traceability that prevent brands from going all-in?

SB: The resources available at the brand level to work on various projects are very limited. I think it has more to do with this than anything else. There are so many initiatives, from 3-D imaging to extensive IT projects, that getting on the agenda is difficult. Will 3-D get the money or time first? Will PLM? Unfortunately, the toughest thing is that quality and transparency are not sexy. There’s so many benefits and such a huge ROI, but it’s not as thrilling as other technologies, and that keeps brands from investing the time and money.

SJ: On that note, how can transparency benefit an apparel company’s revenues?

SB: Obviously I see a definite ROI in transparency that ties directly to the way we consume today. The first revenue driver I see is the return process, particularly with online purchasing. If you have traceability and you’re getting a product returned due to poor quality, you can trace it back to see what in the supply chain needs to be fixed. Definitely, that’s the benefit when you trace your process early on. You won’t produce something if you know the raw material is not to the specification you want. That’s where the major ROI lies for me. Those returns could impact up to 10 percent of a company’s revenue, especially with online purchasing.