This shocking statistic—from a recent survey report conducted by global trade B2B platform Serai and research firm KPMG China—underscored the urgency of tackling supply chain transparency. To help move that data point, Serai brought together thought leaders from some of the industry’s top designer, legacy and digitally native brands for a virtual roundtable to discuss their goals and challenges in a collaborative, pre-competitive environment.
Led by Serai’s Andrew Dennison, managing director, head of supply chain solutions, Lindsey Hermes, head of enterprise solutions, and Edward Hertzman, Sourcing Journal’s founder and president, the roundtable encouraged participants to discuss how they are shining light on their own opaque supply chains, and what advice they had for the group.
To protect the privacy of those involved in the roundtable, Sourcing Journal is not broadcasting the video discussion nor naming participants or their companies. A summary of the most salient discussion points and findings is below.
Visibility and transparency are not the same thing
While often used interchangeably, the differences are nuanced and not always understood, nor do they necessarily mean the same thing to every company. The group agreed that visibility is knowing what your suppliers are doing (or not doing), while transparency is being able to document, with data, the transactions that happen along the way. “You can have visibility based on what your suppliers tell you they’re doing, but transparency gives you the data to verify what they say, and act on the information as needed,” said one brand.
And transparency technology can remove frictions and build trust.
“Visibility is just knowing who you are as a company, but transparency is your suppliers’ willingness to partner with you on this transparency,” said another major brand. “It’s them putting information in the platform, sharing country of origin documents when asked, and sharing the next step in their supply chain. For us, transparency is telling our suppliers exactly what we’re going to do with that information. That we will not use it to go around them directly to their mill or spinner, or use it for cost negotiations. It’s holding ourselves accountable to that.”
Collaboration is essential to gaining transparency into your supply chain
Even those suppliers willing to be more transparent don’t necessarily have all the proper paperwork to do so. “Spinning is complicated as fibers come from different sources and get spun together,” noted one digitally native brand. “It’s hard to look backward to obtain that information, but going forward, companies are more aware of what they need to provide, and can work on getting and providing the required paperwork and verifications.
Not all suppliers have the same goals, which can add a burden to collaboration.
“Because we are not a brand or retailer and we sell to a lot of different companies that all have different goals, our challenge is how we approach it with our suppliers,” said one participant. “It’s important for us to meet their specific goals, but not all of them go together in a way that are easy to approach. You don’t want to overwhelm your suppliers with all these different conflicting goals or requirements because that’s also exhausting and challenging for them.”
Transparency has many obstacles
One digitally native brand admitted to making transparency a lower priority because they’re funneling all their efforts and dollars into its current hyper growth mode, opting to focus on one area like cotton.
Transparency can’t solve all problems, either. Another company expressed frustration that especially in the past six months, even when they can obtain the information, “price and availability of the most sustainable fibers make it hard to be innovative and accessible.”
Broadcasting your vendors to the industry gets mixed reviews
It might be considered good behavior to list vendors on your website as part of your outward-facing supply chain transparency journey, but not everyone was on board with such openness.
“Vendors are very excited to expand their capacity. And something I learned is that they tend to be risk takers to get that initial growth and new brands under their roof—without properly planning for it. And then my product is at risk if they over commit,” noted one denim brand who prefers to focus on fabric content, regenerative cotton, recycled fibers or sustainable washing versus giving her factories more exposure. “But I can still produce those factory verifications when challenged to do so.”
On the flip side, while a brand’s factory base used to be its “IP and secret sauce,” that is less true these days as pre-competitive collaboration drops barriers. “Just look at H&M’s Treadler division,” said Sourcing Journal’s Edward Hertzman. “They opened up their sustainable supply chain to the [industry], and figure that the more business they can give these factories, the more they can invest in sustainability and continue to grow their sustainable journey.”
Getting Tier 3 suppliers and beyond to engage requires deep trust
Everyone agreed they can easily get to their Tier 1 and 2 suppliers for information, reporting and collaboration, but going deeper is often a problem, especially if you don’t explain what you’re trying to accomplish.
“Being able to communicate to Tier 3 suppliers and beyond the ‘why’ we need the information, and getting them to be responsive to that, is difficult, as is connecting all of those dots transactionally through the entire process,” said a relatively new children’s apparel brand.
Another speculated that some suppliers are afraid of being more forthcoming. “I think there’s this assumption among suppliers that if they’re not doing really well in certain areas they know you’re going to care about that, you’ll stop sourcing from them if you get that information.”
She advised reassurance. “We want to foster collaborative relationships, much like our Tier 1 and 2 relationships, and we make it clear we’re not looking to ‘cancel’ or ‘punish’ people. We want to work together and gradually improve, but we need the information to do that.”
Newer or smaller companies have a particular interest in making it work with existing suppliers. “It can be challenging for a smaller brand to constantly seek new suppliers if they can’t provide the sustainable alternatives,” said one.
Creating expectations builds compliance
The more brands demand information from their Tier 3 and down suppliers, the more those vendors will start to expect the requests, and the more comfortable they will be providing the information.
If that fails, a mandate might be necessary. “When the industry requires you to look as far back as Tier 3, then that’s all that the companies need to do,” said another company about why looking further is so opaque. “The requirements need to be expanded end to end.”
A European retailer expressed that it’s not just getting end-to-end information that eludes her, but having confidence in the “truthfulness or accuracy of the information that’s submitted” at such tiers.
Making things easy for suppliers also goes a long way.
“Companies are getting asked multiple times for data and receiving different spreadsheets, SharePoint sites, things like that. But if you can make it easy with a simple form to fill out, or have it actually come straight from this system for some of the more sophisticated suppliers, it can be much easier than typical Survey Monkeys and Google forms getting sent all around the world and then having to piece the information back together again,” said Serai’s Dennison. “To me, those are the keys to get into trust down to Tier 4.
Companies need to align transparency timelines to get to 2030
Right now, transparency timelines are a bit misaligned, as designers are designing for 2023 and 2024 but sustainability executives are looking at 2021 with their lifecycle analyses.
“This huge gap that exists in sustainability that stops us moving as quickly as we need to move, particularly with all the changes that we need to get to by 2030,” said one legacy brand. “If we’re always looking back and our teams are looking forward then there’s a void, and digitalization really fits in to fill that void and to move us to near real time.”
Sustainability and traceability aren’t free…
There are two questions around supply chain traceability. One is the business angle (“Will my consumers stop buying from me if I don’t clean up my act? Will they pay $3 more for a cotton shirt because I need organic cotton?”) and the other is the moral imperative (“Is this just the right thing to do?”).
“Everybody wants to be sustainable but it’s time consuming and costs money,” stated one major brand. “But if you don’t have the moral imperative, then all decisions get made based on business strategy and that has held back sustainability and traceability for years. You need to invest in systems procedures, you need to enter data into the Higg index, for example, you might have to say goodbye to the supplier with great prices who isn’t sustainable. Coming out of the pandemic it’s hard to tell ownership these are investments I need to make. I’m now begging for a director of sustainability because I can’t continue to run this with my team.”
…Yet not investing in them is risky
While some companies were built with a sustainable, ethical ethos, the whole industry isn’t having an ethical awakening overnight. Will companies who don’t invest in sustainability now because they don’t see immediate ROI, go the way of companies that didn’t invest in e-commerce and now sit in a dying mall?
“If you don’t make a change now, in 10 years, it might be too late,” said one brand.
Others are still seeking that balance. “We’re still seeing sustainability in terms of price be a soft benefit for the consumer,” admitted one luxury brand, noting that the brand is the one absorbing the cost of materials, putting systems in place, dealing with changing margins, etc. “We’re currently testing a few products around pricing with our consumer, who already is quite conscious of the environment, but to be totally honest, the question of balancing out the investment and all that entails is still a challenge.”
It all comes down to scale. Hertzman pointed out that just like obtaining an electric car today is so much cheaper than in the past, scaling up recycled cotton and giving more business to apparel factories doing the right thing can make sustainability more accessible to all.
About Serai: Founded by HSBC and based in Hong Kong, Serai has the strength of a global bank and the agility of a start-up—a powerful combination in today’s ever-changing global climate. Serai has committed its first mission to simplifying the future of international trade, empowering brands and manufacturers to make data-driven risk management decisions while promoting transparency and trust. Today, there are over 25,000 buyers and suppliers across 140 countries on Serai leveraging the power of our secure platform to find and trade with new partners. Learn more at www.seraitrade.com