After Rana Plaza – do consumers care about supply chain transparency? Our research shows they do – Tim Kraft, Yanchong Zheng

MIT Sloan Visiting Assistant Professor, Tim Kraft

From Next Billion

Five years ago, the Rana Plaza factory in Bangladesh collapsed killing more than 1,100 workers and revealing the horrific working conditions that garment workers endure across the developing world. Still, to this day apparel makers are trying to get a grasp on the social responsibility practices being used in their supply chains.

MIT Sloan Associate Professor, Yanchong (Karen) Zheng

 

To create a transparent supply chain requires a company to both learn what is occurring in their supply chains and disclose relevant information to consumers. Gaining supply chain visibility is the often-overlooked aspect of supply chain transparency. It is a complicated and time-consuming endeavor—and the benefits to a company’s bottom line are not always entirely clear. Do customers really care? And even if they do care, are they willing to reward a company for its efforts?

According to our research, the answers are yes and yes. A majority of customers value insight into a company’s supply chain—and some are even prepared to pay a premium for greater visibility.

A number of forward-thinking companies such as Nike, Levi’s and Patagonia, for instance, have long published their lists of suppliers, and have also put mechanisms in place to ensure their products are manufactured in a responsible manner. For them, supply chain visibility is an absolute must: a social good that safeguards human rights, but also provides information that customers deserve to know.

While events such as the Rana Plaza collapse, one of the deadliest industrial accidents in history, have helped to force the issue, many companies still have limited insight into the practices being used in their supply chains. Why? Gaining supply chain visibility is hard. Modern supply chains are complex, globe-spanning systems, and monitoring them is an exceedingly difficult challenge. Large brands or retailers can easily have hundreds, and even thousands, of first-tier suppliers alone, with those suppliers then having their own extensive supplier network.

Regulations have not done much to move the needle. Take, for instance, the California Transparency in Supply Chains Act that was enacted in 2012. The law stipulates that retail sellers and manufacturers that conduct business in California must disclose their efforts to “eradicate slavery and human trafficking from their direct supply chains.” However, the law does not state anything about requiring companies to exert effort; rather, they’re just required to say what they’ve done—even if they have done nothing.

Read the full post at Next Billion.

Tim Kraft is a Visiting Assistant Professor of Operations Management at the MIT Sloan School of Management.

Yanchong (Karen) Zheng is a Sloan School Career Development Professor and an Associate Professor of Operations Management at the MIT Sloan School of Management.

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