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Supply chain transparency: creating stakeholder value Contents 1 The call for supply chain transparency 2 What is supply chain transparency 3 Value of transparency 4 Capabilities needed to deliver transparency 5 Conclusion and contacts © 2020 KPMG Advisory N.VN.V.. 2 Supply chain transparency: creating stakeholder value The call for supply chain transparency Today’s business climate is by the omnipresent upswing and use becoming more and more of technology and social media, Changing business and interconnected and complex. companies are facing scrutiny of their social-economic Customer needs and expectations supply chain from governments, climates increasingly are increasing and businesses, while consumers, NGOs, investors and require transparency meeting these expectations, are other stakeholders. For example, (1) across an organizations’ required to be valuable, profitable, nowadays the food industry is obliged supply chain… flexible, safe and cost-efficient. to be transparent about ingredients, Simultaneously, business models are food fraud, animal welfare and child shifting towards partnerships and labour. The ability to fully comply with platform-based businesses. This different guidelines that relate to requires companies to actively business practices, sustainability engage with different third-party mandates and track-and-trace laws, organizations. Additionally, has become crucial. (2) The complexity is on the rise due to pharmaceutical industry recently went outsourcing, globally dispersed through a regulatory shift requiring it partners and constant pressure on to identify individual tablet packs of costs. Such aspects lead to medicine (‘serialization’). This was to intertwined and multiplex supply enable origin traceability and track chains that can be difficult to counterfeit, as a pack of medicine administer and are prone to risks. passes through different countries and different companies. It created The Supply Chain Worldwide Survey new standards and methods to drive revealed that 70% of the companies transparency across the medicine surveyed perceive their supply chain supply chain. as ‘very’ or ‘extremely’ complex. Recently, KPMG conducted a survey Non-transparent supply chains and on digital supply chain investments upstream operations can leave where visibility and traceability came companies sightless, resulting in out as the key investment driver in greater uncertainty, a higher both 2018 and 2019. exposure to risks, and supply chain disruptions. On top of that, supported Exhibit 1: Respondents (including CXOs) indicate traceability and visibility as #1 investment driver for 2018 and 2019 2018 2019 1. Ensure traceability and 1. Ensure traceability and visibility visibility 2. Manage new distribution 2. Maintain legacy systems nodes 3. Improve speed to market 3. Lower total cost to serve Sources: Supply Chain Worldwide survey, Geodis 2017 Digital Supply Chain Investment Survey, KPMG & JDA © 2020© KPMG2020 KPMG Advisory Advisory N.VN.V.. N.V. 3 Exhibit 2: Transparency is recognized as one of the key C-level issues in supply chain management that requires attention to deliver growth and control risk C-level issues Talent Cost Risk and Compliance Management Operations Technology Transparency …this is reflected by Effectiveness qualification of transparency as a key Surveys of Supply Chain and Risk Management Industry Executives C-level issue show… cited difficulty in do not utilize tracking understanding tools to enable real- 57% enterprise-wide risk 56% time reporting exposures had no formal said <10% of spend structures to aggregate 50% is covered by 29% the overall risk sourcing tool exposure facing the business said there is no believe there is ‘likely process at their to almost certain’ risk company to 29% 27% with the price of raw aggregate risks from materials across the business requirements and indicate having benefits are not well complete visibility into quantified when 13% the end-to-end Supply Growth discussing Supply Chain Chain Transparency Source: Digital Supply Chain Investment Survey, KPMG & JDA © 2020© KPMG2020 KPMG Advisory Advisory N.VN.V.. N.V. 4 What is supply chain transparency? Achieving supply chain transparency stakeholders trying to achieve is the fundamental process of different objectives. E.g. from increasing visibility, traceability and business leaders to manage large transparency by collecting and and complex companies, partner sharing information throughout the organizations to increase supply chain and communicating it to collaboration and reduce waste and authorised internal and external costs, regulators to track policy stakeholders. It provides the ability to translation, consumer groups to gain insights, learn and act on supply influence preferences, etc. chain information to make better We distinguish three levels of supply informed decisions. chain transparency as shown in We distinguish three The request for supply chain exhibit 3: levels of supply chain transparency originates from multiple transparency: 1 Internal transparency Exhibit 3: Supply chain transparency requires key actors to enable visibility and traceability on 2 Value chain transparency multiple levels 3 End-to-end supply chain Customer Manufacturer Raw materials transparency Tier 1 Tier 2 Retailer Distributor Supplier Supplier N+3 N+2 N+1 N N-1 N-2 N-3 N-4 N-5 N-6 Transparency levels Value levers Operational efficiency 1 Internal transparency (cost) Value chain Revenue increase, Operational 2 transparency efficiency ( 1 – 2 tier) 3 End-to-end supply chain Risk & reputation, Revenue, transparency (multi tier) Operational efficiency 1. Internal transparency 3. End-to-end supply chain transparency (multi tier) Looking at transparency within companies i.e. at a function level and Looking at transparency across across the operations of the multiple tiers of the value chain (with company. The focus here is primarily a higher focus on the supply side), to enable efficient decision making with an additional basic goal of and to reduce waste to deliver better providing reassurance to internal and operational efficiency. external stakeholders about specific topics e.g. child labour, circular 2. Value chain transparency supply chain, fair wages, (1 - 2 tier) deforestation, carbon neutrality, etc., which have a direct impact on brand Looking at transparency with tier one and reputation in the market place. or two value chain partners i.e. customer side transparency and supply side transparency. The basic driver is to provide a better service that results in a revenue uplift and improved operational efficiency. © 2020© KPMG2020 KPMG Advisory Advisory N.VN.V.. N.V. 5 Smaller companies and internal joint innovation initiatives need functions of large companies tend to transparency and create focus on the internal transparency transparency in the value chain whereas larger corporations seem to The combination of complex, put more effort into getting full supply fragmented and siloed supply chains chain transparency. with limited data sharing, dispersed Driving innovation and partnership data ownership & governance and a across the supply chain can act as a large number of actors make key lever that can deliver step change achieving and sustaining supply chain to companies. There are challenges transparency challenging. A that cannot be solved by companies helicopter view is required to enable individually but need to be driven by a a real understanding of the end-to- collaborative innovative effort. These end chain. Value is realized across key business units and business Value of transparency functions, hence clarity of value buckets The drive for transparency covers chemical company moved away from for an organization different elements and requires country-based visibility (linked to across stakeholders is involvement of multiple stakeholder business P&Ls) and created a key starting point for groups. Although this makes European level visibility in supply collaboration transparency challenging, it is a very chain logistics to provide the most valuable and essential exercise. efficient product/service to the end customers. This led to 10-15% When different groups successfully greater cost efficiency in inventory, collaborate, value is realized across transportation and higher On-time In- key business units and business full deliveries to customers. functions. E.g. in a recent project, a Exhibit 4: Transparency increases business value across all key value dimensions (i.e. Growth, Risk and Cost) and is therefore of interest to multiple business functions For example: — Reduce waste and Operational inventory challenges Excellence — Control foreign Total Business Value Value Business exchange exposure Business For example: Value Risks & — Compliance with legislation Compliance — Human Rights Due Diligence For example: Consumers — Customer loyalty & Growth — Brand perception Key value dimensions © 2020© KPMG2020 KPMG Advisory Advisory N.VN.V.. N.V. 6 One of the most important values of and are able to respond to the driving transparency is the growing demand of consumers for opportunity to enable new business more healthy, environmentally models and value propositions. The conscious and traceable products. relationships between companies, Visibility helps reduce risks and costs their suppliers and customers as it guarantees fewer disruptions become stronger by creating a step and waste within operations across change in customer value, e.g. the end-to-end chain. Companies are platform thinking. This opens up the
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