The Retailer Summer Edition 2021

THE RE TA I L ER

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WHY YOU SHOULD CARE ABOUT THE DIFFERENCE BETWEEN TRANSPARENCY AND TRACEABILITY

Tom Woodham Partner IBM Global Business Services

I n 2019, Gartner advised that “transparency and traceability” was among their Top 10 Strategic Technology Trends for 2020. In 2021, both transparency and traceability have their role to play in improving commer- cial operations and achieving sustainable development, an ambition that is rapidly moving to the top of boards’ action lists. You can bundle them as a technology trend, but transparency and traceability are distinct and shouldn’t be used interchangeably. In brief, for business in general and regarding supply-chain operations in particular, supply chain transparency is a commitment to increased communication about the provenance of products. It’s a tone of honesty and openness, and it can cover a wide range of voluntary disclosures and degrees of detail. Traceability provides verified, granular supply-chain tracking data that connects any individual item directly back to its sources. Traceability is one category of information that supports a policy of transparency. Let’s take a look at an example. Today, consumer brands whose products contain palm oil want to tell their customers what percentage of that palm oil comes from sustainably farmed sources. At best today, some brands may say that 50% of the palm oil they use in their products comes from sustainable sources. Providing consumers that information is being transparent. In this example, the “50%” statistic is a bit vague, simply because palm oil is processed and sold and that much of the information is collected via assessment questionnaires. But today, it’s nearly impossible to provide any more detail than that truthfully, as the current level of information is valid at an average or aggregate level. But what the consumers increasingly want is traceability: A more gran- ular set of claims that customers can trust. They want to knowwhether the exact item they want to buy contains palm oil sustainably sourced. They are looking to be able to trace the ingredient back to its source. In another example, it’s down to knowing what field your strawberries were picked from and potentially under what conditions of labour and with what pesticides. Consumers increasingly want traceability

What is transparency? Transparency is a broad approach that incorporates information and data collection, storage, calculation, validation, and sharing. It requires data from internal sources, as well as data from suppliers, third parties and audits. Often this data relies on EFs (Environmental Factors) that use generic or reference locations; how do we then know that these factors are consistent and accurate? Transparency in supply chains is critical not only for sustainability but increasingly for efficiency and profitability. Delays, waste and other problems in supply chains cause friction that cost time and money for every party along a supply chain, from shippers to carriers and last-mile logistics, to wholesalers and retailers. Transparency is a policy that says enterprises are focused on identi- fying issues in their supply chain, isolating hotspots, and developing improvements with their suppliers, facilities, people and products. It helps protect business and deliver on company sustainability goals. It can include things like the treatment of workers and a seller’s efforts to improve working conditions. Sustainability in the supply chain would mean that with traceability, fashion consumers could choose which garments to buy based on the health and safety standards of the factory in which the items were produced. Transparency and traceability will offer consumers more choice and companies’ greater responsibility to end tragedies like the Rana Plaza factory collapse , slave labour in the Thai seafood industry and deforestation in Malaysia and Indonesia. Traceability is the granular, data-driven solution that can enable busi- nesses to operate more efficiently and with greater control to manage sustainability commitments. Traceability offers enterprises the ability to verify where any particu- lar product unit and its ingredients or parts come from. It provides a crystal-clear view of supplier performance and risk. It is a guarantee of quality and a means to execute controlled recalls in an emergency. At its most simple, traceability provides answers to the questions, “where did this come from, andwhere did it go?” It enables brands tomanage their supply chain down to the individual item and helps with recalls audits, and it lowers the risk of mislabelling. Traceability data is critical in the current climate, where it applies to the vaccine supply chain, for instance. Traceability can reduce risk, improve quality and performance