What is the association between supply chain structure and supply chain transparency?
Focal firms are struggling to increase the transparency of their extended supply chains, in spite of increasing pressure from investors, non-governmental organizations and regulators. Some supply chains seem more conducive of collective outcomes like transparency than others. Is this a valid observation? What supply chain structural characteristics drive transparency? And what strategies can managers pursue to facilitate supply chain transparency?
To shed light on this underexplored empirical phenomenon, Professor Jury Gualandris and team have gathered and analyzed Bloomberg data about 4803 firms and 20,504 contractual ties organized in 187 extended supply chains. Instead of focusing on the transparency of individual buyers or suppliers, their large-scale study empirically examines transparency in the context of collective public disclosure of material environmental, social and governance (ESG) information made by a focal firm’s customers, suppliers and sub-suppliers.
They find robust evidence that supply chain structure in terms of interconnectedness, which refers to the density and clustering of ties connecting a focal firm’s extended supply chain members, and heterogeneity, which refers to the degrees of geographical and industrial differentiation among these members, strongly associate with supply chain transparency.
Their recent article published in the Journal of Operations Management, a premier scientific journal affiliated with the Association of Supply Chain Management, advances three important managerial recommendations:
First, in addition to selecting more transparent supply chain members, supply chain professionals should invest more time and efforts into brokering new supply chain ties. Focal firms should connect supply chain members that do not share ties with the same customers and belong to different manufacturing clusters, to increase supply chain density without exacerbating supply chain clustering. Supplier forums and conferences could offer important opportunities to broker new ties between these supply chain members (Gualandris and Barg, 2020).
Second, when selecting new supply chain members, supply chain professionals should pay more attention to how the addition of these actors could modify the structure of the extended supply chain. The number and nature of ties that new suppliers or customers could potentially develop with existing supply chain members, based on their technical and relational capabilities, should become important criteria for selection.
Third, supply chain professionals should be cognizant of the unintended consequences of localizing their supply chains. Although supply chain geographical homogeneity may generate positive competitive effects in terms of reduced production lead times, lower costs and improved quality, it may also hamper supply chain transparency and the ability of the focal firm to address the ever-growing informational demands of external stakeholders
Gualandris, J., Longoni, A., Luzzini, D., Pagell, M. (2021), “The Association Between Supply Chain Structure and Collective Transparency: A Large-Scale Empirical Study”. Journal of Operations Management, link.
Gualandris, J., & Barg, J. (2020). Huawei: Struggling to develop a more sustainable supply network. Ivey Publishing, Product number: 9B20D001, link.