Is Your Supply Chain Trustworthy?
Written by Chris Coldrick, Partner – Supply Chain and Procurement at Deloitte Australia
Trusted relationships are often critical to supply chain performance. In a recent Deloitte study of 1,000 executives from large global organisations operating complex supply chains, various enhancements were identified as adding “significant value” to an organisation’s financial performance. Among these, ‘enhancements that improved trust with customers’ were racked as second most valuable. However, while trust is deemed important in boardrooms and to the C-suite, often insufficient attention is paid to this topic. A recent poll suggests only 14% of executives have a way to track stakeholder trust across the organisation, and 63% of board members admit that they either do not discuss trust or have no fixed cadence to discuss trust.
At its core, trust is based on the relationship between an organisation and its stakeholders. Trust is the outcome of high competence and the right intent, which in turn typically rests on four factors of trust: capability, reliability, humanity, and transparency. These factors are relevant and can be measured across the operating and functional areas of the organisation. This includes areas such as customer experience, cybersecurity, culture, and supply chain operations. Organisations can take actions within these operating domains to help earn and maintain trust with their different stakeholders in practical and tangible ways.
C-suite executives should maintain and grow trust in their supply chain to help mitigate operational risk, improve resilience, protect the brand, make strategic decisions, and enable growth. When trust is impaired, the damage often cascades across the business ecosystem. At its core, customers may not trust they can purchase the brand’s products when they need them most, suppliers may lack confidence in the enterprise’s ability to scale demand, and board members and investors may lose trust in the C-suite and organisation’s ability to navigate an ever-more-complex environment. Alternatively, when trust is strong between an organisation and the stakeholders in its ecosystem, the organisation is typically much better positioned to collaborate with customers and vendors, share critical information, and capitalise on market opportunities in a concerted manner.
Executives at large multinationals believe their stakeholders trust their supply chain capability and performance, yet a recent Deloitte survey of US stakeholders suggests this confidence is significantly overstated. When we asked global executives to assess customer trust across the four factors, they overestimated the trust in their organisations’ supply chains by an average of 20%. Even when customers think of their leading suppliers, they still have lower trust in those suppliers than executives believe. These findings suggest executives have potential trust blind spots in areas that customers care about—areas that may need to be explored and analysed.
Our analysis shows that stakeholder perceptions of reliability and transparency are paramount to organisational performance: these two factors demonstrate a statistically significant relationship with annual revenue growth and an organisation’s ability to maintain operational consistency through supply chain shocks.
For both trust factors, when stakeholder assessments move from lower scores (strongly disagree and disagree) to higher scores (agree and strongly agree), the likelihood that organisations experience growth rates of 15% or more increases 14% for reliability and 25% for transparency. Further, there is a similar relationship to resiliency as organisations are approximately 30% more likely to maintain operational consistency throughout supply chain disruptions when moving from lower to higher levels for both trust factors.
Investing in Technology to Improve Supply Chain Trust
Leading suppliers are investing in actions that help create a more reliable—and predictable—supply chain. This is especially true in the realms of technology and intelligence including the application of a digital thread (a single, seamless strand of data that stretches from development to commercialisation). Specifically, the leaders are 3.9 times more likely to strongly agree that their organisation has a fully deployed digital thread compared with the rest of the field. One study in 2021 found that more than 67% of companies had only begun to develop their digital thread in the two years prior. Therefore, it’s notable that more than a quarter of these leaders (27%) have already achieved this level of supply chain sophistication, while only 7% of the rest of the field have accomplished the same.
Closely related, the leaders are 3.8 times more likely to use advanced predictive algorithms to better forecast demand. Layering more accurate forecasting over the data provided by digital threads can help bolster a supplier’s ability to set expectations and plan for future needs and disruptions. For instance, aerospace manufacturer Boeing developed a digital thread to connect data across the entire product life cycle. By embedding sensors across factories, Boeing has a near-real-time view into inventory needs and operational inefficiencies. And to make this process more proactive and forward-looking, Boeing plans to use artificial intelligence (AI) to “mine for additional improvement over time”.
The benefits of this focus on technology are significant as they can help companies build reliability and resilience into their supply chains while requiring less costly investments in physical infrastructure (such as incremental inventory, incremental capacity, or incremental suppliers). For example, sensing and analytics tools can provide advance warning of impending issues and thus may mitigate the need to diversify existing supply chains. Technology enables supply chains to become more agile as organisations are better able to sense demand and predict and adjust for potential issues that threaten inventory, service, compliance, or other critical needs.
A Trusted Supply Chain is a Valuable Business Asset
An intentional focus on trust can help supply chain leaders better understand stakeholders’ needs and prepare their organisations to develop and implement the initiatives that will generate the greatest impact and value over time. Supply chain trust is an asset that you should manage just as you would manage any other critical organisational asset. And while shareholder value and cost optimisation should almost always be supply chain priorities, too myopic of a view on these aspects may inadvertently erode trust—and eventually, the bottom line. Rather, it’s important to nurture trust across the wide array of stakeholders the supply chain ecosystem encompasses. Whether it be customers, employees, vendors, communities, investors, regulators, or others, each can play an important role in building a trusted supply chain.
This article is excerpted from “Is your supply chain trustworthy,” published by Deloitte Insights, 13 July, 2023.
