The value of trust in a supply chain

Supply chains were severely disrupted during the pandemic, resulting in a broken trust between organizations and the stakeholders that rely on them. What can these organizations do now to rebuild that trust and prepare their businesses for even more volatility and uncertainty?

21 August 2023

By Eric Landicho

EARLIER this year, Deloitte Global surveyed more than 1,000 executives of large global organizations from across various industries operating complex supply chains. Considering how the pandemic severely disrupted global supply chains, affecting consumers and businesses' access to products and materials they have come to rely on, Deloitte wanted to see how that "broken trust" is mending during this period of recovery. What the researchers found is that supply chain executives significantly overestimate stakeholder trust in their capabilities and intentions.

For this survey, Deloitte measured trust by assessing how an organization performs across these trust factors: capability, transparency, reliability and humanity. These factors, in turn, can be measured across the operating and functional areas of an organization, such as customer experience, cybersecurity, culture and supply chain operations. Of the more than 1,000 respondents who were surveyed, 89 percent said customers trust their supply chain operations, but just 68 percent of roughly 500 customers said the same. This represents a trust gap of about 20 percent.

Digging deeper into the results, we find that the gap is highest for the reliability factor, with 90 percent of respondents believing they are trusted as reliable suppliers but only 65 percent of customers saying so. This is followed by humanity, which encompasses treating workers fairly and with respect, among other things; Deloitte found a 24-percent gap here. For transparency, there is a 22-percent gap, and for capability, which includes ability to maintain operational consistency, there is a 16-percent gap.

These results suggest that suppliers have blind spots in areas that are highly important to their stakeholders. Deloitte analysis also shows that stakeholder perceptions around these trust factors have a statistically significant relationship with annual revenue growth. For reliability and transparency, in particular, when stakeholder trust around these two factors improve, organizations are also more likely to experience growth rates of 15 percent or more.

Addressing these issues, therefore, will be critical as suppliers continue to face volatility even as the world seems to have closed the book on the pandemic: 77 percent of Deloitte's survey respondents said their organizations experienced an adverse supply chain event in the last 12 months, and almost half expect more shocks in the next two years. These findings are consistent across North America, Europe and the Asia-Pacific region.

In the survey, Deloitte identified leading supply chain organizations based on supply chain performance and looked at the distinct actions these suppliers are taking to inspire stakeholder trust.

Invest in technology to foster reliability

Leading suppliers recognize the importance of reliability in inspiring trust, and are thus investing in actions that help create a more reliable and predictable supply chain. Deloitte found, for example, that 27 percent of these suppliers already have a fully deployed digital thread — a single, seamless strand of data that gives the organization visibility over the entire lifecycle of a product.

These organizations are also 3.8 times more likely to use advanced predictive algorithms to better forecast demand. These capabilities strongly position these suppliers to plan for future needs and react quickly to disruptions if and when they occur. It also allows them to capitalize on new growth opportunities.

Make visibility into sustainability a priority

Trusted organizations put an emphasis on transparency, and with the growing urgency to take climate action, transparency around sustainability initiatives has become a priority for these leading suppliers. Deloitte noted that these leaders are paying particular attention to improving visibility into their Scope 3 emissions, which are indirect emissions produced by customers who use the company's products or suppliers that are involved in making the products. Again, these organizations are turning to technology such as AI to better calculate the carbon footprint of their products and to analyze the materials used by their suppliers in an effort to create greater visibility into their sophisticated supply chains.

Demonstrate humanity to create a competitive differentiator

Humanity as a trust factor is an important competitive advantage when it comes to talent acquisition and customer value. The leading suppliers identified by Deloitte make a deliberate effort to focus on the human side of the supply chain by, for example, making talent development a growth priority and continually ensuring that their supply chains are defined by customer values. One such supplier actively solicits ideas from its workers on how the organization could have a more positive impact on the communities they serve, and some of these ideas have been adopted by the organization in ways that have significantly reshaped its sourcing practices.

As supply chain executives look toward a future that will continue to be characterized by volatility and complex challenges, they will need to build on their resilience and agility to stay competitive and ensure growth. Strong stakeholder trust will be a key component of that strategy. Suppliers that intentionally focus on their performance across the four trust factors — reliability, transparency, capability and humanity — will be in a better position to pivot, to respond, and to take advantage of opportunities when the disruptions materialize.

As published in The Manila Times on 21 August 2023. Eric Landicho is the Managing Partner & CEO of Deloitte Philippines.

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