The results of a study conducted by Harvard Business Review Analytic Services (HBRAS) and commissioned by Basware highlight that businesses worldwide lack transparency in their supply chains. The majority of those business leaders surveyed (60%) warn that poor visibility of who they do business with is a significant source of risk. Nearly a quarter (24%) admit that they fail to effectively evaluate supplier business practices, with 45% citing manual processes that lead to incomplete data entry as a key cause.
Klaus Andersen, CEO of Basware, commented: “The very fact that so many organisations lack the ability to effectively monitor who they do business with is a significant cause for concern. Chief executives are right to be worried about the reputational and commercial implications of blind spots across their supply chain. This report finds that visibility of the flow of money, goods and services is a defining characteristic of successful businesses. This means taking responsibility for not only the quality of goods and services, but also the manner in which they’re produced. We define this as visible commerce. It’s about having full transparency which allows the business to make better and more responsible decisions.”
As well as placing importance on ethical considerations, the most common factors for evaluating suppliers remain economic. 60% of study respondents cite “value for money” and 54% “cost savings” as their top areas of focus. Firms identified as much more successful are nearly twice as likely to be effective at evaluating their suppliers.
Nine-in-ten executives interviewed for the report entitled ‘Using Transparency to Enhance Reputation and Manage Business Risk’ believe a culture of transparency is essential to increase employee engagement and simplify processes. The majority (59%) expect their finance and accounting arms to drive that culture of transparency, with one third (36%) attributing operational savings in excess of 10% to improved visible commerce. A further 40% of firms are keen to do more to ensure ethical Best Practice among suppliers.
Guillaume Roels, Timken Chaired Professor of global technology and innovation at INSEAD (and who was interviewed for the report), remarked: “We have to move beyond the mentality of silos. Many organisations try to optimise just for their business, but they don’t see the whole value chain. Businesses really compete at the supply chain level. You need to find ways in which to capture the savings and to share the benefits with your supply chain partners. Transparency doesn’t come for free, though. You have to work hard to achieve it.”
While executives identify the finance and accounting arms of their enterprises as key to transparency, they cite technical, organisational and cultural barriers to fully realising the benefits of that openness. 44% stated that they lack the tools and technology to evaluate and monitor their suppliers. Alarmingly, nearly a quarter (23%) of respondents said that none of their suppliers are electronically connected to their purchase-to-pay system.