Supply Chain Transparency in the Apparel and Food Industry


Bachelor Thesis, 2014
27 Pages, Grade: 1,3

Excerpt

Table of contents

List of figures

List of abbreviations

1. Introduction

2. Consumer demand for transparency
2.1 Definition of supply chain transparency
2.2 Relevant industry characteristics and developments
2.3 Scandals driving the need for information

3. Practices to enable transparency
3.1 Tracking and tracing
3.2 Methods for analyzing supply chain sustainability
3.2.1 Life-cycle assessment
3.2.2 Higg index

4. Approaches to communicate supply chain information to consumers
4.1 Product labeling
4.1.1 Current approaches
4.1.2 Consumer dissatisfaction
4.1.3 Evaluation criteria of green labels
4.1.4 Developments in the eco labeling landscape
4.2 Company dependent communication channels
4.2.1 Websites
4.2.2 Social media
4.3 Integrated solution for communicating transparency

5. Conclusion

Bibliography

List of figures

Figure 1 - Framework for communicating transparency (own illustration)

List of abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1. Introduction

Modern consumers are concerned about more than quality and price of the products they purchase. They demand concrete and credible information about the entire procurement process. Unsubstantiated company statements on the sustainability and safety of sourcing processes have proven to be insufficient to meet those demands (Hofstede, 2003). More and more companies increase the transparency of their supply chain (SC). However, in order to reach customers and to fulfill their needs, companies have to effectively communicate supply chain transparency (SCT) to the end consumer (New, 2010)

This thesis focuses on transparency in the apparel and food industry because especially here consumers claim insights into the global supply networks (Meise, 2011, p. 138). It analyzes tools to enable SCT and provides an overview of practical methods that are available to the apparel and food industry for communicating transparency to consumers. Moreover, the paper evaluates these methods based on their effectiveness at meeting consumer demand and illustrates how different approaches for enabling and communicating SCT can be combined. The presented information was obtained through extensive literature research and website analyses. An exhaustive review of the particular laws and regulations relating to transparency is out of the scope of this thesis.

First, this paper defines the concept of SCT and analyzes current consumer demand in the apparel and food industry. It explains how certain industry characteristics and recent SC scandals drive this demand. The following chapter deals with tools and methods employable by producers to gain the necessary information for fulfilling consumer demand. On the one hand, tracking and tracing within a supply network is analyzed. On the other hand, two methods for analyzing SC sustainability are addressed. In a next step, this thesis evaluates different approaches to how apparel and food companies can communicate the demanded information to consumers and, thereby, make SCs more transparent. In doing so, the concept of labeling in the apparel and food industry is analyzed. Subsequently, the use of company websites and social media for supplying customers with SC information is addressed as well. Before drawing a conclusion, the paper proposes a framework that shows how methods for obtaining SC information can be integrated with different communication channels to meet consumer demand for SCT.

2. Consumer demand for transparency

2.1 Definition of supply chain transparency

Transparency with regard to SCs is an issue that was originally addressed in Operations Management (Meise, 2011, p. 13). Companies employ transparency in order to improve operational performance. Bastian and Zentes (2013) emphasize how SCT e.g. increases responsiveness and enables performance evaluation of supply chain tiers. That information, however, is generally not accessible by the consumer. This paper focuses on SCT from the marketing/consumer perspective. Communicating transparency to consumers is a comparatively new approach, which is based on consumer demand and driven by the factors that are analyzed in chapter 2.2 and 2.3.

This thesis adopts the view of SCT as „the extent to which all the network’s stakeholders have a shared understanding of, and access to, product and process related information that they request, without loss, noise, delay and distortion“ (Beulens et al., 2005, p. 482). The thesis focuses on transparency towards consumers, who are important stakeholders of a supply network. According to this definition, both product and process related information is of importance. That includes transparency on what is inside the end product as well as on how this product is procured. The definition indicates that only information requested by consumers is relevant. If a company provides consumers with information on SC attributes that are irrelevant to them, SCT is not increased. Similarly, Hofstede (2003) emphasizes that knowing consumer demand is a precondition for transparency. Chapter 2.2 addresses the questions of what information consumers request and why this information is important to them. The authors of the given definition also highlight that, in transparent SCs, information has to be communicated thoroughly (without loss), accurately (without noise), promptly (without delay), and truthfully (without distortion).

According to Kalfagianni (2006, p. 19) as well as Bastian and Zentes (2013), SCT has both a horizontal and a vertical dimension. The first is related to company internal factors. It describes the visibility of processes and how accurately the impact of a certain SC step on e.g. the environment can be estimated. The vertical dimension deals with transparency along the SC from the origin of raw materials to the final sale to consumers. It is closely related to the field of traceability, which is examined more closely in chapter 3.1. Producers and retailers are usually concerned with transparency both up and down the chain, whereas consumers are only looking for transparency up the SC (Meise, 2011, p. 13). Full SCT can only be achieved when sufficient information on both the horizontal and the vertical dimension is available. Lamming et al. (2004) point out that within one SC the provision of transparency can vary from supplier to supplier; whereas Beulens et al. (2005) emphasize that all steps in a SC should be transparent to provide a thorough picture.

Meise (2011, p. 14) identifies five major issues of SCT. These issues are product provenance, process and production methods, environmental impact, transportation aspects like distance and type of transportation, and ethical aspects like fair trade and workers’ rights. These issues are of different importance to various consumers in the apparel and food industry. In the following step, the transparency specific needs of those consumers are analyzed.

2.2 Relevant industry characteristics and developments Apparel industry

The trends of globalization and outsourcing have changed the SC of the apparel industry significantly (Pretious and Love, 2006). Nowadays, a common SC for producing a t- shirt spans many countries and multiple continents. As a result, companies lose both oversight of the SC network as a whole as well as control over the conditions under which their products are procured (Jones and Williams, 2012). Globalization also increases the overall complexity of the sourcing process making it more opaque for consumers (Caridi et al., 2013) and driving their concern about products’ provenance. The so-called trend of fast fashion has evolved during recent years. It refers to the fact that product life cycles are getting shorter, as producers need to respond to rapidly changing demand of fashion consumers and trend cycles (Kozlowski et al., 2012). Consequently, garments become obsolete faster and are disposed and replaced quickly by new products. Companies like Zara focus on minimizing SC lead times and providing consumers with novel products as fast as possible. In spite of the ongoing trends of outsourcing and globalization, these companies remain in control of their suppliers (Berfield and Baigorri, 2013).

Furthermore, consumers have become aware of the social and environmental impact of the apparel industry. Activists reveal abusive production and working conditions particularly in Southeast Asian countries. The media informs consumers about the destructive effects of clothing production on the environment. Consequently, they have developed a need for clothes that are procured in an ethical and sustainable SC (Doorey, 2011; Shen et al., 2012). Cervellon and Wernerfelt (2012) point out that ethical fashion is already becoming mainstream due to increasing consumer demand. However, the authors emphasize that consumers’ focus remains on the fashionableness of their clothing. Eco-friendliness alone is not sufficient to meet their demand.

In contrast to a garment’s color, fabric, or even quality, the way in which the cotton was sourced and processed is not visible to consumers at the point of purchase. Even after the purchase they are not able to assess the validity of company statements about the provenance of a product. Therefore, from the buyer’s perspective, the sustainability of procurement processes represents a credence characteristic of consumer products (Bastian and Zentes, 2011, 2013; Atkinson and Rosenthal, 2014). In order to evaluate the sustainability of a garment’s production consumers demand transparent SCs and concrete information about the sourcing process (Cho, 2014).

Increasing counterfeiting of branded products is another important driver of the need for SCT (New, 2010; Li, 2013). Consumers call for product authentication tools to ensure they did not purchase counterfeits. Tracking and tracing methods can prevent fake components from entering supply networks. Companies that make use of SC traceability and communicate it through transparency can enable consumers to check the authenticity of their products. This field is analyzed more closely in chapter 3.1.

Food industry

The need for greater transparency has been an issue in the food industry for many years (Deiters and Schiefer 2013, p. 20). This is mainly based on the diverse risks for consumers’ health associated with the consumption of food and its dynamic quality (van Dorp, 2004, p. 7).

In recent years, however, industry trends drive consumers’ concern about food safety and ethicalness even further. Similar to apparel production, the food SC has increased in length and complexity over the past years. Ingredients of everyday food items are typically sourced in multiple continents (Roth et al., 2008). Consumers lose overview of their food’s provenance and often don’t know how and where their products are sourced. Moreover, worldwide transportation of perishable food products can pose an additional health risk to consumers (Deiters and Schiefer 2013, p. 73). Technological progress has enabled companies to use new production and processing methods. Intensified animal production leads to an increased risk of animal diseases and other health problems (Kalfagianni, 2006, p. 15). For instance, this fact became apparent in outbreaks of salmonella and various infections. Meise (2011, p. 2) points out that consumers are typically unfamiliar with these methods and that, thereby, their concerns about food safety are increased.

The emergence of global corporate players is another trend in the food industry. Cost pressure and profit maximization have led to both major company consolidations across all levels of the SC as well as to increasing food commoditization (Roth et al., 2008). These trends have mitigated contact between consumer and producer. Establishing transparency can renew this interaction (Meise, 2011, p. 7). Alexander and Nicholls (2006) emphasize that, nowadays, international corporations are involved in multiple stages of the food production process and that their sourcing strategies are subject to extensive scrutiny.

As it holds true for the apparel industry, the food industry is influenced by activists and environmental groups. With rising awareness of the unethical supplier treatment in emerging countries, consumers demand not only safe but also ethically sourced products (Trienekens et al., 2012; Grankvist et al., 2007). Issues like fair trade, effects on wildlife, and sustainability are of increasing importance. In contrast to attributes like price and shape, these constitute product attributes with credence quality, as explained above (Meise, 2011, p. 17).

In short, end consumers in the food SC are typically concerned with both the safety and the ethicalness of the food they purchase. They demand concrete information on products’ provenance, used processes and ingredients, as well as on ethical aspects. Consumers from both industries show an increased willingness to pay for transparently sourced products and research shows that SCT strengthens customer loyalty (McCann Ramsey, 2014; Meise, 2011, pp. 4 ff.). Producers see these potential benefits of enabling transparency and are eager to meet consumer demand.

2.3 Scandals driving the need for information

Apparel industry

Apart from the before mentioned industry trends, recent scandals diminish consumer trust in SC activities. The 2012 factory fire in Bangladesh is a case in point. A fire in the Tazreen garment factory killed 112 employees (Manik and Yardley, 2012). Several critical safety issues in that factory like the illegal storing of flammable garments and blocked emergency exits drew public attention to the poor and dangerous working conditions in Bangladesh. The Tazreen factory supplied international retailers like Walmart and Sears with garments. These retailers, however, stated they were not aware that they procured clothing from this factory. This underlines the fundamental problem about the complexity of apparel SCs that was mentioned above: Retailers lose oversight of their products’ provenance. In turn, consumers’ trust in apparel companies decreases and they demand SCT to check the provenance of the products they buy.

Food industry

Similarly, the continuing sequence of scandals in the food industry leaves consumers worried (Beulens et al., 2005). One example is the incident of contaminated Chinese milk powder that was uncovered in 2008. Over 6000 infants had become ill and several died due to melamine contaminated milk products (Ramzy and Yang, 2008). According to Gale and Hu (2009), increasing competition for raw milk incentivized Chinese suppliers to water down and adulterate milk. The authors point out that the powder producers regularly had modern factories and safety measures in place but that their reliance on opaque supply networks left them with little control over the delivered raw milk. Ramzy and Yang (2008) emphasize the growing distrust towards Chinese food supplies as a consequence of the scandal. The incident also left Western consumers concerned due to the increasing number of Chinese food imports.

In 2013, the so-called horsemeat scandal in Europe shook consumers’ confidence in the food industry. After Irish food inspections had revealed the existence of horsemeat in frozen burgers, incorrectly labeled meat products were uncovered throughout Europe (Morris, 2014). In some cases, food products consisted to up to 100% of horsemeat. Yet, it could mostly not be solved, how and where exactly the adulterated meat had entered the SCs. These scandals reveal a serious lack of traceability in the food industry.

Modern tools to establish traceability in supply networks are analyzed in chapter 3.1.

These allow companies to gather information on products’ provenance, which was identified as one of the most important consumer concerns. Chapter 3.2 deals with analytical methods that enable companies to accumulate sustainability information. Subsequently, different approaches for communicating this information to consumers are analyzed in the fourth chapter.

3. Practices to enable transparency

3.1 Tracking and tracing

In order to establish SCT, the produced goods need be traceable throughout the entire SC. Especially in the food industry traceability is a major issue for consumers (Kelepouris et al., 2007). Product tracking refers to the ability to determine when and where a specific item was produced/processed and to identify its current location (Fritz and Schiefer, 2009). In the case of product deficiencies, tracking is a necessary condition to assess which other units might be damaged and need to be withdrawn from the market. Tracing deals with determining the origin of a certain unit’s raw materials and the subsequent processing of this unit. It also refers to the identification of all suppliers related to the production of specific units. Fritz and Schiefer (2009) differentiate between backward and forward traceability. The first deals with identifying a product’s initial origin. Backward tracing of deficient products helps to reveal the source of a deficiency. The latter refers to identifying a product’s future steps in the SC and its (final) destination. Once backward tracing has determined the sources of deficiencies, companies can employ forward tracing to assess which other product units might be affected. According to Kelepouris et al. (2007), traceability requires all SC partners to support product identification in order to ensure the gapless tracking of goods.

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Details

Title
Supply Chain Transparency in the Apparel and Food Industry
College
University of Mannheim
Grade
1,3
Author
Year
2014
Pages
27
Catalog Number
V299990
ISBN (eBook)
9783656972099
ISBN (Book)
9783656972105
File size
987 KB
Language
English
Series
Aus der Reihe: e-fellows.net stipendiaten-wissen
Tags
Supply Chain, Supply Chain Transparency, Apparel Industry, Food Industry, Labeling, RFID, Supply Chain Management
Quote paper
Marcus Fuchs (Author), 2014, Supply Chain Transparency in the Apparel and Food Industry, Munich, GRIN Verlag, https://www.grin.com/document/299990

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