New research has revealed the scale of the challenge companies’ face when collecting information about their value chains. The study by leading value chain mapping experts Historic Futures found that most retailers and brands say a lack of information has a real impact on business performance (63% saying it was significant, 33% slightly agreeing).
Tim Wilson, Founder and CEO, Historic Futures, says, “This research shows that many companies are starting to recognise the importance of knowing more about their value chains yet have uncertainty over the level of data that is needed. Over the last decade we have worked with many large international brands and retailers, (including Walmart, Marks & Spencer, Decathlon, Forest Stewardship Council – FSC and many others) to help them gather knowledge about their value chain structures and operations. Our experience supports the findings of this research in that the biggest challenges are both the need for increased awareness about the business cases and effective technology and tools to enable data collection.”
Indeed, almost half of retailers and brand owners surveyed said that they do not have enough useful data from multiple steps within their supply chain (beyond data received from immediate suppliers) and only a quarter said the data they receive from immediate suppliers is sufficient in order to find out about what happens in their value chains.
Despite that, the research also revealed the significance that all organisations now attach to knowing where products come from. As many as nine out of ten retailers and brand owners say that what happens in product value chains is important to understand the social and environmental impact of products. Over 80% believe it is important for product quality and performance.
However, there is confusion about what data is needed and how much. There is an acknowledgement that a significant amount of value chain information needs to be collected in order to address different challenges. 90% of respondents said location of suppliers and raw materials is necessary information, 80% said knowing about people’s working conditions and rights is needed, 78% about resources (e.g. water and energy), and 70% about compliance with third party standards.
Over half of respondents (54%) think that the data needs to be very detailed in order to make effective judgements about value chains, with data from all participants in the value chain needed in order to enable mapping from raw material (country of origin) through to final product. A third (33%) think that information does not need to be quite as detailed, only requiring data from immediate suppliers showing the possible range of ‘who supplies who’ and the regions in which materials originated.
Historic Futures believes that the level of data required really depends on the business case that it needs to support – that is, what an organisation needs to find out and what is at stake. For example, those wanting to manage their risk perhaps just need to know the location of raw materials. However those wanting to know not only the origin of raw materials, but how the product was made, by whom, using how much energy, water etc, will require greater and more accurate data. The research found that for most organisations just being able to know where raw materials come from would be a good place to start.
When asked about what level of responsibility brand owners should have for gathering value chain data, almost half (48%) of respondents said that they should be responsible for finding out all or at least multiple steps in their supply chain. However, the other half (46%), almost a third of which were retailers and brands, said that they only need to know who the direct supplier of their product is, and should expect that this supplier knows their supplier (and so forth).
The main barrier to collecting value chain data, the study found, is lack of understanding of the business benefits. Just over a third also said a lack of information systems is a significant challenge, and only 16% said return on investment challenges were significant factors. Additional comments raised the importance of data security and commercial sensitivity around data sharing.
“We are now exploring the many different business cases for value chain mapping, and the level of required data to achieve these with the aim of increasing awareness amongst decision makers”, says Wilson.
Photo credit: Historic Futures