Inside transparent supply chain operations

Estab­lish­ing a trans­par­ent sup­ply chain is crit­i­cal in today’s glob­alised econ­o­my, but is chal­leng­ing to accom­plish. Com­pa­nies increas­ing­ly rely on large, wide­spread net­works of con­trac­tors and sup­pli­ers, but man­ag­ing them has become pro­gres­sive­ly com­plex and risky. 

As coun­tries tight­en their reg­u­la­tions, hir­ing clients must ensure that not only they, but their part­ners, uphold high stan­dards in areas such as health and safe­ty, sus­tain­abil­i­ty, labour laws and cyber secu­ri­ty. Those who fail to do this may find them­selves exposed to sig­nif­i­cant lev­els of finan­cial, legal and rep­u­ta­tion­al risk.

Embed­ding trans­paren­cy and best prac­tice across sup­ply chains is key, but achiev­ing this can be tough, as rules dif­fer from coun­try to coun­try – and change reg­u­lar­ly – mak­ing remain­ing com­pli­ant a full-time job. Hir­ing clients must col­lect rich, usable data about their part­ners to mon­i­tor their per­for­mance and help them improve. But many con­trac­tors, par­tic­u­lar­ly small­er ones, lack the sys­tems and process­es nec­es­sary to gath­er this infor­ma­tion, while fac­ing the same require­ments. 

Benchmarking for success

Mar­ket-lead­ing com­pa­nies are increas­ing­ly turn­ing to spe­cial­ists, such as ISN, for help. Estab­lished in 2001, the Dal­las-based firm is a glob­al author­i­ty in con­trac­tor and sup­pli­er infor­ma­tion man­age­ment, pro­vid­ing data-dri­ven solu­tions to help com­pa­nies man­age risk and strength­en their con­trac­tor rela­tion­ships. 

ISN clients can col­lect and analyse large vol­umes of data on their con­trac­tors’ per­for­mance, giv­ing them full over­sight of sup­ply chains. They can also bench­mark them­selves against peers with­in their indus­try or geog­ra­phy to iden­ti­fy poor per­for­mance and best-in-class sup­pli­ers. 

To do this, the com­pa­ny lever­ages its inter­na­tion­al net­work of near­ly 700 hir­ing clients and 75,000 active con­trac­tors and sup­pli­ers, span­ning indus­tries as var­ied as oil and gas, con­struc­tion, man­u­fac­tur­ing and IT.  

Rick Dorsett is senior direc­tor at the com­pa­ny, over­see­ing its health, safe­ty, envi­ron­men­tal and sus­tain­abil­i­ty review team. He believes hir­ing clients have made progress in improv­ing sup­ply chain over­sight but acknowl­edges that there is room for improve­ment.

“For a third par­ty con­trac­tor or sup­pli­er to com­ply with your expec­ta­tions they have to under­stand them,” says Dorsett. “The key is cre­at­ing the right frame­work and com­mu­ni­cat­ing it effec­tive­ly, but it isn’t always easy.” 

This is where a firm like ISN can step in, he says. Help­ing hir­ing clients to set goals and bench­marks, and decide on the data they need from con­trac­tors, can dri­ve change. Clients ben­e­fit from a diverse range of reports, dash­boards, inter­ac­tive ana­lyt­ics and per­cep­tion sur­veys to help them under­stand their net­works. They can also eval­u­ate their con­trac­tor bases in their entire­ty or seg­ment­ed by busi­ness unit, work type or job site. 

Blind spots

Accord­ing to ISN’s research, detailed in its Con­trac­tor Man­age­ment White Paper 2022, firms are under pres­sure to tack­le sup­ply chain blind spots. A large amount of work con­tin­ues to be out­sourced by hir­ing clients, but one in four either do not track or do not know the amount of work done on their behalf. 

In addi­tion, while one-third of hir­ing organ­i­sa­tions sur­veyed described them­selves as “proac­tive” or “sus­tained” in the matu­ri­ty of their con­trac­tor man­age­ment sys­tems, 16% con­sid­ered them­selves as “reac­tive” or at the start of their jour­ney. Only 6% con­sid­ered them­selves at a sus­tained state of matu­ri­ty.

This is con­cern­ing, giv­en that many con­trac­tors and sup­pli­ers still do not pay key areas of com­pli­ance due atten­tion. Sep­a­rate research car­ried out by ISN in 2021 found that only 60% of con­trac­tors and sup­pli­ers had imple­ment­ed an envi­ron­men­tal man­age­ment sys­tem, and few­er than half had poli­cies in place regard­ing pro­tec­tion of human rights (42%), diver­si­ty and inclu­sion (45%), and forced labour (41%).  

Addi­tion­al­ly, less than one-third (27%) of con­trac­tors and sup­pli­ers were found to have defined cri­te­ria for noti­fy­ing a hir­ing client of a cyber inci­dent in 2022, accord­ing to ISN.

But progress is being made in some areas. Jen­ny Buck­ley, senior vice pres­i­dent at ISN, says con­trac­tors and sup­pli­ers have improved cer­tain aspects of their busi­ness­es – for exam­ple, 87% had anti-dis­crim­i­na­tion poli­cies in place in 2021. That said, any com­pa­ny that works with third par­ty con­trac­tors will be exposed to some lev­el of risk. 

“Com­pa­nies that man­age this risk suc­cess­ful­ly will reap the ben­e­fits, but those that don’t could pay a heavy price,” she says.  

By offer­ing clients deep insights on their sup­ply chains that can be turned into action, ISN’s tools improve con­trac­tor per­for­mance over time, in turn ben­e­fit­ing the hir­ing client. In recent research,  ISN found that 65% of best-in-class com­pa­nies with lead­ing con­trac­tor man­age­ment sys­tems report­ed improv­ing safe­ty cul­ture as most effec­tive in dri­ving down seri­ous injuries and fatal­i­ties (SIFs) and 99% of best-in-class com­pa­nies incor­po­rate SIF met­rics as part of their over­all grad­ing scheme.

“Using ISN’s tools is an ongo­ing process, not a one-off,” says Buck­ley. “You glean data, then cir­cle back and use those insights to edu­cate and improve your sup­pli­ers. It’s not about dis­qual­i­fi­ca­tion but con­tin­u­al improve­ment, allow­ing you to quick­ly iden­ti­fy where things are going wrong and pro­vide spe­cif­ic feed­back.”

ISN Cul­ture­Sight enables hir­ing clients to poll employ­ees and work­ers anony­mous­ly to assess their per­cep­tion of risks and flaws in their process­es and poli­cies. Mean­while, Ven­dor­Sight allows them to sur­vey con­trac­tor and sup­pli­er views on their pro­cure­ment prac­tices, so the hir­ing client obtains a fuller pic­ture of how it per­forms as a busi­ness part­ner. 

“These tools are about eval­u­at­ing the strengths, oppor­tu­ni­ties and over­all con­sis­ten­cy of process­es with­in your busi­ness,” says Buck­ley. “Ulti­mate­ly good com­pli­ance comes from good gov­er­nance, and ISN can help clients dri­ve that cul­tur­al change.”

Find out more about how ISN can help you build more trans­par­ent sup­ply chains

Please see ISN’s insights report, A strat­e­gy-led approach to health and safe­ty gov­er­nance, for a com­pre­hen­sive look at the world of health and safe­ty.

Establishing a transparent supply chain is critical in today’s globalised economy, but is challenging to accomplish. Companies increasingly rely on large, widespread networks of contractors and suppliers, but managing them has become progressively complex and risky. 

As countries tighten their regulations, hiring clients must ensure that not only they, but their partners, uphold high standards in areas such as health and safety, sustainability, labour laws and cyber security. Those who fail to do this may find themselves exposed to significant levels of financial, legal and reputational risk.

Embedding transparency and best practice across supply chains is key, but achieving this can be tough, as rules differ from country to country – and change regularly – making remaining compliant a full-time job. Hiring clients must collect rich, usable data about their partners to monitor their performance and help them improve. But many contractors, particularly smaller ones, lack the systems and processes necessary to gather this information, while facing the same requirements.