You’ve probably heard the term “transparency of information” before. This principle applies to all departments in a company. It applies both to internal messages to inform employees about management decisions and to external communication about the products that customers buy. But, specifically in the procurement sector, what does this principle of transparency entail? Why and how should you implement it throughout the supply chain?
What does the principle of transparency mean in procurement?
The principle of transparency can be defined as the access to information about the company. It must be clear, precise, accurate and understandable to all. Data transfer takes place internally, such as through the sharing of the company’s global strategy with employees. It is also carried out externally to the company through the disclosure of product composition, among other things.
While this principle applies to many services, it is becoming increasingly important in procurement.
The supply division is responsible for the selection of raw materials for the company’s production. Its role is to help create the best possible product while keeping costs under control and meeting delivery requirements.
Information transparency in procurement can be implemented in various contexts:
- Announcing business issues;
- Sharing the choice of suppliers;
- Providing the company policy;
- Notification of potential delivery delays;
Why is information transparency important in procurement?
A transparent communication policy offers a number of advantages to companies.
The legal aspect
Directive 2014/95/EU requires companies to disclose their business model, results, policies, key risks and performance indicators. This is intended to provide the government with a more accurate picture of the situation of companies (regarding environmental and social issues, respect for human rights, anti-corruption, etc.).
Although this directive is currently only applicable by law to large companies and major groups, VSEs and SMEs also have much to gain from its implementation. The principle of transparency goes far beyond the mere legal aspect.
Small and large companies alike understand that they must stand out in a competitive market. Customers no longer buy a product just to meet a need. They search for and choose values. Most of them are also willing to pay a little more for a responsible item.
Companies must therefore communicate in a transparent way, so that consumers know what they are buying, throughout the supply and production chains. This is why more and more of them are opening up. By being fully transparent in their communication, they avoid suspicion and misinterpretation. Customers can then make informed choices in line with their values.
The procurement function has every interest in focusing on information transparency.
The business world is increasingly moving towards sustainable development practices. Three issues – social, environmental, and economic – now play a strategic role in communication. Besides the legal aspect mentioned above, providing evidence of an ethical, environmentally responsible, and human rights-based approach is part and parcel of a company’s growth.
Chief procurement officers can incorporate CSR into both the procurement of equipment for employees and the sourcing of raw materials for production.
Return on investment
The principle of information transparency helps to create a virtuous circle. When a company shares information honestly, consumers are more likely to trust it, choose it for their purchases and recommend it to others. It’s a win-win contract: customer satisfaction, on the one hand, and a high ROI for the company on the other.
This is a key factor in the success of a company.
How can the principle of transparency be applied in the supply chain?
Information transparency must be maintained throughout the supply chain.
On the supplier side
Upstream, this involves:
- Defining the company’s objectives, CSR criteria and values;
- Communicating them;
- Building a network of responsible suppliers;
- Implementing an R&D strategy both internally and externally.
Specific action between the company and the suppliers ensures that the previously defined objectives are achieved.
On the customer side
Downstream, it is important to ensure that communication is clear, accessible, and authentic. It must be consistent with the company’s overall strategy and bring added value to the recipient.
Your selection criteria and advice are all points worth sharing:
- Why did you choose a particular supplier (proximity, delivery method, etc.)? ;
- Why do you favour this raw material over another?
- What advice can you give to help your prospects make the right choice?
Eliminating waste and improving processes are two valuable lines of communication in Lean.
Human well-being – including safety in factories, respect for working conditions and working hours – is a topic that deserves to be highlighted.
Route optimisation and the elimination of overstocking and overproducing are all data to be shared in relation to environmental issues.
Informing the public about the implementation of a responsible procurement policy is part of a commitment to deliver high-quality products.
Transparent communication to reflect corporate image
Corporate image is based on consumer perception. By promoting information transparency, you bring this overall impression in line with reality.
The procurement function is directly integrated into the company’s value chain to achieve customer satisfaction. Customers are increasingly interested in knowing where products come from and need to be aware of the decisions taken and have easy access to them. The procurement strategy must therefore be made visible and aligned with the company strategy throughout the supply chain.
Transparency is the key word here. Simplicity, authenticity, and honesty are essential to avoid misinterpretation.
To find out more, download our white paper "Purchasing Policy and CSR"