Meaning
Operational transparency extends beyond the immediate vendor to include the suppliers who provide components or materials further up the chain. Achieving sub-tier supply visibility allows a company to identify risks in their network that are not visible at the surface level. This information is used to prevent disruptions caused by failures at small, specialized providers.
Network Transparency
Mapping the entire supply chain involves collecting data on the origin of every part used in the final assembly. The network transparency of a company is measured by the percentage of its spend that can be traced back to the raw material source. This process often reveals dependencies on a single geographic region or a single specialized factory.
Risk Identification
Early detection of potential problems allows a business to develop backup plans before a crisis occurs. The risk identification of the supply chain includes monitoring the financial health and the local environment of sub-tier vendors. If a tier two supplier faces a strike or a natural disaster, the buyer can proactively source parts from another provider.
This reduces the time it takes to recover from a disruption and helps to maintain the flow of goods to the customer. Detailed knowledge of the sub-tier helps in verifying the ethical and environmental claims made by the primary vendor.
Chain Oversight
Monitoring the performance of the entire network ensures that all parties are following the required safety and quality standards. The chain oversight of the organization provides the data needed to respond to regulatory inquiries about the origin of products.
