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How to Turn a Profit By Being Radically Honest With Your Customers

Your newest competitive advantage? A transparent supply chain.

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BY Kate Rockwood - 15 May 2017

PHOTO CREDIT: Getty Images

"I didn't set out to create a sustainable supply chain," says Scott Tannen. But in 2013, he was on the hunt for new bed linens, and he couldn't stop thinking about the Rana Plaza disaster--the Bangladeshi garment-factory collapse that left 1,127 workers dead.

He began to wonder about the origins of a rather innocuous sleep accessory: Where did manufacturers get the cotton to produce sheets and pillowcases? How did the fabric get milled? Were the factory workers treated well? But answers were elusive. So Scott and his wife decided to create a luxury-bedsheet company that could answer those questions.

Three years later, Boll & Branch, based in Summit, New Jersey, is profitable, with annual sales of more than $40 million and a supply chain that is entirely traceable.

Trying to clean up a supply chain is nothing new--big corporations have been at it for years, mainly as a way to mitigate risks and dodge the next big scandal. But startups, says Steven Swartz, a partner at McKinsey and a supply chain expert, are now realizing that building a better one can provide a competitive edge, particularly among consumers demanding to know where their stuff comes from.

Insist on Access

Supply chain experts might spot more than you, but "it doesn't take a Harvard MBA to go into a shoe factory and see if those people are treated fairly," says Michael Burnette, a director at the Global Supply Chain Institute at the University of Tennessee. When Tannen set up the supply chain for Boll & Branch, he considered factories in Europe, the Middle East, and Asia, asking for webcam tours of any he couldn't visit in person. A blocked fire exit or a vague labor policy was an immediate red flag. "When we found the right factories in India, we knew it: They were completely open with us, and they let us put our own people on the factory floor," he says. Today, their mill workers receive medical insurance and are not required to work more than eight hours a day, with the option to earn overtime.

Turn to Certifications

Relying on third-party certifications can vastly reduce the legwork of vetting vendors, says Burnette. That was the case for Foodstirs, a line of non-GMO, organic baking mixes. Before they visited even one cocoa farm or flour mill, co-founders Sarah Michelle Gellar, Galit Laibow, and Greg Fleishman agreed to use only Equal Exchange-certified chocolate (which guarantees cocoa farmers are paid a fair wage) and Non-GMO Project-verified ingredients (which guarantees they are grown without the use of genetically modified organisms). Using third-party certifications as a filter left the team ample options and relieved them of the need to vet every possible supplier from scratch.

Find Ways to Automate

When Jared Auerbach launched his Boston-based seafood distributor, Red's Best, in 2008, the lifelong "fish guy" would meet boats on the wharf with four-part carbon-copy forms. Manually tracking each catch wasn't just time-intensive--it was riddled with errors. So Auerbach armed dockworkers with digital tablets and developed software that tracks every fish from the moment it leaves the boat. "It means we're faster and more accurate, and the fishermen trust us more," says Auerbach.

Make the Process a Journey

Intent on perfecting every piece of your supply chain before launching? You could wait yourself right out of business. "If you're a soapmaker, the provenance of those ingredients matters much more than the cardboard box you ship it in," points out Burnette. Instead, obsess about your core product now, and then iterate on the other elements once you're up and running. "We had to do enough supply chain R&D up front that we could start strong right out of the gate," says Fleishman. "But that doesn't mean our supply chain is set in stone. It's an evolution."

Marketing Radical Traceability

A virtuous supply chain isn't just for your back office--make it your brand

Infuse Transparency Into the Product

The clear capsules that West Hollywood, California-based Ritual sells are a potent visual metaphor for what sets the company apart: total supply chain transparency. Many multivitamins have 50-plus ingredients that are impossible for consumers to trace. Ritual's non-GMO, gluten-free, sugar-free, dairy-free, and dye-free vegan vitamins contain just nine ingredients, the origins of which are listed on the company's website, along with details of where each vitamin was manufactured and the clinical trials that influenced its dosage. In an industry known for its opacity, making that information available took some serious persuading, says founder Katerina Schneider. "We were firm about holding ourselves to that higher standard," she says.

Use Tech to Tell a Story

Once Red's Best was able to track its seafood supply chain in real time, not sharing that information felt like a missed opportunity to show consumers that their purchase was supporting sustainable local practices. So founder Jared Auerbach turned to QR codes: Before the company's bluefin tuna or razor clams are sold and shipped to wholesalers or restaurants, they're tagged with a unique code that, once scanned, details which fishermen caught them, where, and when. "With our supply chain data, we can package the story of our fish to share with our customers and their customers," he says.

Edit the Narrative

Supply chain aficionados might want to geek out on how much water it takes to manufacture boxes, but most consumers will run from an avalanche of info. "We don't want to bombard the consumer, so we needed to stage the message," says Foodstirs co-founder Greg Fleishman. Foodstirs' packaging includes information most important to its customers, like the product's clean ingredients and third-party certifications.

Transparency 2.0

New tech tools can track everything from contaminants to human rights

LaborVoices

More than 10,000 factory workers have used their mobile phones to log their earnings and working conditions into this system, which gives brands early warnings of problems at the far ends of their supply chains.

Frequentz

Launched by the ex-CEO of organic giant Earthbound Farm, this startup puts IoT sensors on supply chain items like packaging crates and refrigerated trucks to track the details of products including food and pharmaceuticals.

Elementum

This Mountain View, California, startup tracks news and social media to monitor a customer's supply chain and alerts it of potential hazards, like a storm or factory fire.

Provenance

This London-based startup is applying blockchain (the same tech that powers bitcoin) to global supply chains--along with physical tags for consumers to see where their products come from.