Consumers more likely to buy from firms with supply chain visibility

29 August 2019

Consumers are more likely to buy from a company that increases supply chain visibility, according to a study.

The research, by MIT Sloan School of Management, found consumers always trust such a company more than a competitor that hides how supply chain workers are treated and investing in supply chain visibility was a surefire way to increase sales.

Professor Y. Karen Zheng and visiting assistant professor Tim Kraft along with León Valdés, an assistant professor at the University of Pittsburgh, conducted a study with 467 participants at two US universities via a game designed to mimic market supply chain conditions.

The game attempted to recreate an environment featuring a retailer, a consumer and a disadvantaged worker making products for the retailer via its supply chain.

The game was set up to discover whether consumers were more likely to buy from a retailer who made a strong effort to be transparent about how they treated workers.

Researchers who set up the game said they went to significant lengths to avoid any situations that could create bias in the consumers’ minds and inserted control tasks to ensure it had academic validity.

Within the game the seller had to decide how much to invest in supply chain visibility, and whether to allocate vital resources to communicating that information to the buyer, truthfully or not.

Consumers then had to decide whether or not they believed the seller and whether to spend scarce tokens on the product.

“Increasing supply chain visibility always strengthens consumer trust,” the researchers wrote. “Furthermore, opportunities exist for a trust-driven revenue benefit due to greater visibility.” 

In their paper the researchers noted that in a recent survey 75% of respondents considered transparency helpful in strengthening trust between businesses and consumers. But according to another poll, 81% of 1,700 companies surveyed did not have full visibility into their supply chains, with 54% having no visibility at all. 

Researchers said that while transparency is expensive, risky, and time-consuming, it was a vital tool to strengthen consumer trust. 

“At a time when customers are becoming savvier – and more sceptical – about social responsibility, our findings show that the investment can be worthwhile as it always engenders consumer trust,” Kraft said.

This was particularly true of companies operating with potentially disadvantaged workers in developing countries.

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