The holidays are upon us! From now until the New Year, ’tis the season when consumers far and wide rush to buy gifts for their loved ones. Online retailers and brick-and-mortars alike are boasting all-time low prices for everything from electronics to puffer jackets, while even grocery stores are offering free delivery, encouraging shoppers to enjoy more time at home with the family. The 2019 holiday season is shaping up to be another big year yet again.
But I wonder — where does all this stuff come from after all, and what impact do these products and offers have upon the world as a whole?
Sarah Emerson recently wrote an article on Medium that spells out the complexity of these questions when she tried to track the origin of an AmazonBasics battery that exploded in her kitchen. In short, it was near impossible to find the origin of her cheap batteries and along the way she learned just how difficult it is to get data/information about the products we buy.
As consumers we’re taught to chase a bargain — in fact price was likely the factor that led Sarah to purchase the AmazonBasics batteries in the first place. And there’s no direct fault in this; after all, when confronted with the option to pick between two items that appear similar though priced differently, why wouldn’t we pick the more affordable item? Most people wouldn’t think twice.
The problem here is that not all products are created equal. While we may be enjoying a discount, somewhere something or someone is often paying a price for that luxury good. From low wages to child labor and animal cruelty, buying the cheapest product or most convenient service often has unwanted consequences, and these injustices are all created as a result of variables within the supply chain.
So what exactly is the supply chain, and why is it important?
The supply chain includes the resources (raw materials like cobalt or cotton), activities (like milling, smelting, fabrication, processing, or shipping), people (farm and factory workers), and organizations (manufacturers, brand owners, or corporations) that contribute to the transition of a raw material into a finished product for a customer.
Image from forthcoming report Sensors, Identifiers, & Digital Twins.
Emerson ascribes malicious intentions to Amazon, assuming they are intentionally obscuring supply chain provenance information for their gain. The reality is less nefarious — it’s near impossible for a company to completely control their supply chain, which means it’s near impossible to share upstream product data with downstream consumers. Using multiple suppliers and manufactures is typical business activity in the supply chain. It’s core to the capitalist market and the baseline of how businesses make their products.
A company may do business with a manufacturer who may, unknown to their brand clients, outsource parts of the order to another manufacturer. They might source the material differently from batch to batch (depending on availability and price). This could simply be getting a better price on a certain raw material due to legitimate market fluctuations, or perhaps because it is sourced in a jurisdiction with less rules and regulations. It’s in these multiple suppliers, with the intention to get a better deal that exploitation can occur.
Whenever a company in the chain is trying to maximize profits (or cut costs) there will inevitably be unscrupulous individuals willing to exploit the situation to their benefit — without being forthcoming about the reasons. This is why it’s difficult to get comprehensive data about products being created in the supply chain — it involves many companies, with various levels of ethics. This makes it difficult to have data you can trust.
In our research, one company comes up as a leader in sustainable supply chain — Patagonia. A core part of Patagonia’s mission is to build products without harm and inspire solutions to the environmental crisis.
“Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.”— Patagonia’s Mission Statement
Patagonia has paved the way to creating a transparent supply chain with their Footprint Chronicles site, which gives detailed information about their suppliers, mills, and factories along with developing standards for for traceable raw materials. Down that is used in their products must comply with their “TDS/NSF Global Traceable Down” standard. Due to their strong product demand, there are counterfeits on the market. One way they combat their counterfeits is to accept returns of counterfeit products, to get them off the market. Because of Patagonia’s high standards, consumers can feel confident that when they buy authentic Patagonia products, they are not impoverishing the world.
While Patagonia is the leader in sharing supply chain data today, new technologies promise more transparency. Imagine being able to scan the barcode of your product and find out exactly where the cotton was sourced. This idea is being implemented by French retailers, Carrefour, which has been experimenting with blockchain digital tracking technologies to improve operational transparency and increase consumer trust in its products.
Customers can scan a QR barcode on a pomelo grapefruit with their phone and find out the date of harvest, location of cultivation, the owner of the plot, when it was packed, how long it took to transport to Europe and tips on how to prepare it. “Some people spend as long as 90 seconds reading the provenance information,” says Emmanuel Delerm, French superstore Carrefour’s blockchain project manager. He continued, “millennials are buying less but buying better products for their health, for the planet.”— Reuters
QR barcodes are just one example of the many tools being explored to improve supply chain transparency and boost consumer trust. Another — the concept of the “Digital Twin” — has also shown great promise.
Coined by Dr. Michael Grieves, “Digital Twin” is the term used for the digital version of a physical object that has data associated with it. A digital twin gives the ability to associate data with the physical object, and to access it digitally. The term started out being used for modeling systems, but has come to represent data associated with a physical object. In the context of the supply chain, a digital twin is the digital representation of the physical item, and aggregated data about that item from multiple sources, yet easily shareable. This data can include provenance information — like where the materials came from, manufacturing data, like which factories it was produced in, and brand data, like the name and description. It could also include compliance and regulation data, and commerce data like a barcode or other commerce number.
So what are the benefits to sharing supply chain data to end consumers?
- Increase corporate trust: Consumers can be confident in their purchases, while brands live up to their sustainable promises. This communicates real action on sustainability initiatives which increases shareholder trust.
- Increase corporate control: Supply chains can be long, and even a brand owner may not know all the steps — increasing the transparency can be beneficial for a company to have greater knowledge about all the suppliers and factories that contribute to their supply chain.
- Identify business opportunities: Companies with supply chain data can identify patterns in their supply chain and use this information to improve business processes.
- Improve regulatory compliance: Supply chains cross many jurisdictions, and increased transparency can help with regulatory compliance at different stages — especially when data must be shared with government agencies.
- Attract younger demographics: Research shows younger demographics care about product sourcing and are willing to pay more for ethically sourced products.
- Reduce exploitation: Exploitation is hidden along the supply chain. Knowing the provenance and data about the things we buy, enables us to make better buying decisions.
In our research, we came across several projects using new technology to increase the transparency of their supply chains. While these are in their early stages, companies can see real-world applications by industry leading companies.
- Matterum: Vinay Gupta’s ambitious vision to make property easily transferable using blockchain.
- Hyperledger Supply Chain: This Linux Foundation project explores supply chain tracking. Members include IBM, GS1, Oracle, RMS, and many mid-sized companies focusing on blockchain solutions for enterprise supply chain problems.
- Novartis Pharmaceutical: Novartis is exploring using verifiable credentials to track data on the pharmaceutical supply chain.
Companies need to consider their plan for data transparency in their supply chains. While the transition to a transparent supply chain won’t happen overnight, it has already started, using new technology that enables sharing of trusted data. Companies that use these new technologies to share supply chain data (without revealing suppliers and their competitive advantage), will find a long term economic advantage. There are steps every company can take today.
Learn more in the forth-coming report, Sensors, Identifiers, and Digital Twins: Tracking Identity on the Supply Chain. https://bit.ly/GSCreport
