Supply Chain Transparency: Blockchain to the Rescue?

As pointed out by Chloe Cooke in her 2017 wrap-up post on this platform in December, it has been a while since we addressed the topic of supply chain transparency. Specifically, we have not posted to our Transparent Tuesday series since April 2017, and the article before that came in February 2016! It is safe to say there have been significant changes in this space over the past 10 months.

One of our more provocative posts in this series begged the question, “Do consumers really care?”, a question for which there is no blanket answer. However, recent trends show that consumers are getting more involved and want to know more about the products they are buying.

Consumers demand more transparency

The level of engagement by consumers in the supply chain transparency space is growing. This is especially the case when it comes to the food and garments industries. For example, within the food industry, we are seeing some big brands come out with more scannable labels on yogurts, fruits and vegetables, that tell a ‘supply chain story’. But are these efforts coming too late? Just like we have seen in other areas of logistics, startups may be addressing the needs of the market better than the big brands can. Just look at Lyft’s and Uber’s market share take-over from the Taxi industry as an example. Similar services are popping up in the food industry, especially when it comes to fruits and vegetables. The most recent one I read about is called Chesapeake Farmery, which connects consumers directly to local farmers, thus eliminating large portions of the traditional supply chain that grocers use. The continued success of these types of startups shows consumers are placing more value in knowing where their food is sourced.

Coming back to the fashion industry, at the beginning of the month, 70,000 consumers signed a petition that encouraged large companies and brands to make supply chain transparency a priority in 2018. Part of the demands from consumers include the revelation of the factories in which these companies manufacture the garments they sell. The biggest problem here is that some of these companies have lost control over their supply chains as they became more complex, and can no longer fully visualize the entire operation.

Blockchain to the rescue?

Blockchain technology is being touted as ‘THE solution’ to overcoming the opaque supply chain operations some big brands and companies are facing. The only problem is the lack of a true understanding of the technology as well as limited practical examples to draw upon. But here, the question also remains: will it be the startups that dominate the space, or will large corporations take the reins and make the most out of this new technological advancement to achieve the level of supply chain transparency their customers want to see?

Many companies, large and small, are paying attention to and investing in the blockchain technology. At the end of last year, we saw UPS bet heavily on the technology as the company sees it as a significant part of the future of the logistics and freight industry. In order to stay up to date on the latest development, UPS joined the Blockchain in Transport Alliance (BiTA). The company identified the technology’s ability to create decentralized ledgers, for example records of dates, locations, loads, certification, and other relevant supply chain information, as the greatest benefit.

One practical example of the use of blockchain technology from a startup comes from the food industry. A UK based company, Provenance, used blockchain technology in Indonesia to track tuna fish from the fishing boats to the end user, bringing visibility and traceability to an otherwise cloudy supply chain operation.

Whether large or small, it seems as though companies will be spending a long period of time in the trial and error phase before the best and most efficient applications for blockchain technology are identified.

Accountability is on the rise

Whether it is blockchain, or some other form of technology, creating more transparent supply chain operations will no longer be a ‘nice to have’ for corporations, but rather a ‘must have’. Numerous organizations are rallying consumers around the transparency movement. In the fashion industry, there are several campaigns that are trying to hold companies accountable for their supply chain actions and demanding more information about their operations. There is the Clean Clothes Campaign, which is promoted across social media under the ‘#GoTransparent’ hashtag. Then there is the Fashion Revolution campaign which encourages consumers to ask the big brands who made their clothes, again running on the hashtag ‘#whomademyclothes’.

There are similar campaigns in the food industry being organized by consumers, non-profits and other organizations. Back in October 2013, I covered a campaign from Oxfam called Behind the Brands. This is an ongoing evaluation system on the sustainability, traceability and transparency of the supply chain operations from the top ten food companies in the world. They have been tracking the activities of these firms in areas such as their treatment of farmers and other workers, their treatment of the land they use and the surrounding environment, and of course, their level of transparency. These 10 big brands are still not scoring all too well in the transparency field, but some progress has been made over the last 5 years.

Closing Thoughts

Whether it’s the food industry, the clothing industry, or any other consumer goods, today’s end users are becoming more conscious of their buying decisions and want to be more informed when it comes to supply chain processes. Supply chain transparency should be at the top of every supply chain manager’s to-do list in 2018. Not knowing where certain parts are sourced from, or where your products are being manufactured is one of the biggest risk factors supply chain managers face. Therefore, it is important to begin mapping out these processes, or updating existing networks.

Blockchain technology has shown potential to be able to help this area. It is advisable to follow the lead of both large companies such as UPS as well as smaller startups if businesses want to keep up with the latest developments with the technology. A lack of transparency can lead to reduced trust from consumers, and in the end, it is these consumers that will decide to spend their money elsewhere when a crisis breaks out.

Where does supply chain transparency rank on your 2018 supply chain management to-do list? Are you looking at blockchain technology as a potential solution?