Global supply chains will improve with better data. Here’s how they get it.
The global economy is inefficient. Improving the situation will need communication and coordination, but this is not possible because businesses are currently unable to get the information they need. Solving this is essential if we want to build a sustainable economy.
Every business is part of a much larger network. The retailer that I bought my jeans from is part of a global supply chain that includes the brand, tailor, weaver, spinner, and cotton producer to name a few. These businesses are all involved in making the same pair of jeans and each one needs information from the rest. Most are forced to survive without it, however, because getting the information is difficult, slow, and expensive.
Each business only knows the businesses they directly trade with, and they don’t know who the other businesses in their supply chain are. If they need to ask a question of one of these unknown companies, then a message has to be passed down their supply chain via emails and telephone calls, from one business to the next, until it gets to the right person. Then they have to wait for the answer to be passed back up again. This process is so bad that at least 50% of the data about the products we buy is incorrect or missing.
Getting information flowing would unleash massive efficiency gains across the economy. Zara is the world’s largest fashion brand and is 28% more profitable than their competitors. This is because they have managed to create communication and coordination between their business, their tailors and weavers. In South Africa, the Sustainable Cotton Cluster has produced a network so efficient that it has created 5,000 new jobs and increased sustainable cotton production by over 700% since it began in 2014. Our company, Resonance, estimates that the value of the information trapped inside businesses globally is at least a trillion dollars.
Current attempts to resolve this problem focus on two approaches. The first is making supply chains transparent, so that the brand knows all of the businesses in its supply chain. This approach is failing, however, because businesses won’t reveal the identity of their suppliers. This is commercially sensitive information and could easily be used against them. Supply chains are opaque for sound commercial reasons.
The second approach is technological and uses blockchain, which creates a chain of custody for the data. This is valuable because businesses can trust the data they get because they understand where it came from. These solutions are failing to get traction beyond the testing phase, however, because they have the following flaws:
- Every business is required to adopt the same platform, which may not suit everyone’s needs.
- They reveal commercially sensitive information, and most require transparency.
This shows that a technological solution must meet three requirements to be successful:
2. Communicate and link any data from any piece of software, so businesses can use the software they want.
3. Provide a chain of custody to help businesses understand the data they receive.
There are many businesses tackling the different parts of this problem in depth, and our company has developed a solution that proves it is possible for a single system to bring all these properties together.
In a world that seems to be accumulating ever more bad news, I have a little ray of hope. In only 11 years smartphones have created a digital network that has connected nearly every person on the planet. We expect our solution to create a digital network between businesses just as quickly.
I want you to imagine a supply chain with the tools it wants to create the sustainable future we need.