Can Supply Chain Transparency Save the World?
I spent half of 2019 researching digital identity technologies that track goods on the supply chain. While I enjoyed the research, I didn’t think the results would be particularly mind-blowing. I thought we’d analyze the pros and cons of some technology and give recommendations for execution. And, indeed, on the surface our report covers technology trends, data concerns, current challenges, and visions of the future.
However, hidden below the surface of our research was something far more important. The supply chain exists because of economics and trade, and this interconnectivity touches almost every human on the planet, and in fact, the planet itself. The supply chain is the process by which we take raw materials from planet earth and transform them into products to be shipped, sold, consumed, and sometimes recycled. What my research revealed is that we can change the world, improve human life, save the environment — and still make money — by upgrading the global supply chain system.
“We have to change the incentives of our entire economic system to address the problems we’re facing today.” — Subject Matter Expert Interviewee
This problem is huge, and while there are no easy solutions, there are clear paths forward. Key to forging these paths is how we look at enabling data transparency, informed by concepts such as digital twins, coordinated technology, and smart farms, fisheries and factories.
Digital Twins
A digital twin is a non-physical representation of a physical object. Digital twins are mainly used for modeling systems, but this term has been used to represent data that has been collected and stored about a physical object. For example, a fish that is caught in the Atlantic carries all kinds of information — data — that is important about the catch. This data follows the physical object — the fish — as it moves through the supply chain. Various companies and government agencies need the information to certify the catch; the fish’s digital twin can aggregate this data, which can then be shared with participants in the supply chain.
Digital twins have been named the top supply chain trend for 2020 in this post, which describes several other uses.
“Imagine a production line in which every piece of equipment transmits information about its current status. If anything starts to overheat, technicians can plan a repair before the part fails and the entire production run is forced into an expensive unscheduled shutdown. Digital twins promise more accurate and effective KPI reporting and have the potential to dramatically alter how businesses plan and adapt to change.”
In our research we came across ZestLabs, a company that uses sensors to track variables (such as temperature and jostling) around the transportation of perishable foods. I was impressed with Zest because they have not only solved the IoT tracking sensor problem, but they also have innovative ideas for ensuring their data is accurate and usable.
Industry 4.0
Industry 4.0 is a German term describing coordinated technology that changes the industrial game. It’s seen as the fourth industrial revolution, applying information technology to the manufacturing industry.
What does this look like in practice? Picture factory robots, IoT sensors gathering data, and AI reading the data are hyper-optimized to create an automated industrial environment with minimal human intervention. Imagine a factory floor filled with autonomous robots at work, day and night, in darkness or in light. Each is designed with wireless connected sensors that can communicate with other robots and with the broader production line to make their own decentralized decisions using artificial intelligence and machine learning. Does the production line need to speed up? Or slow down? Is one of the machines not working efficiently? Let’s call a technician to take a look. This is a phenomenal systems view map of some things to consider when thinking about cyber-physical systems.
What I’ve described above could be considered a smart factory. But let’s not stop with that one smart factory. Imagine an ecosystem of connected smart factories. A factory that refines a raw material could feed multiple downstream factories to further refine that material into specific products. One factory might not only refine cotton, but direct it to where it’s used to produce thread, fabric, and finally T-shirts or pharmaceutical supplies. What if we included smart farms and fisheries in the upstream supply chain? It might seem like a crazy idea at first, but it is technologically possible with autonomous farm drones and self-driving trucks.
Since Industry 4.0 smart factories are running with native data collection and sharing, what’s to stop us from gathering additional data about the manufacturing experience? Like how much electricity is used to produce a particular item? Or details on where the energy comes from — coal, solar or maybe hydro powered? The data could also include market externalities that are difficult to include today, such as environmental impact or quality of life. And I’d be remiss to not mention 5G, which could help with solving the need for always-connected devices.
The Industry 4.0 revolution will introduce new efficiencies using technology to increase productivity. Industry 4.0 puts forth a grandiose vision that is fully integrated and perfectly executed — but reality will of course be much messier and complex. Regardless, it is helpful to see the vision of what could come, if only to inspire us to work to make that world a reality.
Circular Supply Chain
One market externality that is too infrequently considered is the cost of disposal. Do you think about what happens to your clothes when you are done with them? Did you know there is a global trash crisis?
Many companies have decided it’s more cost effective to throw away a broken version of their product than to fix it. A few years ago, during a major heatwave, I ordered an air conditioner that was delivered defective. The manufacturer’s solution? I was to cut the electrical plug off the air conditioner and send just that portion back. That company had decided it was cheaper to scrap the entire air conditioner rather than repair it. I found another way to exchange it for a working model, but I suspect that I just made someone else do the inevitable.
The market externalities of trash or recycling are not included in a product’s cost calculation, and companies relinquish their responsibility for the product when the consumer pays for it. This supports supply chains building cheap products with underpaid labor. Ultimately, this is a problem we will have to face and solve. More data about production materials will enable a new market of recycling and repurposing a finished product as the raw material for something new.
Identity and Data Standards
We can take baby steps toward digital twins, Industry 4.0, and the circular supply chain right now. In each of these visions, data is a key component. Data collected at each stage in the supply chain must be verified, harmonized, confirmed, and stored somewhere. All of the IoT devices, including robots, and data collecting sensors, must have an identity. The data they collect will need to be verified so we trust it. And the data needs to be in a format that is easily shared and displayed — securely. This means the data must be collected and aggregated in the cloud and must also be available via an app or another medium to the end user. And, finally, the data must also be available in both machine readable and human readable formats.
Companies are not typically in the business of transparency with their supply chain. Some may not even be aware of the many links in their own existing supply chain. Others may be afraid of leaking supplier sources, which are considered proprietary information. But today, there are new data technology standards that plan to address these needs.
Through our research, I discovered that there currently isn’t much data available about any given raw material as it moves through the supply chain. Is it responsibly sourced organic cotton manufactured in factories that pay a living wage? Or is this cotton grown in Uzbekistan with forced labor that drained the Ural sea? If this data is collected and shared with end consumers, maybe a significant segment will choose to buy the more sustainably produced product (or choose to go without).
Working Together
Not everyone wants to compete the same way in today’s world. For some companies, a sustainable mindset is more important than top profits. When Allbirds found out that Amazon had knocked off their shoes, they called them out for blatantly disregarding their efforts to further sustainability practices, saying basically, if you’re going to knock off our products, knock off our sustainability too.
“Customers value companies that are mindful of the planet and profits, and we believe the most powerful businesses in the world, such as Amazon, should lead on these issues, and will be rewarded for doing so. Please steal our approach to sustainability.” — Allbirds
Consumers want to make sustainable decisions with their money, but all too often lack the data to do so. We do the best we can, but that’s really not enough to save the world. The visions in this piece can inspire companies to take action on incremental changes that will have long-term effects. Sample effects might include developing and using data standards, which make it easier to share and confirm the veracity of the materials data for purchase decisions and recycling. Companies can fund pilot projects that share data with consumers to test how they use the data in a retail experience. And company executives need to understand that this transformation is most certainly a marathon, not a sprint. Start today to prepare for the long term shift. We didn’t industrialize the globe overnight and we won’t upgrade the supply chain overnight either.
If consumers have accurate data about the things we buy, and we vote with our dollars, this will send a clear message to industry to make decisions that are sustainable for people and the planet. Consumers will buy great products, companies will make a profit, and we just might be able to save the world in the process.
Read the report that inspired this thinking: Sensors, Identifiers, and Digital Twins: Tracking Identity on the Supply Chain.
