The manufacturing and production sectors make up 16% of global GDP and in doing so, they are key drivers for economies around the world. Indeed, as industry has evolved, these sectors have built increasingly complex supply chain networks, designed to create the highest-quality products for the lowest price. Each activity in the chain focuses on ensuring the highest level of efficiency at the lowest cost, however, this is causing concerns about the level of corner cutting involved in achieving these efficiencies, especially against a backdrop of soaring competitiveness. This is leading to a critical situation in which rapidly growing, complex supply chains become vulnerable to enormous economic, social and environmental risks that require urgent attention.
As the complexity of a supply chain grows, the ability to monitor each link in the chain becomes even more difficult. This leaves the retailer at significant risk due to rising consumer expectations for transparency. As a result, according to Accenture, almost 35% of global chief executive officers identify supply chain complexity as one of their top business risks.
Concurrently, society is changing – consumers are demanding more and more transparency and information about the social and environmental impact of the products they purchase as they become more sensitivity to ethical behaviour. Consumers increasingly want to know where the products they purchase come from, how the materials are sourced and whether the workers employed to produce the goods are treated fairly.
This is creating a dichotomy for the manufacturing sector, as whilst complex global supply chains have reduced the direct costs of many products, indirect costs, such as the environmental ones, are gaining greater attention. For example, if a manufacturer is a significant contributor to carbon emissions and does not appear to be tackling the situation, they are up against significant risk of consumers choosing a lower-carbon alternative, or at least an organisation able to deliver a clear policy or strategy to address the impact their production systems have on the environment.
Indeed, while supply chain sustainability conversations began with worker welfare, safety and sustainability measures at specific manufacturing sites, they have since expanded to include the tremendous impact these complex supply networks have on climate change. This pressure is exposing manufacturers and producers to reputational damage from not being able to monitor their global supply chains effectively. But how can manufacturers efficiently monitor their supply chain for risks if they are increasingly complex? The answer lies in blockchain.
Blockchain is the creation of a distributed and immutable ledger that allows real-time transparency, privacy and high security. Originally the technological backbone of cryptocurrency, it is being increasingly used to monitor global supply chains in previously opaque industries. Blockchain is able to monitor an entire supply chain by creating a ‘block’ for each stage of a process, allowing transparency and accountability at an unprecedented level. Its applications include; diamond traceability, ethical health data management and trace apparel from sourcing the materials through production into the stores.
Although blockchain allows consumers to track and choose a product based on activities within the supply chain, the number of platforms offering this service is increasing and making it difficult to navigate. Therefore, to maximise the potential of blockchain supply chain data to improve transparency and sustainability of supply chains, a new single-source platform where consumers can access traceability data across multiple sectors and brands is needed.
Although it is a challenging task, there is one such collective looking into the creation of an independent platform and capable of comparing supply chain information whilst also being able to overcome the technical challenge of presenting data from multiple sources and differing blockchain protocols.
Everledger, the International Trade Centre (ITC) and Lenzing Group and its blockchain solution-provider TextileGenesis, recently launched a pilot platform to provide an impartial hub of knowledge on global supply chains that could help consumers track and trace the products they purchase. Although in its infancy, the platform may one day be able to provide the assurances consumers are increasingly demanding whilst reducing the risk for businesses operating in the supply chain. Indeed, the consortium expect that in the future, the platform may also be able to provide assurances about a wider range of accountability-based questions such as validations of factories claiming to have certifications such as the Leadership in Energy and Environmental Design [LEED]-certified buildings or include wider levels of sustainability-related data covering regions around the world.
The 4IR is transforming the global manufacturing sector and as social opinion and preferences for ethical behaviour shift further forward – manufacturers are being faced with two options; evolve or fade away. While transparency of global supply chains does not equate to a panacea to the challenges today’s manufacturers face, the ability to provide transparency and accountability via blockchain could amplify the sustainability of these networks. But to make this platform a true, universal success, it is vital to incorporate more data sources and more perspectives to provide as much accountability as possible.
Therefore, to build future supply chains based on positive behaviour, brands and suppliers should be encouraged to join blockchain platforms such as the ITC consortium’s model, to help shape the future of digital traceability and enhance the transparency and sustainability of the global manufacturing and production ecosystem as a whole.