When it comes to real-world applications for Web3 technologies, many people are still on the fence, especially in sectors that seem far from the “trendy” things like metaverse or cryptocurrency.

And a great example of that is “Supply Chain”.

In several past editions, I mentioned this topic, but usually just as an example for something else.

Edition #4 covered the “Industrial Metaverse” and we had this:

Months later, in edition #28 we talked about “ReFi & Web3 for a Sustainable Economy” and once again Supply Chain was mentioned:

So, after some teasing, it’s time for a more detailed discussion on a topic that is vital for the world’s economy - and one that can certainly benefit from Web3.

LFG!

Supply chain: A quick overview of the space

First things first:

“What is Supply Chain”?

Well, there are a lot of ways to put it, but I’ll share a definition that I really like (and it’s by McKinsey):

“The supply chain is the interconnected journey that raw materials, components, and goods take before their assembly and sale to customers”

In an article they have published about this topic, they also listed different types of supply chain participants:

• Producers, which make or grow the raw materials for goods

• Vendors, which buy and sell materials

• Manufacturers, which make materials into goods

• Transporters, or logistics providers, which move those goods around the world

• Supply chain managers, ensure that operations run smoothly in everything from planning to sourcing raw materials, manufacturing, delivery, and returns

• Retailers, which sell goods either online or in physical stores

• Consumers, who buy and use those goods and services

So it’s clear that we are talking about a colossal sector - one that in one way or another affects all of us. And since it affects and involves so many players, it’s really hard to be precise about its size - but many sources point to something around 15-25 trillion USD.

Now, imagine navigating a labyrinth of countless suppliers, each linked to an intricate web of sub-suppliers, complicating every attempt to monitor and verify the integrity of the supply chain.

This complexity doesn't just make operations tough; it intensifies the call for transparency and traceability, but we’ll cover these two later on.

A chain of challenges

Speaking of “complexities”, with layers of suppliers and processes spanning different territories and regulatory environments, the task of maintaining everything working is far from being easy.

So before we jump into how Web3 can help this industry, let’s first see some of its main challenges:

Visibility Shortfalls

One of the core struggles today is the sheer lack of visibility that many companies face within their supply chains.

That means that many companies end up navigating in the dark, struggling to pinpoint inefficiencies before they escalate into full-blown crises. Enhanced visibility is essential not just for identifying bottlenecks but for smoothing out the entire operational flow from raw materials to finished products.

Fragmentation and Compliance Complexity

Many modern supply chains introduce a challenge of fragmentation. Often, companies find themselves having to deal with suppliers where data sharing and effective communication are hampered by sheer scale.

This fragmentation complicates compliance, especially when operations span across various regulatory environments, each with its own set of rules and standards.

Inefficiencies and Transparency Gaps

Inefficiencies are a significant drain on resources, with estimates suggesting that cross-industry inefficiencies lead to around $1.5 trillion in annual revenue losses globally.

Compounding this issue is a critical lack of transparency, where many companies are unable to properly track their supply chain activities, leading to lost opportunities for optimization and risk management.

The Environmental and Ethical Imperative

Now more than ever, sustainability and ethics are at the forefront of supply chain concerns. With increasing consumer and regulatory pressure, only a small percentage of companies feel fully confident in their visibility over their supply chains.

This uncertainty makes it challenging to guarantee that sustainable and ethical practices are upheld consistently, risking reputation and compliance.

Complex Demand Forecasting and Market Volatility

Today’s market is anything but predictable, with rapid shifts in consumer behavior and spending patterns - not to mention politics, wars, etc.

Effective demand forecasting has become a complex but critical task for businesses aiming to maintain just the right inventory levels - too much, and you’re wasted; too little, and you miss out on sales. Staying agile and predictive in inventory management is more crucial than ever.

Adapting to Consumer Expectations

The shift in shopping habits towards online platforms has set new standards for delivery and service. Most consumers now expect fast, often free, delivery services, putting pressure on businesses to overhaul their inventory and distribution strategies to keep up with demand.

Keeping pace with these evolving expectations is key to staying competitive in a swiftly changing landscape.

Each of these challenges presents a unique obstacle, but also a unique opportunity for innovation.

Moving forward I’ll share some insights on how Web3 can help businesses face some of those challenges - especially the ones related to Transparency and Traceability.

Web3 enters the room:
Empowering Transparency & Traceability

Transparency in supply chains isn't just about opening up business practices to scrutiny - it’s (also) about forging a path to sustainable and ethical operations that align with global standards and consumer expectations.

At its core, transparency facilitates an environment where businesses can preemptively identify and address potential disruptions, ensuring a smoother operational flow and reinforcing stakeholder trust.

Traceability complements transparency by enabling the precise tracking of products from origin to end-user. This granular visibility is crucial for verifying the ethical credentials of products and ensuring compliance with regulatory standards.

Innovations like blockchain technology, RFID tags, and IoT (“Internet of Things”) devices are revolutionizing this space. Blockchain - like we covered in MANY previous editions 😄 - offers a decentralized ledger that is immutable and transparent by design, making it ideal for fostering trust and security in transactions.

Together, transparency and traceability don't just support compliance → they empower businesses to enhance operational efficiency, reduce waste, and build a brand reputation grounded in trust and ethical practices.

By integrating these principles, companies are not only able to safeguard their operations against risks but also position themselves as leaders in the push for a more responsible global market.

So from a “nice-to-have” element, having a transparent, traceable supply chain, is becoming more and more important for modern businesses aiming to stay ahead.

Let’s dive a bit further into these two elements, shall we?

Transparency

Transparency is foundational to building trust and ethical practices within supply chains.

It allows companies to show not just what they're doing, but why they're doing it, matching their operations with the growing consumer and regulatory expectations for sustainable and ethical practices.

This transparency means others can see the entire lifecycle of the products they deal with, supporting their decisions on how to deal with different stakeholders.

Moreover, transparency supports regulatory compliance, making it easier for businesses to navigate the complex web of international standards. By openly sharing their processes, companies can reduce the risk of legal complications and enhance their reputation. This “openness” is essential in a competitive market where authenticity translates directly into customer loyalty.

Companies can create digital records for each step of the production/distribution process, gathering information such as raw materials, resources’ origins, manufacturing conditions, transportation, and others. These records can then be linked, creating a transparent “trail” of provenance - which ultimately can be converted into customer satisfaction, value perception, and brand awareness.

Traceability

While transparency provides the ‘what’ and ‘why,’ traceability offers the ‘how’ and ‘where’, ensuring that every product’s journey is mapped and monitored.

This capability is vital for verifying that products adhere to the highest standards of quality and ethics from start to finish. Traceability enables companies to manage the specifics of each item's path through the supply chain, providing assurances that all products are handled correctly and in accordance with both company standards and legal requirements.

Traceability is about precision and accountability, as it ensures that if issues arise, they can be traced back to their source, allowing for quick resolutions and minimizing potential damage.

This level of detail is critical in maintaining not just compliance with stringent regulations but also in fostering a transparent supply chain where information is powerfully used to improve processes, reduce waste, and ensure that all products meet the consumer’s expectations.

Nearly a year ago, I had a really interesting conversation with Kathleen Rademan, the Director Innovation at Fashion for Good, where she shared some cool insights about the intersection of traceability in the fashion industry, including the one below:

Spotlight: IBM Food Trust

There are many other use cases I could have picked, but I decided on this one because it involves: 1) a HUGE company that everyone knows about (so there’s no doubt about blockchain already being a reality - and not just a “trend”) and 2) food, which is perfect for a “tangible” example.

IBM Food Trust stands out as a benchmark for innovation and collaboration in when it comes to dealing with food safety and supply chain management.

This initiative harnesses the power of Blockchain to create a transparent, immutable record of food provenance, transaction data, processing details, and more.

Yes, it’s about ensuring that food is safe, but it’s also about building a network of trust across different stakeholders, including growers, processors, wholesalers, and retailers.

IBM Food Trust aims to transform the food supply chain into one that is more transparent, efficient, and reliable. By allowing various participants to access a permissioned, secure record of data, the platform makes it easier to trace the origin and history of food items, manage supply chain operations more effectively, and reduce waste.

This kind of visibility is critical as it can help prevent food fraud, ensure regulatory compliance, and enhance consumer trust.

How does it work? The system utilizes several modules, each designed to address specific aspects of the supply chain. For example, the Trace module enhances the ability to track and verify products at every stage - from farm to table - thus ensuring that food quality and safety are maintained throughout the supply chain. The Certifications module keeps track of relevant certificates, making sure that all suppliers meet the required standards of operation.

The real magic lies in the platform’s capacity to bring diverse food supply chain participants into a single ecosystem, where data is shared and also secured through blockchain technology. This inclusivity helps empower all players with data that helps improve their operations and ultimately deliver better products to consumers.

So in short, this is what it offers:

→ Enhanced Traceability: Track food products from their origin to the consumer, ensuring safety and quality at every step.

→ Improved Efficiency: Reduce waste and streamline operations by providing a real-time, accurate view of the supply chain.

→ Increased Transparency: Share secure, immutable data across the network, enhancing trust among consumers and participants.

→ Compliance and Certification: Manage and verify certifications easily, ensuring all products meet legal and safety standards.

→ Collaborative Network: Foster a cooperative environment where all supply chain actors can benefit from shared insights and innovations.

If “finding better/more sustainable ways of doing things” is a topic that interests you, I recommend you also check our edition #28, as it covers some other ways in which Web3 can be used for better practices.

See you soon.

#LFGrow
Diego Borgo