Intricate networks that span the globe, supply chains are susceptible to a number of problems such as theft, cost overruns and legal issues at any given link in the chain. Without a way to monitor, identify and prevent such concerns, they could jeopardize more than just a single shipment.
Supply chains are the lifeblood of the consumer economy we live in today, and blockchain technology is already revolutionizing how they're operated. By introducing a distributed time-source, the supply chain industry can provide more reliable global timestamps at checkpoints for products being transported across borders, incentivizing more punctual deliveries and penalizing delays.
- Supply chain fraud affects organizations of all sizes and industries.
- Proving adherence to local and international labor and supply laws is a difficult task.
- The financial costs of supply chain management and administration are substantial.
- Ethical and environmental concerns are prevalent in many supply chains, which can attract negative public attention.
Supply chain management underpins the effective functioning of industry and commerce. However, as our world becomes more interconnected and interdependent, the complexity of supply chains continues to increase. By improving supply chain transparency and accountability, the Analog Timegraph can reduce this complexity and its resultant risks, costs and inefficiencies.
Fraud and counterfeit
Supply chain fraud affects organizations of all sizes and industries. From small scale, opportunistic theft to organized crime involving bribery of officials, supply chain fraud results in an estimated $49 billion USD of losses annually for retailers alone. Process disruptions resulting from the global COVID-19 pandemic have weakened process controls, which has exacerbated the issue through increased opportunity for theft.
Similarly, counterfeit materials illegally added to the supply chain can cause loss or inefficiency downstream. This is because counterfeit goods may malfunction or be appraised as less valuable, effectively reducing the production feasibility or quality of goods to be produced by the manufacturer.
Corporate and legal standards
Stringent corporate standards cover all aspects of the supply chain. By preventing exploitative labor practices, unsustainable sourcing or other negative social or environmental practices, corporate standards exist to mitigate potential harm to participants and external parties involved along the supply chain.
Proving adherence to local and international labor and supply laws is a difficult task, and corporate compliance teams spend significant time and money developing and monitoring risk management protocols. Evidence feeding into these protocols is often bureaucratic and paper-based, requiring extensive verification.
The financial costs of supply chain management and administration are substantial. Aside from direct costs such as procurement and transport, each step along the chain must be monitored and tracked in order to prevent delays, scheduling conflicts or loss due to negligence or theft. Companies must therefore invest heavily in staff and systems to oversee these administrative burdens. These expenses are so significant that the American Productivity and Quality Center includes IT systems, finance and planning, order management and returns management as key components of their Cost-Effectiveness metric that calculates total supply chain costs per $1,000 USD of revenue.
Visibility over outsourced manufacturing
It is common practice for companies to outsource all or some of their supply chain or manufacturing processes to third parties. As well as ensuring that they are themselves compliant with corporate governance and legal standards surrounding supply chain, in many jurisdictions, they are also responsible for ensuring compliance by their outsourced service providers.
The complexity and manual nature of much of supply chain administration makes this task challenging. Without spending significant amounts of time and money auditing the supply chain standards themselves, they may have to rely on self-reported statements from the service provider. While in many cases this is sufficient, if the service provider provides false or incomplete assurances then the hiring company may find themselves inadvertently liable should poor supply chain practices be uncovered.
Ethical and environmental concerns are prevalent in many supply chains, which can attract negative public attention. In order to mitigate this, many companies in relevant industries will make public statements or reports over and above their legal requirements. By demonstrating their commitment to ethical practice they can mitigate much of the negative PR associated with operating in an industry with a poor reputation.
However, given the self-interest involved, many are skeptical as to the quality or veracity of these self-published reports. A lack of objective or externally verified data sources in many supply chains makes self-published reporting easy to criticize or dismiss as baseless image management.
- Analog’s smart contracts are well suited to address the issues of externalities and incentives.
- Instead of reporting via lengthy and obtuse governmental reports, signatory nations can be required to submit ongoing Timegraph updates on the outcomes of the initiatives.
- The Timegraph can be utilized by industry watchdogs to ensure fair and impartial access to resources.
- ANLOG can be used to incentivize a series of supply chain milestones that minimize scheduling conflicts or missed deliveries.
- Corporations can further make use of the supply chain data they previously submitted to the Timegraph.
Fraud and counterfeit
By escrowing ANLOG in the Analog smart contract ecosystem, companies can incentivize the submission of a wide range of supply chain tracking data. For example, at each link in the chain, the local administrator could be required to submit time, date, location, material type and quantity data on any shipped or received materials. As this data is then recorded immutably on-chain, any discrepancies in material type or quantity would be available to audit in the future.
This allows for quick identification of where materials may have been stolen or replaced with counterfeits. Similarly, the fact that detailed records are submitted on-chain serves as a disincentive to prospective thieves who will realize the likelihood of being caught is now much higher.
Corporate and legal standards
In many instances, the aforementioned details submitted to the Timegraph could serve as readily accessible evidence that the supply chain is meeting legal or corporate governance standards. For example, instead of manually needing to maintain different databases for different parts of the chain or obtain paper certificates from different distribution centers, all the information could be accessed through a single Analog API.
Furthermore, the fact that the submitted data has been objectively verified reduces the possibility that the supply chain records contain errors or have been falsified in any way.
ANLOG can be used to incentivize a series of supply chain milestones that minimize scheduling conflicts or missed deliveries. Similarly, the searchable and retrievable nature of the Timegraph makes it suitable to serve as a central database covering the entire chain, making planning, analysis and management of the system and processes more efficient. The combined result of these aggregated efficiencies would be savings in administrative expense.
Visibility over outsourced manufacturing
When a contract is signed with a third-party service provider, a clause can be inserted requiring the service provider to submit specified time-bound data at each step of their supply chain. This contractually required and objectively verifiable data can then serve as evidence that the hiring company has fulfilled its obligations to ensure third-party service providers act in accordance with legal and ethical standards. The fact that the information needs to be verified by time nodes and is subsequently recorded permanently on-chain minimizes the risk of the service provider failing to report or misrepresenting their activities.
Corporations can further make use of the supply chain data they previously submitted to the Timegraph. As well as using it for their internal risk monitoring and logistical planning, they can utilize the Analog API to filter it into a digestible format for public viewing. This supplements any formal or informal reporting with verified on-chain data that the public can investigate and research on their own. Consequently, corporations can fortify their PR efforts with this added credibility to the underlying data.
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