• 6 min read

Can blockchain secure supply chains, improve operations and solve humanitarian issues?

How do we take our hyperscale DNA and think about societal problems that already exist at scale? We have proven that most technology in one form or another can perform when architected for scale. But where and how do we start and then how do we penetrate with swarms of adoption to make meaningful impact on society’s greatest problems?

clip_image002In my last post, I posed the question: What does identity mean in today’s physical and digital world? I was coming off the ID2020 Summit at the UN where we announced our work on blockchain self-sovereign identity. What struck me most was the magnitude of the problems identified and I haven’t been able to stop thinking about solving these already at scale problems ever since. One of the things that Microsoft thinks about when it looks at products is solving problems at scale. It is and has always been a mass market product juggernaut. Yesterday we strove for a vision of “a PC on Every Desk” and today we look to Azure, our hyperscale cloud to solve the world’s productivity problems at scale through massive compute, memory and storage workloads operating at a nice little hum in datacenters that span the globe. But I digress.

clip_image006The important question is: How do we take this DNA and think about societal problems that already exist at scale? We have proven that most technology in one form or another can perform when architected for scale. But where and how do we start and then how do we penetrate with swarms of adoption to make meaningful impact on society’s greatest problems?

I started to think about where the problem space crosses the corporate and enterprise landscape. What if we can link corporate objectives directly to the problem of child labor? What if we can find businesses that might benefit from the exploitation witnessed and eliminate them? Alas, these approaches are too direct and won’t scale as first steps on this journey.

Another approach would be to look at ways we can back into solving the problems. So I began to think more indirectly about the attack surfaces that corporations operate on where there might be child labor, trafficking or other infractions. If we could identify large attack surfaces in a specific industry that might be a good starting point. This led me squarely to an industry I know very well that has been struggling to evolve ever since Amazon entered their playground: Retailers, Brands, and Ecommerce sites. The landscape gives us an unprecedented opportunity to maximize coverage via a corporate attack surface trifecta:

1. Retailers: think Macy’s, Nordstrom, Best Buy

2. Brands: think Perry Ellis, Nike, Under Armor

3. Ecommerce: Amazon, Tmall, and all of the retail.com variants like Macys.com

The one thing they all have in common is Supply Chain.

Their supply chain ends in the developed world with retail stores to shippers, truck drivers, dock and port workers and their employers. It extends back to overseas warehouses, distribution centers and all of their laborers, whether contracted, full time or part time or temporary workforce. The origin of the supply chain extends all the way back to the factory and local shippers handling the goods.

clip_image008Take the case of a company like Perry Ellis that is tagging each item of clothing at the manufacturing factory, called source tagging. When a worker hangs a tag on a piece of clothing or sews an RFID tag into a pair of jeans the life of the tracked good begins. Retailers and brands have been evaluating and deploying RFID and other sensor and tracking technology in the Supply Chain and Retail stores for many years. In 2004 I built an RFID Practice at IBM Global Services. That year Walmart demanded all of its suppliers tag their products with RFID.

So, like other blockchain projects, this begs the question, why now? What is so special about this technology that lets us simultaneously add value to Macys.com and Perry Ellis while starting to chip away at one part of the un-identified, trafficked or exploited world population?

I believe the answer lies in a very subtle tweak to the existing tracking systems that are being deployed across the entire retail and ecommerce landscape. What if we could use something like RFID chips and scanners to securely and provably identify every touchpoint of every piece of product all along the supply chain? Why does that add value if we are sort of doing that already?

A little history. The reason tracking tags like RFID are being deployed by brands and retailers is to be able to effectively compete with Amazon.com. What is the single biggest competitive threat a retailer has against Amazon? The answer is a seemingly simple feature on a website:

“Buy Online, Pick up In store”clip_image010

Underneath what looks like a simple ecommerce site feature lies a very big problem: Inventory Transparency. Retailers cannot effectively invoke this competitive advantage without Inventory Transparency. Retailers cannot achieve Inventory Transparency without RFID or other tracking tags.

RFID systems today simply allow you to track inventory at each waypoint in the supply chain and all the way through the retail store stockroom, floor and checkout. On any given day, you can tell in which part of your supply chain or store replenishment process your product is located. Part of the challenge is that many systems deployed today don’t do a good job providing visibility tracking all the way through the supply chain. This is partly because of siloed tracking systems and databases that live in a multitude of legal entities.

So why is it that even with all of this tracking, there is still a high percentage of lost product due to fraud?

How can a simple identity tweak improve this situation for retailers and brands while simultaneously chipping away at child exploitation?

Enter the trust protocol we call blockchain and specifically blockchain self-sovereign identity. The state change is to plug the holes in your supply chain by identifying and provably tracking every scan at a waypoint by a device or human being operating in your supply chain. This starts with the factory worker who sews the RFID tag into the jeans to the Distribution Center RFID Door reader to the employees or contractors at the DC. It extends to the entities involved, the factory owner, the Contractor that employs the DC contractors, etc. By doing this you create a closed system of verifiably known actors across the supply chain. Blockchain also lets us create a shared single ledger of truth across these independently owned waypoints, driving forward full supply chain inventory transparency. We are using this concept in a number of projects to reduce fraud in other industries. This use case meets my sniff test criteria for blockchain value in a project.

Blockchain can provide value if:

1. There is fraud or lack of trust in the system

2. There are multiple parties to a transaction

This identity tweak takes a corporate system used for tracking goods and transforms it into a system that can reduce fraud, operating costs, and product loss while simultaneously reducing reliance on exploited people, not to mention new opportunities for supply chain financing and insurance.

Should a box of Perry Ellis jeans fall out of the supply chain somewhere, it will immediately be known when it does not reach the next waypoint in the expected time. The forensic investigation will start with the prior transaction that recorded the custody of that item at the prior touch point. A blockchain identity creates the provable record of who last touched the product. This factor holds workers and contracting companies accountable. Reputation gets asserted or attested for that worker and that reputation is rolled up to the Contracting company to create a reputation score for the vendor.

The result is that Supply Chain Contractors will stop hiring unverified or reputationally attested high risk workers. This system of compliance and rating will force Supply Chain workers to be held accountable for their actionsclip_image012 therefore reducing fraud (the corporate benefit) while simultaneously requiring a worker to register a self-sovereign identity that travels with them from job to job. This small tweak to existing RFID deployments paid for by corporations will drive undocumented workers from the system over time thus beginning the process of chipping away at the 1.5B undocumented and exploited people identified by the UN’s Sustainable Development Goal 16.9.

Is this the beginning of an opportunity to offer a “Verifiably Clean Supply Chain Certification” for brands, retailers and ecommerce sites? It is certainly achievable technically. My thesis is even if social responsibility isn’t a big enough reason, there are enough financial reasons to move forward. To this end we have launched Project Manifest and made recent announcements with partners like www.Mojix.com and ID2020.  More details in my next post.