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Home » Blogs » Think Tank » The End of Single-Source Supply Chains

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The End of Single-Source Supply Chains

Container Shipping
Source: Bloomberg
June 11, 2020
John Monarch, SCB Contributor

Back to business as usual. That’s what companies, workers, and families across the country are looking forward to. But there’s one critical economic component that cannot — and should not — go back to what it was: single-source supply chains.

How businesses respond to this challenge will determine whether they’ll make it to the other side.

Let’s be clear: in a post-COVID-19 world, no smart company can rely solely on China for its manufacturing. To do so would mean that business leaders have learned none of the lessons that businesses with shuttered doors are learning right now.

But voices who advocate for returning all manufacturing back to the United States also have it wrong. What if the U.S. experiences a second wave in combination with a terrible flu season? What if it shuts down its economy for another two to three months?

Single-source supply chains, anywhere in the world, are incredibly fragile. And this isn’t just about pandemics; any natural or man-made disaster poses a threat. In order to truly be prepared for the future, companies must establish multiple manufacturing centers with multiple supply chains, and have the ability to coordinate those operations seamlessly.

The reality of an expanded, but much more stable, supply chain comes with a series of costly consequences. Redundancies mean increased costs for businesses as they lose economies of scale. More coordination across multiple manufacturing, logistics, and transportation networks will mean more opportunities for delays, and will impede real-time inventory production operations. Finally, a wider network often means that goods are more likely to be lost, creating a greater opportunity for fraud.

Crises such as COVID-19 have forced states and companies to try and create redundancies out of desperation, due to the combination of overwhelming demand and no reliable supplier. New York City, for instance, just forked over $70 million to an unknown engineer in Silicon Valley who promised to supply 1,450 ventilators. Months later, not a single ventilator has been produced, the contract has been terminated, and New York is scrambling to recover its funding.

From all of this mess, one thing is clear: a more extensive network isn’t guaranteed to strengthen your supply chain. Sometimes, diversifying can be just as costly, if not more so.

The result: either corporate net revenues will come down, or consumers will pay the difference. That is, unless companies across the globe invest in available, cost-effective tools that can track who and what was where and when.

One such solution is the blockchain. To be clear, it isn’t a one-size-fits-all solution to all of our supply-chain woes. But its verifiable track-and-track capabilities can provide governments and companies with cost savings and much-needed visibility into the process and transportation of critical goods. Fraud costs global businesses upwards of $3.7 trillion each year, roughly equating to 5% of gross world product. It's even scarier when you’re thinking about the negative consequences of an illegitimate critical good. The ability to connect products back to their source, and combine that information with critical transit data, is crucial to more efficient and effective supply chains. Verifying certifications and capabilities becomes much easier and more trustworthy on blockchain, and has never been more important as millions of ineffective, counterfeit N95 masks flood the market.

Additionally, about one in every 20 paper documents cannot be found, with upwards of 20 hours spent recreating each lost document. Blockchain’s digital ledger removes this barrier, saving companies millions in both time and money that can be devoted elsewhere.

Blockchain also helps companies integrate key data sets into all nodes of the supply chain, from parts suppliers and manufacturers to shippers and retailers. Innovative logistics companies have tools that connect shippers and carriers worldwide via digital platforms, and allow companies to add redundancy and safety to their supply chains.

These tools will allow companies and governments to identify available supplies, ideally in areas not impacted by the crisis of the moment, and mobilize them to market. This coordination is key to building resilient, cost-effective supply chains as business moves into the post-COVID world. And, as we’ve seen, only the most resilient supply chains will survive in the face of unforeseen adversities.

The modern world is more tightly connected. The benefits of integration are clear, from global manufacturing networks to same-day shipping. But it also means that we need innovative tools to combat these newfound challenges.

The shared tamper-proof ledger of blockchain will not eliminate or prevent all supply-chain challenges, but it will increase visibility for everyone in the supply chain, all the way to the end consumer. Integrating blockchain platforms into core business operations can strengthen a supply chain’s resilience, and allow companies to do business as usual when the next disruptive event hits.

John Monarch is CEO of ShipChain.

Data Management (Big Data/IoT/Blockchain) Sourcing/Procurement/SRM Supply Chain Planning & Optimization Supply Chain Security & Risk Mgmt

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