COVID-19 continues to threaten businesses, communities and economies. Uncertainty often translates into corporate cost-cutting measures rather than long-term supply chain resilience plans. Meanwhile, smallholders are bearing the brunt of the crisis despite being so central to our global supply. There is, however, hope in the ongoing transformation of supply chains, thanks to the cumulative impacts of drones, robots, blockchains, augmented reality, the Internet of Things and virtual reality.
Traceability and accountability throughout the supply chain
Regulators, investors and clients are converging to demand corporates improve supply chain traceability.
Regulators: Now C-Level executives are increasingly open to criminal liability or held accountable for piecemeal risk management, and human rights due diligence and climate action frame the global business ecosystem.
Investors: Several jurisdictions—including Canada, France, United Kingdom and Sweden—actively support greater fiduciary responsibility. As a result, asset manager responsibilities are bound to encompass socio-environmental risks. As they come to better understand its complexities, forward-thinking investors will likely rally behind supply chain transparency.
Clients: Across a growing number of sensitive industries—including the food, automotive and energy sectors—companies focus on supply chain transparency to demonstrate actual value-added and deliver on their social, environmental and ethical commitments.
Echoing the regulatory, investment and industrial demand, technologies are readily available to manage supply chain complexity – and at an acceptable cost.
Challenges of harnessing tech for better supply chains
Discussing supply chain traceability and accountability with business leaders or stakeholders on the ground—smallholders and operators alike—systematically point to challenges in trust, technical skill and that of early adoption.
Trust. Convincing opinion-leaders that new technical solutions can secure transactions is not easy. Particularly now that the pandemic monitoring has been linked to human rights violations, major doubts have been cast on the ability of data-collecting applications to safeguard sensitive data such as GPS coordinates and personal data.
Technical skill. When it comes to the skills involved in adopting technologies, there is a noticeable generational divide. That is true across key agricultural commodity supply chains and markets: those older than 40 often struggle to use their smartphones to its fullest potential. Younger generations comparatively make a better use of technology in general, for instance, embracing the potential for machine learning to boost their productivity.
Early adoption. Emerging technologies are only promising if widely adopted. Consider blockchains: distributed ledgers only make sense if one does not operate alone. Opening large-scale access to finance and incentivising early investments are both critical for technology to reach millions and impact practices on the ground.
Over the past five years, C-Level executives at the far end of complex agricultural commodity supply chains have come to identify the importance of massively investing in digital solutions to stay ahead of their game.
Digital tools positively impact the state-of-play
Companies are directing massive investments toward digitally-powered supply chain transformations, from global management processes to farm-level upgrades. Here is how digital tools can positively affect the current state-of-play:
Focus on sensitive categories
As a first step towards supply chain traceability, businesses must start with their strategic categories. The goal is to prioritise segments where they have the strongest business case for action – which is also where available processes tend to be most unsatisfactory.
Now more than ever, sanitary protection and traceability govern the food business. Blockchains are particularly attractive, as they may offer a cost-effective solution for buyers to transparently manage large volumes of sensitive goods. Overcoming the present recession will require companies to do more than just invest in sampling to warrant confidence in their risk management.
Multiple stakeholders also strive to improve farmer safety, productivity and income. They often struggle to deliver cost-effective solutions to the millions involved in fragmented commodity supply chains. Smartphones may, however, be used to mainstream access to vocational training materials, while augmented and virtual reality could help dovetail agricultural best practices and field specificities.
Pilot technology and build adoption
Second, start small. Pilot a new technology on a priority but moderately complex category. This way, companies may understand the pros and cons, business implications and potential benefits. The food industry, for instance, has notably fielded blockchain solutions for eggs, poultry, beef and cheese to grasp how they impact standing relationships, costs and order processes.
Pilots also offer testing grounds to improve cross-departmental collaborations. Technology adoption hinges on a group’s ability to engage stakeholders within its organisation and across its value chain. Beyond client/supplier transactions, internal alignment is critical, albeit sensitive.
Leverage innovative finance to tilt the scales
A third step lies in bringing new technologies to scale, which generates the following challenges:
Cost-effective activation. COVID-19 exposed a major digital divide, whereupon 3.7 billion remain offline. With cellphone penetration and broadband coverage spreading to even the remotest remote, mobile phones offer a powerful counter. They help connect supply chains players, share content and impact daily practices.
Diluted responsibility. Buyers often generate 10% to 20% of any given supplier’s transactions, limiting their influence. Innovative financial vehicles allow them to address supply chain priorities by aggregating resources and sharing risk exposure. These joint funds may then offer equipment loans, capital ownership or training programmes to support technological adoption among smallholders.
Presence. Changing practices on the ground through technology demands trust. Impacting daily lives therefore depends on convincing opinion-leaders and incentivising farmers, while combining digital contents and in-person training sessions.
So, it is imperative that companies focus on their strategic categories and take the time to harness new technologies. This should be followed by developing relevant digital solutions and innovative finance mechanisms to convey major impact in the field. Major changes are afoot that will doubtlessly bolster supply chain traceability and accountability in years to come. While the benefits of this transparency are numerous, it first and foremost allows businesses and investors to anticipate growing regulatory and legal pressures. It allows them to develop coherent engagement programmes, identify and manage their risks proactively and ultimately shore up their reputation and asset valuation.
Farid Baddache leads the consulting and advocacy activities of Ksapa, leveraging environmental, social and ethical performance to innovate and improve competitiveness of business operations. He also takes part in the impact investment activities, on subjects such as relations with industrial companies and programme design.