A New Playbook for Provenance

Article by Bettina Warburg

Without a unifying technology and effective communication, most modern supply chains end up with segmented and disconnected logistics. One hand rarely knows what the other is doing, leaving the entire network susceptible to failure. Animal Ventures previously discussed a Bloomberg investigation into network server manufacturer Super Micro that became the focal point of an alleged intricate plot. Due to significant shortcomings in their supply chain, the firm exposed their customer base to a hardware-based infiltration.
While many issues created the predicament,  a general lack of cohesion and inability to track participation were overarching flaws. These problems are of course in no way exclusive to a particular firm or industry. These dynamics define the state of modern commerce. In this case, it simply was a small microchip embedded onto motherboards, but any number of tactics would have been equally potent and damaging.
The failure examined throughout the investigation could just as likely happen to a CPG company, automobile manufacturer, video game designer, or anyone else. The global repercussions might change but the results will be the same — just one significant failure in the supply chain can severely damage entire firms and industries, and that’s where blockchain fits into the logistics equation.

Global Networks Have Inherent Weaknesses

Using the network manufacturer as an example, firms often use suppliers from all over the world to build their products. Such a global infrastructure provides companies with cost efficiencies they wouldn’t realize by any other means but also comes with a distinct set of vulnerabilities. A supply chain that spans multiple continents lends itself to inefficient communication. It also makes tracking provenance highly complex and time-consuming.
While Super Micro likely had strong security protocols given their customer base, there were obviously gaps in those protocols. The company was either unable or too indifferent to monitor the motherboards as they moved through the supply chain. This failure of vigilance ultimately destroyed the firm’s stock price and exposed their customers to significant potential harm.

Blockchain Rights Many Wrongs

Let’s rewind the clock a few years and explore how the circumstances might have been different if the firm had implemented a blockchain-based supply chain platform for tracking provenance and third-party relationships. Utilizing a decentralized network and distributed ledger that form the heart of blockchain, the company could have tracked data inconsistencies or alterations made to customer orders to identify anything changed, updated, or incorrect in any way.
Such abilities may not have been sufficient to avoid the global political aftermath of the manufacturer’s supply chain failure. But they would certainly have created a far more meticulous environment that was able to identify even granular issues quickly. Blockchain’s permission-based framework could have supported a closed network that included commercial partners regardless of location. When combined with IoT data from the various production facilities, the firm would have had the ability to verify and secure their manufacturing and distribution data, confirming and retaining immediate information across every stage of development, production, and distribution.
Blockchain would have also significantly enhanced transparency, allowing the server manufacturer to track part sourcing. This would keep them aware of all parties with access to parts and able to monitor their integrity in real-time. The provenance of every component would never be in doubt, with the slightest discrepancies in expected results readily apparent.

Adapt to the New Normal

The cost efficiencies derived from outsourcing production to overseas entities and facilities prevent firms from exploring other manufacturing avenues. This approach comes with substantial amounts of risk to their supply chains. In Bloomberg’s story, blockchain would have significantly changed the narrative. By having every step signed, verified, and validated, Super Micro could have tracked their products through every logistics hurdle.
There is simply no way for a company to fundamentally minimize the risk of contemporary commerce without investing in cognitive supply chains. Humans are inherently inefficient and, in worst case scenarios, corrupt. Blockchain is a vital component to shoring up those shortcomings, especially when partnered with the IoT, AI, and additive manufacturing. The collective power of such innovations can allow firms to enjoy both cost efficiencies and heightened security. Modern commerce has evolved towards a sink or swim crossroads for companies of all industries. Adopt necessary technologies in your supply chain and you’ll vastly increase the chances of swimming to safety and success.
Editor’s Note: This report is the second in a five-part series exploring the future of supply chain integrity. You can read part one here. Check back in tomorrow to read the next entry, and take a look at AV’s white paper for more insight into the future of logistics and security.