Digital Innovation trends, their effects on supply chains and the need for a permissionless decentralized distribution system

Coordinating a supply chain is a massive operational challenge that requires meticulous attention to the movements of a web of related and unrelated parties. Trust within a supply chain is fragile but incentives keep the process moving forward. There are some current supply chain fractures that are manifesting in long delivery delays and price inflation, all of which have detrimental ramifications at the consumer level.

The current issues are only a temporary bump. It is clearly evident that North America and Europe are refactoring different nodes and hubs of their industry chains closer to their geographically controlled borders. Investment in American manufacturing of strategically important goods has already started and will continue to receive rapid priority investments.

But the manufacturing coming back to America will not be powered by thousands of unskilled labour workers on a factory line. Advances in robotics from companies like Boston Dynamics, warehouse optimization from companies like Amazon, inventory management and energy efficiency AI from companies like Google will all transform what the meaning of manufacturing is. Manufacturing is no longer 1000’s of people working on a factory line executing repetitive mundane tasks. It will be smart roaming machines, connected to the network with thousands of sensors (lidar, radar, gps, crash detection, cameras powered with image recognition), this is finally what IOT and 3D printing was made for.

An early signal in this transition can be seen when you look back to the earlier part of the last decade (2013) when Apple moved the manufacturing of their Mac Pro to Texas. At the time, it was touted to be a highly automated process with very little human interaction. Here is an update on Apple’s supply chain management plans within the US (Apple is arguably the most efficient supply chain management company in the world and prepared for the current barriers a decade ago).

In any story, supply chains are driven by consumer demand which is currently generated at internet scale through omni channel marketing experiences (podcasts, influencers, friends virtual experiences), the social economy (Instagram, Facebook, TikTok, Twitter, Reddit) and the retail supply chain (physical stores). Currently, consumers demand near instant access to their goods through a digital experience where they can customize their order to hyper personalize it. Ordering is no longer filling out forms, generating documents that need to be stored in an archaic document management system and then managing permissions across platforms to provide different vendors in a supply chain access to different pieces of information.

Consumers expect an immersive experience where they can swap out different options of their new car with a 3D model of what it will look like with the different rims, or paint job, or trims or leather seats. All of these choices are data driven and semi predictable but they will continue to demand more choice and that will require integrating more nodes in the supply chain. These nodes can be traditional stable suppliers or new vendors, maybe the new vendor is only accessible to geographically constrained consumers (say in Florida) while another vendor is only accessible in Canada (say a new type of winter tire company who 3-D prints the tires on order).

In short, the consumer will continue to demand better delivery and accountability of their products with more customizations. Consumers will also want to know where the parts on their goods were sourced from, for example, people don’t want to buy blood diamonds from DeBeers and want to be able to track the diamond from the mine to their fiance’s finger.

This consumer expectation will therefore mandate an entirely integrated digital system. In the past, large multinational, multi thousand people organizations would build supply chain management systems that would be licensed out to large consumer brands such as Coca Cola or Johnson & Johnson, who would in turn force their suppliers to either integrate into their systems or standardize on the same system from the supply chain management system software company.

This centralization will become a bottleneck and unable to meet the requirements of a fully integrated digital consumer first supply network. Beyond just the actual mechanics of this supply chain there is also the capital movement that accompanies each step in this process. Some vendors may have purchase order loans with high interest rates from a bank or private equity group, some vendors may have terms of payment which may limit the scalability of a company downstream, some companies may be on the brink of bankruptcy and some companies might be startups scrapping for every opportunity they can capitalize on.

Then there is the FX risk, a diamond mining company may require payment in USD from DaBeers who operate in GBP and sell their diamonds across the world in 100’s of different currencies. I can promise you the banks love FX and I’m sure each company in the chain would prefer to book that capital slippage rather than risk currency inflation in some regions or bank fees in others.

All of this is to say, a decentralized network that requires no trust to store data or interact with other parties, can build upon previous data points and have a value token at each exchange of two or more nodes. This untrusted, distributed network would help alleviate much of the bottlenecks and inefficiencies currently baked into the system This decentralized network would allow regional supply chains to form while still giving interoperable access to other regional supply chains (i.e. a European supply chain could be hyper focused on European operations while validating incoming goods meet local regulations from other supply chains using zk-proofs, say an American supply chain).

This is the merging of programmable commerce, interoperable assets and the machine economy. If you had the resources (both network and capital) to execute this opportunity you could build the largest supply chain (aka. Blockchain with baked-in data and value transfer economics) network in the world.