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Bangladesh, supply chains and transparency (… or lack of it)

I was warned by nearly everyone how uncomfortable a visit to Dhaka could be, but I grew to like it and found resonance with its anarchistic and mercantilist charm

It also got me thinking about supply chains and transparency, and how much end buyers actually know about where their goods have come from before on their way to you.

In 2013 Bangladeshi supply chains became a discussion point following the disastrous Rana Plaza collapse. It preceded a barrage of news alongside statements from various international manufacturers, predominantly retail, assuring its western clientele that they were not involved and/ or publicly putting measures in place to ensure that their supply chain was not associated with any related bad practices.

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It seemed like Bangladesh was (is?) a perfect storm where a race to the bottom in terms of price led to exploitation of labour and oversight of standards in the supply chain

But how, in practice, do you check that you are sourcing goods or services from a place that meets your standards (whatever those standards may be)? As a buyer, you can only really play what is in front of out, i.e. your immediate counterparty. And middle men often earn a living from putting up a nice shop front window that shows compliance with all regulations, charging a high price to buyers, and then just sourcing supplies from the cheapest (and least regulated) suppliers.

Ignorance can be bliss in the supply chain for end buyers: they buy from suppliers who tick all the boxes, giving them plausible deniability, and receive some of the price benefit of effectively not.

I hear a lot about is the application of block chain into the supply chain. A utopian supply chain is depicted: each node pings a central ledger with who they are, who they are supplying, and what they are supplying. This happily jumps along the supply chain at every point, so the end buyer has a ledger where they can see where each component was sourced. This works, in theory. In practice, getting the Bangladeshi labourer on the banks of the Old Ganges river to ping a central ledger is not practical. It works in predefined closed systems where each participant is able to participate in the same network.

That being said, there are principles of block chain and shared ledger systems that we can look at, and here at DeepStream we are doing exactly that.

To have visibility across the supply chain you need some kind of procurement network, with a low barrier to entry so that it has as high an adoption rate as possible.

The big software providers (SAP Ariba, IBM Maximo) are so happy with the huge cash flow they can charge buyers for bespoke procurement packages that most of the supply chain is left to their own means. As a result, the energy infrastructure procurement network is a large number of independent intra company networks. Once a request leaves a buyer it gets lost into another medium for the supplier to deal with.

This kind of network for the entire energy infrastructure supply chain is the basis for a lot of the vision behind DeepStream

Boiled down, all of the game changing tech companies (think Uber, AirBnB, Facebook, Google, Bitcoin if it were a company…) are just mediums by which asymmetry of information is broken down within a scalable network of agents that have an incentive to participate. The magic dust that drives value here is NOT tech functionality. And creating this network can provide a huge number of ancillary benefits for the industry.

Behind closed doors DeepStream are working on a more formalised block chain based distributed ledger system within our network

The goal is to leverage the buyer network in validating oil & gas suppliers from a pre-qualification stand point, as well as a ledger which gives visibility of buyer counter-parties further down the supply chain to enhance credit for smaller SME suppliers, giving them easier access to financing and oiling the cogs of the entire system. We need the industry to join but if they do, we can help the industry change.

Written by Jack Macfarlane

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