We were impressed with a hApp that is utilising Holochain to “digitise, tokenise and decentralise the agriculture value chain,” delivering greater capital resources and autonomy to, in this case, produce producers.
This hApp, called “Producer’s Token”, is part of a wider movement to democratise the supply chain process and make it fairer for both consumers and producers by cutting out the middle man.
And it isn’t only the agriculture supply chains that are looking to decentralise and democratise.
As supply chains evolve and grow, products often pass through dozens of sets of hands at factories, shipping vehicles and pallets, distributor warehouses, retail warehouses, shop floors, and delivery fleets. They often travel thousands of miles and go through multiple intermediaries — something which has an impact not only on profit margins, but also on a brand’s ability to connect and communicate with their customers.
All of which effects a company’s bottom line. With revenue growth remaining a challenge, almost half (48 per cent) of manufacturers are racing to build Direct-to-Consumer (D2C) channels, with almost all of them (87 per cent) seeing these channels as relevant to their products and consumers.
Even leading brands, which have traditionally relied solely on partners to distribute their products, are now embracing D2C sales. These can be a powerful distribution channel with the added benefit of full control over the supply chain, and therefore also full control of the overall brand experience.
Decentr is fully behind such initiatives across many industries where they represent better value for consumers and suppliers/providers/producers.
These include digital industries, such as retail bank and PSP supply chains and telecommunications (where the experience of adopting decentralised supply chain solutions has proven similar to their non-digital industry counterparts deploying hybrid digital solutions).
But are current digital “solutions” the right solution for every business?
Not Yet Ready for Mass Adoption
We need to step back and take stock: according to Knut Alick, who co-authored a recent report on decentralised solutions for industry for McKinsey & Company,
“while we salute the power and the promise of blockchain technology, we advise the supply-chain world to take the time to measure its suitability against other, possibly simpler, and less costly technologies. Our research suggests that blockchain technology may ultimately be a good solution for some types of supply chains, but it is not yet ready for mass adoption.”
The author has a point. This is why we are building what we are building. Our platform is designed to expedite across all business verticals the decentralisation process at many critical points on the supply chain.
This is with a view to improving supply chain management while ameliorating certain hurdles inherent to the broader D2C model and its current deployment — hurdles that Decentr in conjunction with Holochain are urgently building a solution to overcome.
The reorganisation and replacement of certain third-party logistics (3PL) — and to a lesser extent 2PL and 4PL— services is not necessarily the most efficient way to implement sustainable decentralised supply chain solutions — not without offering something viable, and more efficient, to take their place. (A saying about a “baby” and “bathwater” comes to mind.)
A more considered, staggered approach to development and deployment might prove more effective in the mid- to long-term.
The Virtues of 3PLs
There are reasons why 3PLs exist across all industries. For all the vitriol dyed-in-the wool decentralisation evangelists direct at 3PLs, it is impossible to ignore that 3PLs have a role to play in ensuring both supplier/provider/producer and consumer are happy while protecting a business’s brand and bottom line.
3PLs have many critical functions beyond the claims of current decentralised tech “solutions” that purport to render them instantly redundant.
These functions are hardly non-trivial to the supply chain process: they include monitoring capacity, inventory positions and capabilities and other third-party coordination activities. This is in conjunction with supporting through management and control inbound sourcing, selling excess production capacity as well as identifying customers who they do not have access to, all while — and here’s the kicker — finding a business new sources of capital.
Certainly, increasingly more of these functions are being addressed by decentralised solutions, but we are not there yet in some very important areas.
As the McKinsey report points out,
“[yet] to date, the authors [of the McKinsey report] are not aware of any at-scale applications to the supply chain, raising an essential question: Can blockchain technology add value to supply chains?”
It is a fair question to ask, putting aside the buzz that makes decentralised solutions sound like a universal panacea for every business need.
The issue with implementing decentralised solutions is that those aspects of 3PLs that are rearranged, reordered or removed entirely from the supply chain/distribution processes effectively need to be, by definition, handled by suppliers/providers/producers themselves. This is, of course, in conjunction with a company’s choice of decentralised “solution” — a solution managers may or may not be familiar enough with to go it alone.
This issue continues to be borne out in practice.
With no access to third-party (operational, statistical, strategic, etc) governance, management or support the transition to decentralised supply chain solutions is proving much more difficult than anticipated for many companies across a range of industries.
And this is all while consumers and competition demand ever-cheaper goods and services.
That is, unless you assume — as noted in the McKinsey report — “a consumer would pay more for a product that offers transparency throughout its supply chain” — a notion that is not being borne out in practice, with one consumer study concluding that “consumers’ perception of supply chain management is that it lowers prices while raising quality”.
Sobering news for businesses caught in the thrall of the time- and resource-consuming pursuit of value chain “upgrades”.
As Sophia Lopez, founder and COO at Kaleido, points out, it is the very lack of a central authority that can make enterprise development and the implementation of decentralised “solutions” extremely “difficult, expensive, time-consuming and hence friction-filled”. For example, companies often go it alone when creating a blockchain solution, and that lack of a central intermediary can “make it difficult for companies to find guidance — let alone the necessary partners, including banks, suppliers, etc” to engage with the new tool.
This means that even in an ideal world, whereby decentralised supply chains have achieved a high degree of autonomy and efficiency, the process of implementing a decentralised solution will — at least for the foreseeable future — still require human oversight on the part of the supplier/provider/producer.
Regardless of how sophisticated and advanced the suite of features that accompanies any decentralised solution, human governance and management will continue to remain critical in order to hold all these elements together and maximise the new procedures and supplier relationships that decentralisation creates.
As a result, businesses considering, or currently implementing, a decentralised supply chain solution are left in something of an economic Catch .22 — whether at the outset they realise it or not.
Think it through: the added governance that a decentralised supply chain solution requires means that in order to be able to offer ever-cheaper prices (the “Holy Grail” of decentralisation in competition terms) demanded by fickle consumers, revenues across many industries will be rapidly required at levels above what can be reasonably realised from any savings made by implementing said system in the first place.
Of course, this is not, and will not be the same and in the same way across all supply chains in all industries, but the overall net effect is unavoidable, certainly in the short-term.
And over the long-term?
To an extent, that depends who you ask and from where they draw their predictions. Ask us: our radically-new heterodox economic model, called deconomics (“decentralised economics”) predicts similarly accelerated metrics and dynamics will come into play over the mid- to long-term due to issues of increasingly fierce competition amongst fully decentralised supply chains within a broader, 100% decentralised decosystem.
Worse, according to deconomics, it is inevitable in a 100% decentralised system that the relative prices of goods and services in many industry sectors will be driven down to below the cost of producing or supplying them.
It hardly needs to be pointed out that that is a paradigm in need of urgent redress.
Decentr steps in to short circuit this unworkable economic Catch .22.
Finding a hApp-y Medium
Before moving on to explain how we plan to deal with this Catch .22, we need to take a step back and recap what Decentr proposes in the broader sense of digitising industry, and how this directly relates to decentralised supply chain management.
What is critical to understand is that with mainstream adoption of deconomics it becomes commercially non-viable for any business to build a digital solution on any platform that is not Decentr, or is not otherwise integrated or partnered with Decentr.
This is what we refer to when we mention “competition amongst fully decentralised supply chains [in a] 100% decentralised decosystem”.
This is simply because all businesses must digitise. Therefore, all businesses are, or will be generating data — including supply chains, which generate an inordinate amount of data (not all of it currently useful).
Data is rapidly becoming more valuable than oil and gold combined in 21st business due to digitisation and the need for better quality, structured and refined data. This means that any business that is not harnessing this data — somehow accruing it as economic value (as part of a “true”, circular data economy) — will be uncompetitive when competing with businesses that are harnessing their data as economic value.
This is irrespective of the type, size or nature of business — or even if this data is part of a supply chain solution.
As the McKinsey report points out,
“in many cases, supply chains are already moving billions of transactions and data, often in real time. The systems are not perfect, and many supply chains have issues with data that is siloed, disparately formatted, difficult to access, or hard to visualize or analyze in the context of big data. Even so, well-managed central databases with good data management, combined with supply-chain visualization and analytical prowess, can be achieved at scale today.”
Centralised or decentralised, it is all a level playing field at the level of generated data.
The logic stands to reason: for any company that harnesses data value the outcome will be that they are in a better position (compared to their competition that does not harness data value) to reduce costs of goods and services. This is whilst reinvesting this accrued data value in improved communications, their CSR remit and other socially and commercially beneficial causes, increasing brand awareness while in the process taking market share from competitors who cannot or will not harnesses their business’s data value.
This is all while further improving the company’s products and services as part of the necessary governance process that an effective supply chain requires — the data itself generated by the very act of governance continuing to contribute to an overall increase in data value.
For this data-as-value paradigm to be maximally effective, hApp developers need to be able to offer their partners a decosystem-wide (d)economic solution that is both supportive and supportive of other hApps and applications, as well as the deconomy and the mainstream economy. This is in the same way as hApp developers also need a decosystem-wide “user layer” (which we are also developing as part of the decosystem/deconomics) to be able to communicate more efficiently between applications.
In this way, supply chains become a critical part of not only a circular economy that benefits suppliers/providers/producers and consumers but also the wider decosystem comprised of smoothly interconnected hApps and other applications.
Decentr is this decosystem-wide economic solution.
Our platform provides not only a uniform “user layer” for mainstream public adoption of a Web 3.0/4.0 solution but a universal economic model — deconomics — to underpin the development and deployment of all hApps.
With Decentr, hApp developers can build their solution, create their own token, and immediately start to benefit from their innovations as part of the wider decosystem and deconomy. In this way, hApp developers can maintain their edge over the competition in terms of quality, price and convenience, both now and into the future.
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