Fixing supply chain inefficiencies: what we did and why it’s hard

Image credit: Meridia

We tried to solve trade inefficiencies to create social and sustainable impact. It was not easy.

Back at the end of 2017, we announced the start of a pilot that we’d be spearheading with Unilever, Cambridge University and a consortium of businesses, banks, and NGOs. We launched this with the mission to unlock the financial incentives that reward sustainability in supply chains.

Since 90% of your business’s impact happens in your supply chain (McKinsey, 2016),  addressing how to improve this has the potential to be massive. However, supply chains are opaque by design. 

When looking at inefficiencies and inequalities in trade finance – the problems are enormous. And we don’t pretend to have a silver bullet. 

We do, however, champion transparency and know that shedding more light on global problems can help drive change.

Here’s what we did accomplish: We were able to get more money invested in social and sustainable impact without having to add more money into the system.

The trade finance system is inefficient. What we found was a way to take all those financial inefficiencies and pass that money on to the first-mile (in this case, small-scale tea farmers in Malawi).

A bit more about the project

Provenance worked on this groundbreaking solution to redesign the way money flows for Unilever’s tea farmers in Malawi. Uniting as a diverse group of businesses with a common goal, Provenance led the project to drive change for these smallholder farmers.

To address a massive issue of such scale, we proposed leveraging blockchain technology to get proven, ‘first-mile’ data and share that across the supply chain. This unlocked new ways for all our participants to invest more in those who currently benefit the least as well as sustainability initiatives versus financing costs.

Together with the consortium, we have now created the Trado blueprint: a new, inclusive model for enabling investment in sustainable smallholder farming in the developing world without brands having to inject more money into the system.

Read our case study or see the full blueprint to use in your industry.

Image credit: Meridia

With that, here are our findings to help you use this blueprint for your industry. This is not a solution as much as it is a framework based on the insights from what we learned while trying to tackle a complicated issue. We learned that…

  • You need the full picture on the ground. Producers at the very start of supply chains are often hidden or completely removed from the sight of the end customer. You have to work with partners on the ground to build relationships, understand their stories and then verify key information needed to connect directly with the first-mile of your supply chain.
  • Sharing is caring. Data needs to be passed around your entire supply chain: Smallholders and producers face huge challenges in accessing financial opportunities because they aren’t visible to everyone. Using blockchain technology, we help trusted ‘first-mile’ data to be shared across the tea supply chain for Unilever. This unlocked new ways for all participants to redistribute value – giving more to those who currently benefit the least. 
  • You need incentives for everyone. Sustainability isn’t enough: To get the smallholder to even give the data or for the processors to do so, there needs to be financial incentives to get their buy-in. Then, the data established from this proof creates opportunities to close the loop for long-term sustainability. The visibility of these practices unlocks access to further financing, creating a virtuous circle.
  • We didn’t move the dial enough. We made 1-3% improvement in living incomes, but we could improve on this dramatically with innovations. To do this would require further validation and more industry support. Our aim was to get above 10% to incentivise smallholders to change their behaviour, but this proved difficult in the limitations of this particular supply chain.
  • It can be the same price. By making finance work better, you don’t need to charge a premium to the shopper for sustainability – although, of course, a premium can make a difference. The savings generated in this model were found through a ‘data-for-benefit’ swap (a sharing mechanism where each party is incentivised to provide information in return for investment in sustainability initiatives enabled by supply chain transparency).
  • People care about different things. Some of us want to know where things come from, others want to know that the people were fairly-paid. Shopper behavior and response to these sorts of messages vary across the market. What works for a mainstream, mass-market tea brand is not always relevant to a smaller, more niche one.

And perhaps most surprising for a business like ours that champions blockchain technology…

  • Blockchain isn’t the starting point. It was useful, but not a ‘need’ in this project.

We set out to disrupt supply chains for good. And while our model proved that by redistributing the rewards in a normal value chain to better benefit the people earning the least – it’s a convoluted journey to get there.

Nevertheless, we fundamentally believe that technology and innovation can be used as a powerful force for good. Our results – and lesson – from this project proved that. We’ve just got more work together to get there.

Do you want to learn more about the journey of this project and see the results? See our case study.

Are you a brand that’s looking to start becoming transparent? Here’s where to start when your supply chain isn’t perfect.