How AI and DNA Are Unlocking the Mysteries of Global Supply Chains
At a cotton gin in California’s San Joaquin Valley, a boxy machine helps spray a fine mist containing billions of DNA molecules onto freshly washed Pima cotton.
When they’re shipped to factories in India, the DNA will act as a sort of tiny barcode, nestled in fluffy fibers. There, the cotton will be spun into yarn and woven into sheets before hitting the shelves of Costco stores in the US. At any point, Costco can test for the presence of DNA to ensure that the cotton it grows in the U.S. has not been replaced by cheaper material — such as cotton from China’s Xinjiang region, which has been banned in the U.S. for links to forced labor. prohibit. labor.
As concerns grow about opacity and abuse in global supply chains, companies and government officials are increasingly turning to technologies such as DNA tracing, artificial intelligence and blockchain to try to trace raw materials from source to store.
Companies in the U.S. are now bound by new rules requiring companies to certify that their products were produced without forced labor or risk being confiscated at the border.US Customs Officer March said they had detained Nearly $1 billion worth of goods entered the United States, suspected to be related to Xinjiang. Products from the region have been banned since June last year.
Customers also demand proof that expensive high-end products – such as conflict-free diamonds, organic cotton, sushi-grade tuna or manuka honey – are authentic and produced ethically and environmentally sustainably.
This is forcing companies that have long relied on factories around the world to source their goods to face a new reality. More than ever, companies must be able to explain the true origin of their products.
This task may seem simple, but it can be tricky. That’s because the international supply chains companies have built to cut costs and diversify their product offerings have become extraordinarily complex in recent decades.Value of intermediate goods used to manufacture internationally traded goods since 2000 tripledin part because of China’s booming factories.
A large multinational corporation may purchase parts, materials or services from thousands of suppliers around the world. One of the largest such companies, Procter & Gamble, has nearly 50,000 direct suppliers and owns brands such as Tide, Crest and Pampers. Each of these suppliers, in turn, may depend on hundreds of other companies for the parts used to make their products—and so on, many levels up the supply chain.
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For example, to make a pair of jeans, companies must grow and wash the cotton, spin it into thread, dye it, weave it into fabric, cut the fabric into a pattern and stitch the jeans together. Other web companies mine, smelt, or process the brass, nickel, or aluminum that makes zippers, or manufacture the chemicals used to make synthetic indigo dye.
“The supply chain is like a bowl of spaghetti,” said James McGregor, chairman of the Greater China region for consultancy APCO Worldwide. “They’re all mixed up. You don’t know where that stuff comes from.”
Given these challenges, some companies are turning to alternative, but unproven, methods of inspecting their supply chains.
Some companies — like Applied DNA Sciences, which sprays a mist of DNA onto cotton — are using scientific processes to tag or test the physical attributes of the good itself to determine where it has traveled on its path from factory to consumer.
Applied DNA uses its synthetic DNA tags, each one-billionth the size of a grain of sugar, to trace microcircuits produced for the Department of Defense, trace the cannabis supply chain to ensure product purity, and even Mist Bandit In Sweden, he attempted to steal cash from an ATM, resulting in multiple arrests.
MeiLin Wan, vice president of textiles at Applied DNA, said the new regulations were creating a “truly tipping point for transparency”.
“There will definitely be more interest,” she added.
The cotton industry was one of the first to adopt tracking technology, partly because of previous breaches. In the mid-2010s, Target, Walmart, and Bed Bath & Beyond faced costly product recalls or lawsuits for selling “Egyptian cotton” sheets that turned out to be fake. made from cotton found elsewhereA New York Times investigation last year documented that the “organic cotton” industry is also rife with fraud.
In addition to the DNA fog used as a marker, Applied DNA can also determine the origin of cotton by sequencing the DNA of the cotton itself or analyzing its isotopes (variations in the carbon, oxygen and hydrogen atoms in the cotton). Differences in rainfall, latitude, temperature and soil conditions mean these atoms are slightly different around the world, allowing researchers to map where the cotton in a sock or bath towel came from.
Other companies are turning to digital technologies to map supply chains by creating and analyzing complex databases of business ownership and trade.
For example, some companies are using blockchain technology to create digital tokens for every product produced in a factory. As that product, such as a jar of caviar or a batch of coffee, moves through the supply chain, its digital twin is encoded with information about how it was transported and processed, providing a transparent log for companies and consumers.
Other companies are using databases or artificial intelligence to comb through sprawling supplier networks for remote links to banned entities or to detect unusual trade patterns that indicate fraud — investigations that could take years to complete without computing power.
Sayari, an enterprise risk intelligence provider that has developed a platform that combines data from billions of public records released around the world, is one of them. The service is now used by US customs agents and private companies. On a recent Tuesday, Jessica Abel, vice president of solutions at Sayari, ran a supplier list for a major U.S. retailer through the platform and saw dozens of little red flags pop up next to company names in the distance.
“Not only do we flag Chinese companies in Xinjiang, but we also automatically explore their business networks and flag companies that are directly related to them,” Ms. Abel said. It is up to companies to decide what to do with their risk exposures.
The study found that most companies know surprisingly little about their supply chain upstream because they lack the resources or motivation to investigate.exist A 2022 Survey According to McKinsey & Company, 45% of respondents said they knew nothing about the supply chain beyond their direct suppliers.
But after Congress banned imports from Xinjiang, it was no longer viable, especially for companies in the United States, where 100,000 ethnic minorities live. presumed by the U.S. government Working under forced labor conditions – came into force last year.
Xinjiang’s links to certain products are already well known. Experts estimate that about one-fifth of cotton clothing sold globally contains cotton or yarn from Xinjiang. The region also produces more than 40% of the world’s polysilicon (used in solar panels) and a quarter of tomato paste.
But other industries, such as automobiles, vinyl flooring and aluminumalso appears to have ties to suppliers in the region and has come under increased scrutiny from regulators.
A comprehensive view of their supply chain can Provide other benefits to the company, such as helping them recall defective products or reduce costs. Such information is increasingly needed to estimate how much carbon dioxide is actually emitted during the production of goods, or to meet other government regulations requiring products to be sourced from specific locations — such as the Biden administration’s new rules on electric vehicle tax credits.
Executives at these tech companies said they envision a future, perhaps within the next decade, in which most supply chains are fully traceable, the result of stricter government regulations and wider adoption of technology.
“It’s very doable,” said Leonardo Bonanni, chief executive of Sourcemap, which has helped companies like chocolate maker Mars plan their supply chains. “It’s a small price to pay, frankly, if you want to get your goods into the U.S. market.”
Others have expressed doubts about the limitations of these technologies, including their cost. For example, while Applied DNA’s technology adds only 5 to 7 cents to the price of a garment, that means a lot for retailers with thin margins.
Some expressed concerns about the accuracy, for example, that the database could mislabel companies. Investigators still need to be on the ground, talking to workers and being alert for signs of forced or child labor that may not show up in digital records, they said.
Justin Dillon, chief executive of FRDM, a software company that helps organizations map supply chains, said there was “a lot of anxiety, a lot of confusion” among companies trying to meet the new government requirements.
Importers are “looking for boxes to check,” he said. “Supply chain transparency is as much a science as it is an art. It’s kind of never been done.”