Supply Chain Commons

Ethical supply chain is an idea whose time has come, and blockchain technology is the enabling technology that makes it practical. Furthermore, it isn't at the low end of the trust spectrum the way that Bitcoin is. That is an important distinction in regards to these applications.

There is a baseline of trust that can be offered by the system that is similar to what we extend to anyone in our town or city. This is simply based on the knowledge that you may meet that person again, or know someone else who knows of them. It is within the context of relationship building where trust continuously builds on a growing history of outcomes. The blockchain can track it all securely.  Not only would this be tracked within the context for trust building in the human sense, but the trace data can be mined for objective performance measures that are directly linked to collective decision making processes that make the whole supply chain work better.

The collective intelligence of markets is based exactly on this sort of structure, except that in many markets the players compete for the best information to horde for market advantage. A supply chain commons would have information producers competing to produce the best information for efficient market operation. By using Commons Based Peer Production (CBPP) to produce the systems and information necessary for efficient markets, an entire complex of micro-markets can operate and become completely integrated with chain operations.

In fact, firms using concetrated financial power to predict and respond to markets better than all other players, with similar investments in asymetric market information, have arguably dominated and destroyed free markets; it is what is most wrong with the system. Micro producers in the chain don't have the individual resources to develop AI based automation themselves, however, a producer within the commons can be funded  almost invisibly with crypto currency integrated into the chains. This way the commons can allocate sufficient pooled resources. The Information producers would compete to publish the best information and systems for chain producers.

Producers of information and systems would have their own commons of production and currencies to measure productivity and allocate resources in their marketplaces of ideas and information. Producers in the chains that make products can use any of it to enhance their operations. This creates the context for trust building in the supply chain itself and will accelerate flows, transaction rates and economic viability from a chain's many sources to the final delivery of value to customers.  There will be virtuous cycles both up and down the chains, and, when the experience of producers provides feedback to the information and automation systems, that make markets efficient. Only experiment and experience can show what we can intiut. There will be  more opportunities for virtuous feedback that we can image. As the depth of relationships and trust builds based on the first limited successes, the growing networks of trust can explode and make possible systems effects that we can only imagine.

There are a number of players looking at this space, and the more we pool our efforts to produce a body of code, practices and operational facilities, the better we can address the complexity and fluidity in this space. There are plenty of complex problems for all to engage and work for an entire ecosystem of companies and institutions, each focused on areas of expertise and capacity. The focus on ethics starts with economic ethics; therefore, this commons has to be designed to be systematically resistant to rent seeking and monopoly. The tools we deploy for producers can enable producers to route around rent seeking middlemen and make fair trade values visible in the supply chain. Ultimately it is the reduction of parasitics in this way as well as applying currencies to create liquidity for production, by making digital assets that accumulate as value is added in the production chain, that will provide the financial energy to drive the production of shared commons based assets.

By creative use of more specifically designed crypto-currencies, these values can even be expressed in markets where the producers on supply chains can coordinate their production with their partners up and down the chain. The Internet of Things (IoT) allows one to actually track the details as parts are supplied to the producers of composite products. That's only one of the more obvious parts of the process, since the big possibility is what can be described as a magic supply chain.

Once one has a whole network of producers who are connected in dynamic, "smart" markets, something completely new becomes possible. Imagine now that there is also a commons for open product designs, or one that is priviledged as a steward for products developed with public and donated funds. A smart supply chain is one that can self-organize to produce products from commons based designs, patents and production research.

The relationships between the design commons and the producers can start at the prototype phase. Probably a different set of low volume producers would produce components and sub-assemblies based on designs emerging in the commons. At each stage of production, prototypes would be produced for testers and systems integrators downstream. When the designs reach release quality, production can scale up fueled by growing orders.  Volume producers can be ready to respond to market signals to deliver components. Advanced supply chain governance tools, using the high quality and timely data building in the blockchain, can give producers the capacity and flexibility to embody the magic supply chain described here. 

The more automation and AI we share in common to augment human markets, the more magic this network will be able to produce. Today many economists think that markets are the answer to everything, but along the way they abandoned the classical economic concerns for rent-seeking and monopoly. If technology in a commons of production can reduce market parasitics to an acceptable level,  then markets can become efficient enough to address the monopoly power of large firms. This will allow markets to function in a way that the classical economists claimed they should.

The Magic Supply Chain is, in a sense, just a projection of classic economic theory with one difference. The markets themselves are considered and governed collectively, as a commons of production. Markets are not automatically self-regulated. We now know that dynamic systems can produce both resilient stability and catastrophic change depending on external forces.

If necessary, markets need to be regulated so that they will not fail. We need to apply our best models of dynamic systems to understand what the driving forces are, and where trim tab adjustments can be effective. This regulation is a function of commons governance, not the magic of the market. Market magic is what we introduced above; technology such that when orders are placed for a new design, whether commons based or private IP, the producers, as a network, can see that and immediately begin to coordinate production. The orders and sub-assemblies may already be on the chains before the design is even finalized, and deliveries can happen soon after the design prints are ready to be made.