While Covid-19 restrictions ease once again across the country, Americans are beginning to see glimpses of normal life emerge. But prolonged shortages and the recent geopolitical conflict in Ukraine are continuing to take a toll on global supply chains. Although the Biden administration has announced dozens of measures meant to strengthen U.S. freight transportation and infrastructure, normal supply chain operations — like normal life in general — will take years to be restored in the post-pandemic era.
Indeed, we are nearly two years into this pandemic, and supply chain issues still dominate headlines. And the situation has been made much worse by Russia’s invasion of Ukraine, prompting interrupted supply of basic materials from Ukraine, factory closures in China, congested port operations and labor contract negotiations in the United States, and more.
The importance and fragility of supply chains is more apparent now than ever before, and has led to a record-number of investments in tech companies trying to solve the problem. Investors have pumped nearly $1.9 billion into the space so far this year, including $420 million in logistics unicorn project44, $200 million in freight technology company Loadsmart, and $25 million in supply chain intelligence startup Verusen.
The latest to score funding is NYC-based Sourcemap, which closed on a $10 million Series A led by Energize Ventures for its “supply chain mapping” technology last week. The supply chain management industry is experiencing what founder and CEO Leo Bonanni describes as a “renaissance,” and Sourcemap is taking full advantage.
“Supply chain is the unsung hero. It was not the most glorious department to be in 10 or 15 years ago. And over the last decade we’ve seen that companies and consumers care a lot more about how things are made,” Bonanni said, adding that this has prompted companies to go beyond the more “traditional definition” of supply chain. “They’re using it to save money and produce higher quality products, but they’re also using it to reduce risk, they’re using it to meet really ambitious environmental targets. It’s just shifted to a totally strategic, competitive aspect of companies, when it wasn’t that way before.”
Now, nearly two years after first covering Sourcemap, Built In sat down with Bonanni once again to discuss this shift, its implications on this 100-year-old industry, and how it can positively impact sustainability and accountability for good. The conversation has been edited for length and clarity.
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To start, what is supply chain mapping? Why is it so important?
Good question, because I invented it. When I started supply chain mapping, it was based on the realization that a lot of the social and environmental problems in the world are in the first mile of the supply chain, where the raw materials are being mined or farmed. At the same time, if you look into it, there’s the least amount of data available about the raw materials side of the supply chain. They’re also often the most disconnected and the most opaque.
Essentially, [supply chain mapping] is a way for companies to identify all of the people they do business with in their entire global supply chain, all the way down to mapping the farms and the mines where the raw materials originate. It’s a process you could do without technology if you have a very, very simple supply chain, but for most companies mid-size and up it’s something you need technology for because there are thousands — sometimes tens or hundreds of thousands — of companies in the supply chains for the customers we help.
At the same time, we know there’s a lot of fraud in supply chain. We know there’s a lot of reasons for companies to misrepresent themselves if it means they have access to really lucrative markets in the U.S. and the EU. With all that data that they collect, basically, our job at Sourcemap is to verify all of it. That means if we’re collecting thousands of farm maps, we need to compare them with satellite imagery to make sure there’s no deforestation going on. If we’re collecting payroll records from factories, we need to make sure there’s enough people on the payroll to make the amount of products being made. If something is happening in a region where there’s a conflict, we need to make sure that nobody in the supply chain is on the sanctions list all of a sudden.
Having visibility in the supply chain, transparency, and making sure that there’s sustainability is all great, but all the data has to be taken with a pretty big grain of salt. That’s a big part of where this technology fits in. It’s really helping give companies data they can trust about their global supply chain.
Supply chain mapping has been proven to work, a lot of the biggest companies have already adopted it, and it’s time for everybody to get on board.
Sourcemap’s capabilities can do more than just track these raw materials, right? It can also have a role in solving issues pertaining to things like environmental sustainability and human rights violations.
Our customers use Sourcemap’s software because it’s the biggest network of companies in the world. They can quickly map their supply chain, verify it, and start automatically looking for fraud, or waste, or any kind of environmental or social policy violation. We basically give our customers an edge in figuring out if there’s anything wrong in their supply chain so they can quickly fix it.
The first customers we had were really concerned with social and environmental practices in their supply chains, and getting enough data to show that their suppliers were living up to the standards that they held there. That would include things like making sure that, you know, the cattle that’s used for leather shoes is not coming from forests that are being burned down or deforested. It means making sure that the cocoa beans that go into candy bars aren’t being produced in ways that use forced labor or child labor. And a whole series of other concerns that, frankly, are very important and happen always at the first mile of the supply chain.
The reason why companies mapped their supply chains traditionally was to figure out their global sustainability impact. Then the reasons that they’ve been doing it since, I’d say, Covid, have really shifted to more core business functions. Covid really made companies realize just how little information they had about their supply chain. Especially when they saw that they couldn’t get supplies of the materials that they needed and depended on. They had to figure out, you know, who am I buying it from? What’s going on over there? Are they able to operate? Am I OK? Are they OK? Covid really made companies aware that mapping the supply chain is essential to resilience and business continuity.
Then, about a year ago, the U.S. really started to step up its enforcement of the law that prevents importing goods made with forced labor in the U.S. And I was asked to testify in front of the Senate Finance Committee last March. Basically, the whole sphere of accountability has expanded. Companies are now being asked by the government to make sure that everyone in the supply chain is living up to basic human rights and environmental standards. So we’ve seen supply chain mapping go from a kind of nice-to-have sustainability tool, to much more of a core process that businesses need to implement if they want to stay in business and stay compliant with the law.
“The byproduct of supply chain mapping is that it relies on this whole new level of communication and collaboration between companies and their supply chains. And that collaboration is what makes the supply chain much more resilient.”
Right now it seems like conversations about supply chains are really centered around what’s going on in Ukraine. But, like you said, this has really been top of mind for two years due to the pandemic. How is supply chain mapping helping companies get through such a difficult time?
This is not the first time that global supply chains have been broken, but Covid was definitely the biggest disruption to the global supply chain. Supply chains are under more and more pressure globally, so anything that happens somewhere in the world is going to have an impact on industry and supply chain. And because all of the industries are competing for very limited resources to get their goods to market, if you have a disruption, it could really put you out of business for weeks or months. Global supply chains are really squeezed and there’s not a lot of wiggle room if you lose a supplier or if you lose a shipping route.
At the same time, there’s all this new communication technology. One of the things we do in supply chain mapping is companies will register their suppliers, and then those suppliers will register their suppliers. So we end up creating a real-time social network that connects the C-suite at a major multinational with traders and farmers and people working in mines halfway around the world. With that communication, it’s a lot easier to reach out and make sure that global disruptions aren’t having an impact. And if they are, find out what they can do to help, find alternative ways to get their goods made, and get their goods to market.
The byproduct of supply chain mapping is that it relies on this whole new level of communication and collaboration between companies and their supply chains. And that collaboration is what makes the supply chain much more resilient.
Is there an example of a time that Sourcemap was used that you’re particularly proud of?
We’ve helped some of the larger footwear companies that buy leather globally find out that some of the leather they were sourcing was from the Amazon, from places that had been recently deforested, and pull out of those areas and find alternative sources. We’ve helped some of the cocoa sector identify farms that were actually in national parks, and work with those farmers to reforest and stop deforestation in those areas.
We work quite a bit with our manufacturing customers to help them bounce back from disasters. We were called in after the tsunami in Japan way back in 2011 to help some big [consumer packaged goods] companies find out which of their suppliers were actually in the affected areas, reach out to them, and make sure that they were able to continue operating. We were hired by Bloomberg’s administration after Hurricane Sandy to help map out the fuel supply chain and make sure that, in the future, any disruption to New York City’s fuel supply won’t take quite as long to bounce back from. They were out of gas and oil for eight days after Sandy, and that meant it was really hard to fuel ambulances and police cars and fire trucks and the like.
We’ve been involved in some pretty crucial moments, helping our customers bounce back to business a lot faster.
Sourcemap just raised a $10 million Series A. How do you plan to use the fresh funding?
The ban of products of forced labor has meant a huge demand in the U.S., and we’re just growing as fast as we can to meet that demand. Lots of companies, lots of new industries, are starting to map their supply chains for the very first time. We’re talking about food, and apparel. Also automotive, pharmaceutical, chemicals, cosmetics, renewables. There’s a whole world of new products — electric cars, solar panels, windmills — and these industries need huge amounts of materials to grow and meet their demand. And in order to do that they’re going to need to map their supply chain and find the right sources of raw materials. So we’re seeing huge demand in the U.S., and we’re staffing up to meet that demand.
And, last week, the EU passed its own version of the law that requires supply chain mapping there for issues like forced labor and deforestation — very similar to the U.S. law. So about half of our business is now in Europe. We just opened an office in Paris actually, and we’re staffing up over there to meet that demand.
“It’s the end of greenwashing, it’s the end of a lot of talk. And it’s the beginning of standards actually measurably improving across global supply chains.”
When you think about Sourcemap and its position amid all this growth, what excites you most about the company and industry’s future?
There’s a complete shift in how companies see their role, and it’s enabled by supply chain transparency. Companies today don’t just see themselves as dealing with their customers and their suppliers. They see themselves as global actors. And they’re able to put in place completely new policies and really raise the bar in terms of how we treat each other and how we treat the environment.
This new ability to manage global supply chains in great detail, and to be connected across great socio-economic divides, means that well-intentioned companies can really set the bar much higher. They can require their suppliers to meet those standards as a condition for doing business, and require that they be transparent so everyone can verify that these standards are being met. It’s really just a whole new playing field where companies with the highest standards can reshape industries to have much better social, environmental and operational standards, and then see it through.
It’s the end of greenwashing, it’s the end of a lot of talk. And it’s the beginning of standards actually measurably improving across global supply chains.