The Kula Ring

Episode 86 Using Blockchain to Secure Your Supply Chain

The Kula Ring podcast is essential listening for manufacturing marketers who want to grow their digital presence and compete online.

Sponsored by Kula Partners—an agency committed to helping leading B2B manufacturers craft digital experiences that transform how they engage buyers, serve customers, and outpace their competition—The Kula Ring podcast features conversations about marketing, sales, and technology with top manufacturing executives from across North America.

The Kula Ring podcast is co-hosted by Kula Partners principals, Carman Pirie and Jeff W. White, both of whom are frequently sought after for their digitally-focused B2B expertise. They regularly share their insights with audiences including conferences like B2B Online and HubSpot’s INBOUND, the Gardner Manufacturing Marketer blog, and other podcasts focused on B2B marketing and technology.

A secure supply chain enables consumers to authenticate products at point of purchase, which adds value. Mark Manning, Founder & CEO of iTRACE Technologies, talks about creating a “digital twin” of a product in a blockchain ledger and using the iTRACE app to deter counterfeit production in a manufacturer’s own supply chain.

Using Blockchain to Secure Your Supply Chain Transcript:

Announcer: You’re listening to The Kula Ring, a podcast made for manufacturing marketers. Here are Carman Pirie and Jeff White. 

Jeff White: Welcome to The Kula Ring, a podcast for manufacturing marketers brought to you by Kula Partners. My name is Jeff White and joining me today is Carman Pirie. Carman, how are you doing, sir? 

Carman Pirie: I am doing well, Jeff. And you? 

Jeff White: I’m doing really well. Yeah. It’s the last gasp of winter here in Halifax, but hopefully that’s near the end of that. 

Carman Pirie: Yeah. Indeed. I don’t know, it’s like sometimes it feels like you have 11 months and a couple of weeks of winter in this part of the world. 

Jeff White: Yep. Winter, still winter, almost spring, and then back to winter. 

Carman Pirie: Yeah, like the old Cape Breton, Nova Scotia joke: “What did you do last summer? I think I played baseball that day.” 

Jeff White: Yeah. 

Carman Pirie: Nevertheless, we can’t complain about the weather. Certainly not in this day and age that we live in. But I think beyond complaining, today’s episode is really… I’m really excited for today’s conversation. It kind of picks up a bit on the heels, if you will, of a discussion that we had with Lisa over at Honeywell, and I think she actually put us on to today’s guest, didn’t she, Jeff? 

Jeff White: Yes, she did. Yeah. She introduced our guest. 

Carman Pirie: Well, why don’t you introduce our guest, as well? 

Jeff White: Yeah, I think I will. So, joining us today is Mark Manning, and Mark is the founder and CEO of iTRACE Technologies. Welcome to The Kula Ring, Mark. 

Mark Manning: Thanks very much, guys. Thanks for inviting me along. 

Carman Pirie: Mark, it’s great to be chatting with you, and really cool to learn more about the company and the technology that you’re bringing to market. Let’s just kind of kick that off. Tell our listeners a bit about you and a bit about iTRACE Technologies, if you would. 

Mark Manning: Yeah, no problem. So, I’m Mark Manning, founder and CEO of iTRACE Technologies. I’ve spent about 15 years working in the brand protection and product security space, so I have an extensive background in fighting counterfeit, gray market diversion, and production overrun for manufacturers around the world. My background is in technology. I studied telecommunications and engineering in the UK before I came out to the US, and I’ve been working with a number of startups over the years. 

But iTRACE is focused on helping brands secure their supply chain and their offshore manufacturing and production, fighting the problems of counterfeit, production overrun, and gray market trading of their products. And once you do that, once you set up to solve those problems, you actually enable a whole wealth of other applications. Things like consumer engagement, product provenance, and being able to understand the history and provenance of a product that’s in the marketplace. 

So, we’ve been focusing on helping companies primarily secure their supply chain, but once you do that, then the other benefits become apparent to the marketing folks, who would engage into their consumers, and being able to even own the secondary market for their products. 

Carman Pirie: I wonder if, to make it a little bit more real for our listeners, if we could talk about a real-life application of the technology and we’ll just work back from there. 

Mark Manning: Sure. So, one of the things, and obviously Lisa Butters at Honeywell connected us, and one of the projects that we’ve been working on with Honeywell is allowing them to be able to securely track, trace, and record the provenance of aircraft parts. And that’s important to Honeywell for a couple of reasons. Primarily, being able to authenticate and ensure that the parts being put on an aircraft are genuine, they came from the identified supplier that is trusted to manufacture those parts, and the part you’re installing is actually the part that it’s supposed to be. But Honeywell has a huge business, as Lisa was mentioning on her podcast with you guys, in the secondary market for used and refurbished aircraft parts. And if you can present a complete history of that part, from the moment it was born through to its end of life, and create that provenance around that part, you can actually generate additional revenue for that component. It has more value. The history about that part is more valuable than a part that has no history, no background, and no identification. 

But being able to do that, you need to be able to ensure that the part you have in your hand is the same part that was originally manufactured and recorded. Honeywell is using blockchain technology to provide this secure and immutable connection between buyers and sellers of used aircraft parts. And they’re using iTRACE to be able to identify that the part that was manufactured and originally recorded on the blockchain is the same part that somebody may have in their hand five, 10, 15, even 20 years later when that part has been installed on the second, third, or fourth aircraft that it may be used on. 

So, iTRACE is primarily, in that application, providing a secure connection between the physical part that someone may have in their hand and a blockchain ledger that is the immutable record of what has happened to that part throughout its life. So, connecting physical to digital, and the term that’s being used right now is creating that digital twin of a physical item, and being able to ensure with a fingerprint and a unique identifier that the part in your hand is the same part that has the record on the blockchain. 

Carman Pirie: Thank you so much for that, kind of unpacking that a bit, because I just think it helps just make it real for folks and they can kind of imagine it. I certainly know I can. And it’s easy to imagine in some ways the applications in those safety-critical environments like aerospace, as you mentioned. But it would also seem like there’s a lot of applications in loyalty critical applications if you will. For example, luxury brands that would have a different, non-safety-related requirement for understanding the provenance of a particular item. Am I getting it? 

Mark Manning: Yeah. No, absolutely, and aerospace is obviously a critical application for safety, as you said, but this is exactly the same application and exactly the same mobile app that we have would also be used in the luxury goods industry. So, imagine a very high-end watch brand, maybe a Swiss watch brand that was charging 20, 30, 40,000 euros for a watch. What if they could guarantee the provenance of that watch for their clients? And not only understand the client or connect with the client when they first purchase that watch, but actually own the information about that timepiece throughout its life, regardless of who owns it and where it changes hands in the secondary market. But allowing brands to deliver the information about that timepiece throughout its life, and it that way, owning the data about the secondary market for their products, extending the connection to their consumers. Not from just the first purchase, but for every time that product exchanged hands throughout its life. Every time it went in for service, cleaning, maintenance, whatever other connection that the brand would have with the owner of that watch. 

Watches are becoming a little like cars nowadays, where there’s a secondary market that is thriving for used, luxury timepieces. And if you can own the data on that secondary market, kind of like Carfax does for cars, you have a very powerful connection with the customers and the people who have your products. 

Carman Pirie: And in so many cases, that secondary market is the gateway, if you will, for many people. Like they may buy a used luxury timepiece initially, and it gets them into that world, but that may just be their first of many purchases, obviously. 

Mark Manning: For sure, and if you can be front of mind or connected with that person every time they think about the next watch that they want to purchase, you now have a very powerful connection between the brand itself and the person at the time they’re thinking of buying something. 

Carman Pirie: And the auto example is one where it’s like you say, Carfax owns that, but then that means no brand does, which is kind of a missed opportunity for brands, I suppose. 

Mark Manning: For sure. Carfax, they saw a hole in the ownership of that data, and they filled that hole. And no one has stepped up, necessarily, to do the Carfax of other products, but Honeywell is certainly positioning themselves right now to be the Carfax of aerospace parts. Not just their own, but also other industry parts that are being bought and sold on their marketplace that they’ve built. So, people are beginning to realize, as you said, that there is a huge market out there that was once seen as the enemy of a brand, but now may be seen as an avenue for the brand to reach and connect with their clients or their future clients. 

Jeff White: Mark, I’m curious. What are some of the other opportunities that you’re seeing manufacturers leverage more with the connectivity they have with their customers via the app that you provide through iTRACE? What are some of the other opportunities that might exist to leverage that brand connectivity? 

Mark Manning: It’s been highlighted time and again on the news recently, certainly with the COVID-19 virus issues that are going around today, and people trying to sell fake test kits, or test kits that aren’t real online. They’re selling medications that aren’t actually real. So, being able to enable your consumer to authenticate their product that they have in their hand as genuine or fake at point of sale. So, that ability to be able to give the consumer the trust that the brand actually cares about the fake products and providing genuine products to their marketplace, they care enough to be able to enable the consumer to authenticate products when they purchase them. 

And this is becoming a major issue today. It’s been a major issue for a long time, but certainly today it’s been highlighted on the news a lot more, in that there are fake test kits for COVID-19. There are fake medications for COVID-19 that are being seized at airports around the country today as we speak. 

So, the brand engagement with the consumer can take on multiple levels and give the brand, again, many, many occasions where they can connect with the consumer directly, give the consumer trust, give the consumer the ability to sign up for a warranty right there on the app, when they’ve purchased the product, by scanning an iTRACE code that is on the product package or on the product itself. So, there are multiple layers. Once you’ve enabled the technology at the very beginning, it’s almost unlimited how creative you can get with connecting with people and using the data that you are generating and providing by having the ability to scan individual products with a mobile app and identify that individual product as unit number 10 of 1,000, or 10 of a million, and creating the data around that individual piece. 

So, I think there’s a lot of trust, a lot of warranty capabilities, and again, a lot of data that can be generated, useful data, even right at the point of sale, from a technology like iTRACE. 

Jeff White: I think that’s really cool, and I mean, that’s certainly one example of how it manifests itself as it approaches the consumer or the buyer. As with Honeywell, we can see the business-to-business side of things there, too. But one of the other things that your product does is it enables the manufacturer to actually see that their supply chain isn’t overproducing one of their product and introducing counterfeit items. Can you talk more a bit about how that side of things work, and how it enables manufacturers to have confidence in their suppliers?

Mark Manning: Yeah, and it’s a really interesting thing for us that when we implemented this technology, obviously we wanted to put all the security in place to be able to have a brand secure their offshore manufacturing and securely apply our technology at the point of manufacturing. And the brands that we work with understand that not every factory in China is as honest as you would like, and not every supplier is playing by the rules. And some factories will produce additional product that will ship out the back door and end up on sites like Amazon, eBay, Alibaba, and many, many other marketplaces that are out there. And when you think about that product that’s leaking out the factory, it’s exactly the same materials, made on exactly the same production line, by exactly the same workers. For all intents and purposes, it’s going to be indistinguishable from the real thing. It may not have gone through the same quality process. It may be made of parts that should have been in the scrap bin and should not have leaked out of the factory at all. 

But it will be almost indistinguishable from a forensic standpoint from the genuine article. How do you track and secure and control that? This is what we started off to solve, was securing the factories for offshore manufacturers, to enable us to be able to trust the information that was further down the supply chain and trust this part that we may see five, 10 years later. One of the side effects that came out of that, which was really cool when our brands started using it, was that having the control over the machines in the factory, and being able to remotely control what the machinery in the factory can produce, gave us the ability to give real-time data on what the factory was producing today and how far through the purchase order they’d actually progressed at any given point in time. 

Now, I understood that yeah, that was valuable information, but I didn’t realize that getting that information from a factory in China could take two or three days, multiple phone calls, and a lot of misunderstanding for the supply chain folks at a brand. Now, what they’re able to do is just log in to the dashboard, review that particular purchase order, and the dashboard will display exactly how far through the purchase order the factory is, which purchase order they’re working on today, and it can give you an indication then of when your purchase order is gonna be complete and when that product will ship. So, it was a real benefit to the supply chain folks when we actually implemented the system and gave them the visibility into the security of the factory and the supply chain leading out to their distribution. 

And that goes above and beyond the traditional track and trace mechanisms that are in place to help secure the distribution and retail side of things. So, we pushed all the way back to the factory, all the way back to the individual products, and gave visibility right from the very beginning when a product is born. 

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Jeff White: I think that’s really interesting, and I have a rather unique anecdote to add there. Back in the day, before Amazon and all of that, I’m really into mountain biking. A friend of mine ordered a catalogue frame that looked just like one that was built by the big manufacturers but was kind of basically ordered out of the back of a bus kind of thing. And that frame failed catastrophically and almost put him in the hospital as a result, because it was exactly that. It was a bicycle frame that was designed and built in the same factory but had obviously been made of lesser-quality aluminum or something like that, and it almost ended up really hurting a good friend of mine. So, yeah, it’s interesting that this kind of thing could help solve that problem. 

Mark Manning: Yeah. It’s unfortunate, the bike industry is rife with that kind of thing. A lot of the bike products are manufactured in China, and they do take liberty with the designs that the brands send over there for manufacturing, and it’s been a thorn in the side of the bike industry for many, many years. I know very well the folks at Specialized spend a lot of time and money and effort to prevent that kind of thing happening, especially with things like crash helmets for cyclists, and there are many, many stories in the news that will corroborate your story about bike components, fake bike components that fail and cause injury. 

Carman Pirie: You know, it’s interesting to me to think about because you’re the founder and CEO of this firm. You’ve kind of lived and breathed this for so long, and when you’ve done that, my guess would be that you see applications for this everywhere. It’s almost like the old Tootsie Roll commercials, you know, everything looks like a Tootsie Roll? You could probably, as you look at business, you can see an application for this in almost every instance. I guess to that end, is there an industry or segment out there that you’re just shocked hasn’t kind of caught on to this?

Mark Manning: What I’ve been shocked at over the years is how long it takes industries to adopt these kinds of technologies, and I’ll use the pharmaceutical industry as an example. When I first started in this industry, I think it was 2003, 2004, the big news at that time was that the US was going to require that pharmaceuticals be serialized, tracked, and traced at the package level. And this was in 2003, 2004. Their initial request for the requirement I think was issued in 1998, that this should happen in the pharmaceutical industry, and everyone was saying, “This is gonna happen in the next two or three years, and RFID is going to solve all of these problems, and the supply chain for pharmaceuticals is secure.” 

Well, it was 2019, I think, the last time… Almost 20 years later, the first pharmaceutical packaging track and trace implementation started to roll out. And it took 20 years for that legislation to actually get approved, and when they implemented it, they unfortunately implemented it with out-of-date and already compromised technology. QR codes, data matrix codes and standard barcodes were used as the tracking mechanism because it was the simplest and easiest to implement, not necessarily the most secure. 

So, that is what surprises me the most, is that even though there’s legislation and a known requirement. In an industry like the pharmaceutical industry, it took so long for this secure supply chain to actually become a real thing, and it’s still not fully implemented. It’s still in its early stages. But hopefully over the next few years, now that first steps have been taken, it will move forward and become a reality for pharmaceuticals, where you as a consumer of a pharmaceutical product will be able to take out your mobile device and scan the code on the packaging, and understand that that product has a provenance. Where it was manufactured, when it was manufactured, who has touched it along the way, and are there any alerts about counterfeits around that particular product itself. 

So, it’s just taken a long, long time for these solutions to be implemented in critical infrastructure like the pharmaceutical world. 

Carman Pirie: I’d be curious, how many of your customers, past or present, kind of initiated this through the lens of security or regulatory, versus a marketing-driven initiative? Does that make sense? 

Mark Manning: It does. I think there’s a third category, there’s a business driver. So, you’ve got regulatory, you’ve got marketing, and then I need this because my business is suffering without it. And most of my clients come to us to solve a particular problem, and the problem is how is my product ending up in bulk on Amazon, eBay, Alibaba, and who is putting it there? Not who’s selling it. The sellers are easy to find and they’re easy to take down. It’s where is the supply coming from that is supplying this gray market? And all of my clients come to us from the business-driven need of securing their distribution and controlling the pricing of their product in the marketplace. Because if they can’t control the price on Amazon of their product, they can’t effectively sell online, because they’re continually getting undercut by gray marketers, diverters, and people selling their product that may be straight counterfeit. It may have come from the back door of the factory. 

So, I see more people driving towards our technology to solve a particular business value problem, and then realizing that, “Oh, once we’ve solved that problem, here are the other benefits that come along from that.” As the founder and CEO of the company, I actually made a decision within our business to avoid heavily-regulated industries like pharmaceutical, specifically for the reasons that I described when I talked about it, is that it takes them too long to actually make a decision and move forward with something. So, from a business perspective, I don’t necessarily play with regulated industries as my target clients. If they come to me, then I’m more than happy to help, which if you think about Honeywell, they didn’t come to me out of a regulatory requirement. They came out of a business requirement, even though they are a heavily regulated industry. 

Carman Pirie: At least it seems that they, and I do not know the history, obviously, like you would, but it seems like they didn’t come to you through the lens of we have a bunch of this already going out on the gray market and we need to put a pin in that. It was more they saw the business opportunity of owning the secondary market, helping to drive market share gain in the primary market. Accurate? 

Mark Manning: Yeah. For sure. 

Carman Pirie: Yeah. It seems that the other way to use it, saying from my grandfather is like you’re closing the barn door after the horses get out. Once the product’s already on Alibaba or whatever and you’re wondering how the heck it’s being supplied, I’m sure those are great phone calls to get for you, and it almost seems akin in the communications world to a crisis communications call in some way, like something’s already going bad, how do I fix it? But man, I guess if I were encouraging the marketers listening to this episode, I might say I think there’s an opportunity to be proactive here. 

Mark Manning: For sure, and the marketers that drive these kinds of technologies, what they actually end up doing is saving the company a massive amount of legal cost. Because a lot of these issues are driven out of the legal department, and this is one of the reasons that Baker McKenzie actually partnered with us to provide our solution to their clients, is that this helps reduce the cost from a legal perspective, and that’s just straightforward expense for a brand. And if you can convert some of that cost into marketing dollars, you can actually generate revenue while saving money on the legal side of things. 

So, we deal with the legal departments in companies a lot, because as you said, they’re in crisis mode. They’re trying to close the barn door after the horse has already bolted, as opposed to being proactive and securing things ahead of time. And that’s the mindset that is slowly changing. Even from the legal firms, the global legal firms like Baker McKenzie have realized that it’s better for their clients if they can help them be proactive than just bill legal hours on the back end.

Carman Pirie: Yeah. Absolutely. That makes complete sense to me. I’m just… Frankly, Mark, thank you for sharing your experience and knowledge with us today. I’m kind of just excited for you. I think you’re on the front end of something really cool here. 

Mark Manning: It’s exciting times, for sure. Especially when you’re seeing the news every day, CNN talking about the fake products that are out there, it just gives more visibility to the sort of things that we’re doing. And yeah, we can solve real problems for real brands today. That’s what we do. So, it is a very exciting time, and there’s a massive world of opportunities out there, because there is a massive amount of counterfeit, fake products, and diverted products, and the consumers today haven’t yet been able to connect easily with the brand marketing team when they have their product in their hand. And enabling the mobile apps that we can deliver gives the brand the ability to connect directly with that consumer at the time they’re interested in buying when they have the product in their hand and they’re most engaged. 

Carman Pirie: It’s a powerful application, and I do find it kind of fascinating that there’s… that I see almost a perfect duality. I could see B2B applications that are just as strong as those B2C ones you articulated. 

Mark Manning: Absolutely. For sure. And I think that’s one of the drivers for Honeywell. They see that massive marketplace. They see the massive opportunity that’s out there to own that data for that marketplace, and they’re driving towards that, and they’re doing a fantastic job of being able to connect buyers and sellers with real provenance information about products that gives the buyer and the seller the comfort that what they have in their hand is exactly what it says it was. It’s not another fake and not a product from somewhere else. 

Jeff White: Seems like a real opportunity for B2B businesses to really learn from what B2C companies have been doing potentially for a little bit longer and begin to implement this technology and this idea more broadly and begin to see the benefits that others are seeing. 

Carman Pirie: I was going to even maybe challenge, Jeff, to say maybe this is an area where B2B doesn’t have to wait for B2C, like if they’re almost kind of equal adopters right now, it’s like come on, B2B folks, maybe you don’t have to wait and always be looking in the rearview mirror. I think there are some great applications here and certainly encourage anybody listening to this to check out Mark at iTRACE and learn more, for certain. 

Jeff White: Really appreciate you joining us today, Mark. It’s been fascinating to learn about this. 

Mark Manning: Hey, no problem, guys. I think this is a great forum to be able to share some of this information, to share the knowledge that we have, and I really thank you guys for inviting us on the show. 

Carman Pirie: An absolute pleasure to have you here, Mark, and stay safe out there. All the best to you. 

Mark Manning: Thank you. You too. 

Announcer: Thanks for listening to The Kula Ring, with Carman Pirie and Jeff White. Don’t miss a single manufacturing marketing insight. Subscribe now at www.rccompplan.com/thekularing. That’s K-U-L-Apartners.com/thekularing.

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