Amid Russian aggression in Ukraine, companies with suppliers in the region have a challenge to overcome. With supply lines between the region and the rest of the world beginning to sever, brands that source their parts and raw materials from Russia and Ukraine will need to start looking elsewhere, but transitioning to a new supplier that fits is no small task.
That’s not to say it can’t be done. In a bid to make procurement less of a headache for retailers, supply chain due diligence platform Sourcemap announced this week that it had raised $10 million to grow its tracking and traceability solution, as well as to support an expansion into Europe.
The series A funding round was led by Energize Ventures, an investment management firm focused on digital transformation in energy and sustainability, with participation from E14 Fund.
“We were the first company to commercialize software for supply chain mapping, which is a process whereby brands and manufacturers go beyond their direct suppliers and find out where their raw materials come from,” Leo Bonanni, CEO of Sourcemap, explained to Modern Shipper. “If there’s any hiccup anywhere around the world that could impact them, like the current crisis in Ukraine, they could act very quickly to make sure their suppliers are OK and to find alternative ways to get their goods to market.”
Sourcemap supports the 400,000 business entities on its platform in a variety of areas, including supplier discovery, supply chain mapping and supplier risk assessment. The company also enables things like transaction traceability, fraud detection, resilience planning and real-time visualization by collecting data on deliveries, environmental conditions and labor practices.
According to Bonanni, while plenty of focus has been placed on the impact of geopolitical uncertainty on the direct supply chain in areas like shipping, freight and last mile — and rightfully so — not enough emphasis is being placed on the very beginning of the supply chain, on the sourcing of parts and raw materials. There, he said, is where the biggest risks lie.
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“[Sourcemap is] essentially a social network where companies that have very sophisticated supply chains, they invite their suppliers, they collect information on who the suppliers buy from, and they invite the sub-suppliers and the sub-sub-suppliers until they get a complete picture of their supply chain down to the farms, the mines, where the raw materials are sourced — and often where the biggest risks to the operations are,” Bonanni asserted.
Sourcemap is helping companies transition away from suppliers in high-risk regions, such as those in Russia and Ukraine, but it’s also enabling new forms of industry to take hold. Industries like electronics, automobiles and solar panels that are embracing clean manufacturing practices, for example, can leverage the platform to find more sustainable suppliers.
“You can’t really build the energy transition without having resilient access to all of these materials and all of these goods. The system is fundamentally different from one that’s powered by fossil fuels,” Juan Muldoon, partner at Energize Ventures, explained to Modern Shipper. “In the renewable energies build-out, you have a trade-off between higher upfront material costs and lower variable costs.”
As an example, Muldoon cited an energy source like wind turbines. Typically, a wind-powered onshore plant would require several orders of magnitude more minerals and raw materials than a gas-powered plant, but there are no ongoing fuel costs to maintain it. Similarly, while an electric vehicle requires more raw minerals like copper, nickel and cobalt than its gas-powered counterpart, the user doesn’t have to worry about refueling it.
“We’ve been following the space for quite some time, knowing that there’s bottlenecks in the system that need to be solved, where really traceability and visibility is the first way to start unlocking some of that value and to provide the energy industry with the tools that are really going to be needed for the energy transition,” Muldoon said.
For example, Sourcemap is helping to enable sustainable sourcing for apparel and footwear brands that get their materials from South America. The platform traces materials like leather all the way back to the slaughterhouse and overlays that data with real-time maps of deforestation occurring in the region, providing a holistic view of environmental risk. According to Bonanni, several Sourcemap clients have decided to pull out of the region as a result of the data the company provided.
“It’s a process that really has its roots in sustainability, things like measuring carbon footprint and social compliance in places where manganese is mined or where cocoa is refined,” Bonanni said. “And it’s a process that’s increasingly become essential for just running a business in this volatile world that we live in.”
Sourcemap’s data collection network unearths terabytes of data for its clients, including information about the exact locations they source from, the quality of the products they’re sourcing and the amount of product they can get from a given supplier on a given date. The platform even provides data on working conditions and worker protections which have been used to help companies avoid labor abuses.
In another example, Bonanni explained that in West Africa, the company uses a visibility network deployed from Android phones — similar to SAP Ariba or another advanced ERP — to track real-time data on deliveries, payrolls and other labor practices. And because the network is run on mobile phones, the platform works even in regions with little to no internet connectivity.
In March 2021, Bonanni testified before the U.S. Senate Finance Committee about the importance of identifying unscrupulous labor practices in conjunction with Section 307 of the Tariff Act of 1930, which is intended to prevent the import of goods produced using forced labor. In his view, the hearing signaled a renewed U.S. focus on limiting such products.
“We’ve been catching up with demand ever since that hearing because effectively, the U.S. doesn’t want to be a market for products made with forced labor,” he explained. “It’s wrong and it’s anticompetitive.”
But Sourcemap sees demand beyond the U.S. While part of the platform’s new funding will be used to grow operations stateside, a significant portion will be invested into the growing European market as well.
“After the U.S. stepped up its enforcement and requirement that companies trace products coming from high-risk areas, Europe proposed similar laws, just last week in fact, that require supply chain mapping for a whole slew of raw materials being imported into the region,” Bonnani told Modern Shipper. “And with that, we see corresponding demand grow in terms of our European customers, and so we’re setting up a European headquarters in Paris to meet and anticipate all the demand that’s going to emerge in that continent.”
Muldoon, who is joining the Sourcemap board to represent Energize Ventures and its LPs, added that in terms of product, the company plans to build on what it already has.
“We’re going to double down on the product advantage that we already have and add and expand to serve these new industries for whom supply chain traceability is really a critical need, whether it’s because of a compliance or regulatory challenge or because they’re having to procure these new materials for new industries,” he added.
That service is needed more than ever. With environmental and ethical labor concerns top of mind for businesses and shippers, carriers and other companies pulling out of Russia and Ukraine en masse, supply chain traceability is no longer a bonus — it’s a necessity.
“Supply chain traceability is not just nice to have,” Muldoon said. “It is the essential tool for procurement teams, and in order for these procurement teams to operate and field value for their enterprises, they need to have this.”