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 cleaned Pima cotton.
That DNA will act as a kind of tiny barcode, nestled between the swollen fibers as they are shipped to factories in India. There, the cotton is spun into yarn and woven into bedding before ending up on the shelves of Costco stores across the United States. Costco can test for the presence of the DNA at any time to make sure its American-grown cotton has not been replaced with cheaper materials, such as cotton from China’s Xinjiang region, which is banned in the United States because of its links to forced labour.
Amid growing concerns about opacity and abuse in global supply chains, companies and government officials are increasingly turning to technologies such as DNA tracking, artificial intelligence and blockchains to try to trace raw materials from source to store.
Companies in the United States are now subject to new rules that require companies to prove that their goods were made without forced labor or they will be seized at the border. US customs officials said in March they had already detained nearly $1 billion worth of shipments entering the United States suspected of having links to Xinjiang. Products from the region have been banned since last June.
Customers also demand proof that expensive, high-value products, such as conflict-free diamonds, organic cotton, sushi-grade tuna or manuka honey, are genuine and produced in ethically and environmentally sustainable ways.
That has forced a new reality on companies that have long relied on a jumble of global factories to source their goods. More than ever, companies need to be able to explain where their products really come from.
The task may seem simple, but it can be surprisingly tricky. That’s because the international supply chains companies have built over the past few decades to cut costs and diversify their product offerings have become astonishingly complex. Since 2000, the value of semi-finished products used to make products that are traded internationally has tripled, thanks in part to China’s thriving factories.
A large, multinational company can buy parts, materials or services from thousands of suppliers around the world. One of the largest of such companies, Procter & Gamble, which owns brands such as Tide, Crest and Pampers, has nearly 50,000 direct suppliers. Each of those suppliers, in turn, can rely on hundreds of other companies for the parts used to make its product – and so on, for many levels up the supply chain.
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For example, to make jeans, several companies have to grow and clean cotton, spin it into thread, dye it, weave it into fabric, cut the fabric into patterns, and sew the jeans together. Other company webs mine, melt, or process the brass, nickel, or aluminum that goes into the zipper, or make the chemicals used to make synthetic indigo dye.
“Supply chains are like a bowl of spaghetti,” said James McGregor, the chairman of the Greater China region for APCO Worldwide, a consulting firm. “They get mixed up everywhere. You don’t know where that stuff comes from.”
Given these challenges, some companies are turning to alternative methods, not all of which are proven, to try to inspect their supply chains.
Some companies — like the company that sprays the DNA mist on cotton, Applied DNA Sciences — use scientific processes to self-label or test a physical feature of the good, to find out where it went on its way from factory to consumer.
Applied DNA has used its synthetic DNA tags, each just one billionth the size of a sugar grain, to track microcircuits produced for the Department of Defense, trace cannabis supply chains to ensure product purity, and even to trick robbers in Sweden into attempting to steal cash from ATMs, leading to multiple arrests.
MeiLin Wan, Applied DNA’s vice president of textiles, said the new regulations created a “tipping point for true transparency.”
“There’s definitely a lot more interest,” she added.
The cotton industry was one of the first adopters of tracking technologies, in part because of previous violations. In the mid-2010s, Target, Walmart, and Bed Bath & Beyond faced costly product recalls or lawsuits after it was found that the “Egyptian cotton” sheets they were selling were made from cotton sourced elsewhere. A New York Times investigation last year documented that the “organic cotton” industry was also rife with fraud.
In addition to the DNA fog it applies as a marker, Applied DNA can find out where cotton comes from by sequencing the DNA of the cotton itself or by analyzing its isotopes, which are variations in the carbon, oxygen, and hydrogen atoms in the cotton . Differences in rainfall, latitude, temperature and soil conditions cause these atoms to differ slightly between parts of the world, allowing researchers to map out where the cotton in a pair of socks or a bath towel comes from.
Other companies are turning to digital technology to map supply chains by creating and analyzing complex databases of corporate ownership and trade.
For example, some companies use blockchain technology to create a digital token for every product a factory produces. As that product — say, a can of caviar or a batch of coffee — moves through the supply chain, the digital twin is encrypted with information about how it was transported and processed, providing a transparent log for businesses and consumers.
Other companies use databases or artificial intelligence to search vast supplier networks for distant links to banned entities, or to spot unusual trading patterns that indicate fraud – investigations that could take years without computing power.
Sayari, a corporate risk intelligence provider that has developed a platform that combines data from billions of public records issued worldwide, is one such company. The service is now used by US customs brokers and private companies. On a recent Tuesday, Jessica Abell, Sayari’s vice president of solutions, ran through the platform’s supplier directory for a major US retailer and saw dozens of little red flags appear next to the names of distant companies.
“Not only are we marking the Chinese companies located in Xinjiang, but we are also automatically exploring their commercial networks and marking the companies that are directly connected to them,” Ms. Abell said. It is up to the companies to decide what, if any, to do about their exposure.
Studies have shown that most companies have surprisingly little insight into the upper reaches of their supply chains because they lack the resources or incentives to conduct research. In a 2022 McKinsey & Company survey, 45 percent of respondents said they had no visibility into their supply chain beyond their immediate suppliers.
But staying in the dark is no longer viable for companies, especially those in the United States, after the congressional ban on importing products from Xinjiang — where the U.S. government says 100,000 ethnic minorities work in forced labor conditions — went entered into force last year.
Xinjiang’s links to certain products are already known. Experts estimate that about one in five cotton garments sold worldwide contain cotton or yarn from Xinjiang. The region is also responsible for more than 40 percent of the world’s polysilicon, which is used in solar panels, and a quarter of the tomato paste.
But other industries, such as autos, vinyl flooring and aluminum, also seem to have ties to suppliers in the region and are more closely scrutinized by regulators.
Having a complete picture of their supply chains can provide companies with other benefits, such as helping them recall defective products or reduce costs. The information is increasingly needed to estimate how much carbon dioxide is actually emitted in the production of a good, or to comply with other government regulations that require products to come from certain places — such as the Biden administration’s new rules on tax credits for electric vehicles.
Executives at these tech companies say they envision a future, perhaps within the next decade, where most supply chains are fully traceable, a result of both stricter government regulations and wider adoption of technologies.
“It’s doable,” said Leonardo Bonanni, the CEO of Sourcemap, which has helped companies like chocolate maker Mars map their supply chains. “If you want access to the US market for your goods, it’s a small price to pay, frankly.”
Others are skeptical about the limitations of these technologies, including their cost. For example, while Applied DNA’s technology only adds 5 to 7 cents to the price of a finished garment, that can be significant for retailers competing on small margins.
And some are raising concerns about accuracy, including, for example, databases that could flag companies incorrectly. Investigators still need to be on the scene locally, they say, speaking to workers and staying alert for signs of forced or child labor that may not show up in digital records.
Justin Dillon, the CEO of FRDM, a software company that helps organizations map their supply chains, said there was “a lot of fear, a lot of confusion” among companies trying to comply with the government’s new demands.
Importers are “looking for boxes to check,” he said. “And transparency in supply chains is as much an art as it is a science. It was never actually done.’
