Nov 02, 2023
The modern supply chain is a complex web of moving parts: each crucial to ensuring the timely delivery of products or services to consumers. However, these intricacies often bring about challenges such as logistical bottlenecks, data fragmentation, and a need for more transparency, among others.
Will blockchain technology solve these challenges and significantly streamline supply chain operations?
We have narrowed down three main value propositions of how blockchain technology will be able to solve current teething problems and transform the supply chain industry.
At its core, blockchain is a decentralized and distributed digital ledger used to record transactions across many computers in a way that ensures the security, transparency, and immutability of the data. Transactions are recorded using cryptographic hashing and are validated using consensus mechanisms and stored in participating notes. Therefore providing a high level of security.
From an industry practitioner’s perspective, blockchain's true value lies in its transparency, traceability, and ability to be the single source of truth through decentralisation. These core advantages set blockchain apart as a transformative tool for supply chain management. The diagram below maps out traditional supply chain processes and how blockchain will solve some of the current problems faced.
Blockchain introduces a level of transparency that allows all parties in the supply chain to see the same information, reducing coordination problems. For instance, if two products share a common component and one's production is delayed, a transparent blockchain system would allow for optimal reallocation of this shared component to prevent inefficiencies. This solves the problem of excess inventory and stock-outs due to limited visibility among different companies.
Imagine a game of passing the parcel, where every pass is written down. In real supply chains, this "parcel" might be a product that moves from a supplier to a retailer. Now, if there's a problem, like a delay, it's hard to figure out where things went wrong. With blockchain, every pass of the parcel is recorded on a shared list that everyone can see but no one can change. So, if product A is delayed because component C3 is missing, companies can see where C3 is stuck and decide to use component C1 for product A instead, which is ready to go.
Blockchain’s immutable nature means that once a transaction is recorded, it cannot be changed, which is key for authenticity tracking. For example, in the pharmaceutical industry, a company can use blockchain to track drugs from production to the end consumer, ensuring that all items are legitimate and safe for use. This type of tracking is crucial for recall efficiency and consumer safety, as it provides a verifiable history of each product.
Think of blockchain as a superhero's shield for products. It protects the history of each item, like a product's journey from the farm to the grocery store. If something goes wrong, like expired food on shelves, the blockchain helps find out why, tracing back through each step. For medicines, it's even more critical. The blockchain acts like a detective, ensuring that every medicine bottle is what it says it is, safeguarding us from fakes.
However, we need to make sure that the data that we captured from the source is robust to prevent a scenario where “rubbish data gets captured, rubbish data gets displayed”. A way to prevent so is to reduce human intervention by using IoT devices and sensors to automatically scan products and add records to the blockchain.
The decentralized nature of blockchain means that data is stored across a network of nodes, which protects against system-wide failures. In a practical case, a company might struggle with numerous legacy ERP systems that do not communicate well, causing data fragmentation. Blockchain can offer a unified platform where all transactions are recorded with unique identifiers, simplifying the record-keeping process and ensuring a single source of truth.
Imagine a big company as a school with many classrooms (ERP systems), each speaking its own language and with its own way of doing things. When the school wants to organize a big event (supply chain activity), coordinating between all these classrooms can be a nightmare. They might not understand each other well because they use different words for the same things. Now, imagine blockchain as a magical notebook that every classroom has. Whatever any classroom writes in their notebook appears in all the others – in a language everyone understands. This way, if one classroom has a surplus of pencils (inventory), they can easily let others know, and those needing pencils can use them instead of buying new ones.
It saves time, reduces waste, and everyone is on the same page – quite literally. This is how blockchain can unify the communication between multiple ERP systems within large supply chain companies.
The launch of the Blockchain in Trucking Alliance (BITA), comprising over 150 member organizations from various facets of the transportation sector, marked a significant stride toward embracing blockchain technology within the logistics and supply chain management (SCM) domain. BITA's inception is a pivotal move, aiming to establish standards and foster industry-wide education on the manifold advantages of blockchain, including the automation and streamlining of complex processes through smart contracts. The integration of blockchain into SCM and logistics provides a unified platform where all transactions are recorded with unique identifiers while allowing all parties in the supply chain to see the same information, reducing coordination problems, therefore providing a multitude of benefits such as the simplification of claim settlements, bolstered transaction security that accelerates payments while concurrently mitigating fraud, and a reduction in the costs associated with compliance and regulatory adherence.
De Beers Group introduced Tracr, the world's first blockchain-backed diamond source platform at scale, which provides provenance assurance for all of De Beers Group’s diamonds from source to store, emphasizing its role in ensuring authenticity and improving traceability throughout the supply chain. The Tracr platform aims to track diamonds each time they change hands, from the moment they are mined, thus guaranteeing diamond purity and providing a tamper-proof source proof at scale, enabling stakeholders to keep track of a diamond’s history.
Blockchain technology can significantly improve the agricultural industry by enabling secure, transparent transactions and ensuring fair compensation for farmers. Smart contracts on the blockchain provide immutable records, reducing the risks associated with traditional supply chains. Additionally, real-time data from IoT devices recorded on the blockchain offers record of transactions with unique, making sure that the records are tamper proof and accessicble to everyone. This therefore enhances traceability and food safety which is favourable to the companies in consideration of the shift in consumer demands on such transparency.
The IBM Food Trust, a blockchain-based solution, records transaction information, provides real-time, trusted data regarding the origin and state of food, which is crucial for safety and compliance, simplifying the record-keeping process and ensuring a single source of truth. For instance, IBM collaborated with Golden State Foods, leveraging blockchain and IoT to monitor fleet operations, ensuring timely deliveries and improving distribution processes.
Blockchain technology enables for a safer, simpler and transparent movement of medications. Blockchain in simple terms can be thought of as a global ledger that is used for storing data. Data once entered in the blockchain is permanent and impossible to manipulate. Allowing a tamper proof record through a single source of truth. The secure decentralized platform backed by blockchain technology ensures the safe movement of medications all over the world and prevents illegal/fake drugs from entering the supply chain.
Mediledger offers a solution to drug traceability and counterfeiting with the help of a blockchain-based SCM system. The Mediledger Project is a collaboration between world-famous pharmaceutical manufacturers such as Pfizer, Genentech, and AmerisourceBergen. The project is using blockchain technology to enhance the efficiency and security of the drug supply chain. It enables real-time tracking of medicines and works towards diminishing the likelihood of counterfeit products and prevents anti-data tampering
With a growing emphasis on sustainability, accurately tracking and reporting carbon emissions is crucial. Blockchain can provide an immutable record of carbon emissions data, facilitating compliance with environmental regulations and enabling companies to showcase their sustainability efforts transparently.
CircularTree's CarbonBlock , in a pilot project with Porsche, BASF, and Motherson, showcased how a blockchain-powered data platform could reduce companies' carbon footprint by enabling the exchange of reliable and complex data. This project specifically aimed to measure and manage the carbon footprints of a Porsche Taycan bumper using smart contracts. The success of this pilot project was recognized with a Plug and Play Global Innovation Award during the STARTUP AUTOBAHN 8 in 2020
When we talk about the complexity of a supply chain, imagine a juggler trying to keep a dozen balls in the air. If your business juggles suppliers, partners, and processes across different regions or countries, it's like adding more balls to the act. The more complex the routine, the harder it is to keep track of each ball. So the question is, "Are you the juggler with too many balls to keep an eye on?"
In simple terms, if your business has a lot of steps and partners involved in getting a product from start to finish, it's complex. This is where blockchain can step in as an excellent assistant, helping you keep an eye on every single ball without breaking a sweat.
Counterfeit products are like pesky weeds in a garden; they can pop up anywhere and ruin the integrity of your beautiful plants. You must be vigilant and protect your garden. So ask yourself, "Am I constantly on the lookout for those weeds in my garden?"
If fake products or dishonest dealings are hurting your business, think of blockchain as a garden fence and a weed killer in one. It can help keep the bad stuff out and ensure that everything inside the fence is the real deal.
Partnerships in business are like a team sport; every player needs to be in sync for the team to win. Consider, "Is my team ready to play a new, perhaps more complex, but rewarding game together?"
If your business relies on other companies and everyone needs to work together smoothly, blockchain is like a new team strategy that can make everyone's moves clear and coordinated.
Transparency in business is like being able to see through walls; it's crucial to know what's happening inside at all times. Think about, "Do I wish I had x-ray vision in my business operations?"
If you're having trouble keeping things clear and open with stakeholders, blockchain acts like x-ray glasses for your business, allowing everyone who needs to know what's going on inside.
Trust in business is like the foundation of a house; it needs to be strong, or everything might collapse. So you have to ponder, "Am I spending too much to build and maintain that foundation?"
If a lot of your time and money goes into making sure everyone is honest and everything is accurate, blockchain is like a cost-effective, built-in lie detector and calculator all in one.
The deployment of blockchain technology in supply chain systems not only address the inherent challenges in supply chains but also significantly enhance operational efficiency and trust among stakeholders. The adoption of blockchain is a progressive step towards building more resilient and transparent supply chain systems in a digitally evolving marketplace.