Why Blockchain continues to be relevant in today’s Global Supply Chains

• Globalisation: In today’s world, supply chain runs through multiple countries and geographies, which makes it over-complicated and cumbersome, leading to high costs and inefficiency. Payment between manufacturers / suppliers/ customers / vendors takes days to complete. There’s a rise in uncertainty, which induces a significant level of variability risks and margin pressure. All the parties in the supply chain interact via third party entities instead of directly with each other, leading to lengthy procedures.
• Track and trace : The long supply chain also means that it’s incredibly difficult to track and trace products in the chain. It becomes impossible to pinpoint exactly where a defective product piece came from, who produced it and how it came into the chain. Consequently, it takes weeks / months to trace the source, affecting day to day operations and puts the overall chain into pandemonium.
• Transparency : Lack of transparency in the chain, makes it difficult for customers or buyers to truly know the value of products. Customer also need to know the origins of products and how environmentally conscious the products are.
• Trust on quality : Lack of trust among all the participants is of importance as well, trust that all the participants have done their job responsibly / ethically and that they have delivered quality while following standard safety standards. It’s impossible to investigate supply chains when there is suspicion of illegal or unethical practices within the chain.
• End to end visibility : Fragmentation of data in silos continues to be a major issue. There’s high information asymmetry with very little data interoperability and it’s hard to ensure the integrity of products as they flow through the supply chain. Challenges include fighting contamination, reducing counterfeiting and maintaining an efficient supply chain. At the end, this hurts the consumer, the environment and companies who actually participate in honest and sustainable production methods.
• Increasing costs : Last but not the least, supply chain costs are increasing day by day, putting pressure on bringing in efficiency and innovation. Technologies used to manage global chains are falling behind the growing complexity and cost, creating opportunities to innovate new ones. Blockchain can perhaps bridge that gap.

Blockchain has all the key features that align with the basic need for reliability and integrity that are crucial in a supply chain. Let’s look at each of these features in details along with the benefits that it brings about, especially from a supply chain perspective.

• Decentralization : Decentralization is at the core of Blockchain. Any data that is stored inside the Blockchain is not owned by one centralized entity. Data is shared by everyone who is part of that blockchain’s network. This breaks down the concept of Silos and there’s no question of data isolation across all the entities which may be located all over the world.
• Immutability : Immutability means non-tamperable. No entity can tamper with an entry in the distributed ledger. It’s impossible to falsify any transaction or records which ensures that the records are honest and corruption free. This completely eliminates unnecessary audits, saving time and money.
• Transparency : Every single transaction in the supply chain can be recorded in Blockchain and its available for everyone to see. This provides complete visibility to all transactions for all entities and adds a layer of accountability and builds trust among all the parties.
• Provenance : Products / parts can easily be traced to its place of origin using Blockchain. There’s complete information on which entity owned it and at what time. This helps reduce counterfeiting in supply chain and easy detection of defects in the chain which otherwise would have taken days to trace.
• Consensus : All entities in the chain agree the validity of each transaction and everyone holds the same version of truth.
• Smart Contracts :These are self-executing computer program that can automatically enforce agreed rules and process steps. They help by fully automating process steps which involves legal contracts.

Blockchain as “Universal Supply Chain Operating System”

Blockchain allows to track all types of transactions (securely and transparently). Every time a product changes hands, the transaction can be documented, creating a permanent history of a product, from manufacture to sale.So, what makes Blockchain so important for global supply chain management? Well, it’s primarily due to the following tasks which Blockchain can easily enable:

• Document or record quantity and ownership / transfer of assets like containers, trailers, pallets between different parties – as they move along the global supply chain route
• Track all purchase orders, goods receipts, shipping notifications, customs / import certificates or other global trade-related documents
• Assign / link every physical assets to serial numbers, batch / lot numbers, bar codes, tags (RFID) etc
• Verify product certificates / physical properties of good along the chain (e.g. whether the item meets certain quality standards)
• Share all information about the manufacturing process, assembly, delivery, and maintenance of products with the different parties in the supply chain
• Benefits in supply chain: Total transparency, greater stability, better security, increased innovation, replacing slow manual processes (automation) and reducing supply chain overall costs.

After having understood how relevant Blockchain is, in today’s supply chain management, let’s now look into the major use cases in practice today which are known to have provided benefits in real business scenarios.

TRANSPARENCY AND TRACEABILITY IN SUPPLY CHIANS

• Track and Trace products in the entire supply chain(Store supply chain information in Blockchain – product source, how they are made and managed across the chain). This improves supply chain transparency and monitors provenance. This in turn provides proof of legitimacy and proof of authenticity for products. In addition, it also delivers on customer benefits – provides visibility to product info, origins, whether ethically sourced etc. This use case has been successfully put into use in Luxury goods market (Proof of authenticity), Pharmaceuticals (counterfeit products), Consumer and Retail Industry (Food safety) and Perishable Goods Tracking.
• Digital Identity: Interactivity with IOT sensors (autonomously record and transmit product condition). This ensures visibility to product integrity and provides evidence of product tampering. Primary use of this is in Cold Chain monitoring (Pharmaceuticals, Consumer and Retail Industry)

SUPPLY CHAIN PRIOCESS AUTOMATION

• Payment and settlement processing through smart contracts (Automation of payment release on goods delivery and Digitization of letter of credit). This increases efficiency in payment and settlement process (invoice accuracy & reduction of overpayments), helps reduce logistics disputes and allows for greater speed and efficiency / reduction of human error. Majorly used in Trade Finance and Logistics sectors.

EFFICIENT & LEAN GLOBAL TRADE

• Trade documentation and administrative processing for ocean freight shipments. This allows each stakeholder in the supply chain to view the progress of goods through the supply chain and understand where a container is in transit. In addition, there’s complete visibility to status of customs documents, bill of lading and other data. This ensures secure data exchange and a tamper-proof repository for documentation. This use case is primarily used in Ocean Freight and Global trade industries.
• Blockchain-based system focused on replacing the traditional bill of lading as well as facilitating a single source of truth: This enables direct communication, eliminating the need to go through central entities and rely on intermediaries. This in turn, drives process efficiency and operational cost reduction. Primarily in use in Global freight and logistics sectors.

It’s been quite a journey for Blockchain from cryptocurrencies to a situation where it may have significant impact across industries. Supply chain is no exception in this journey and as discussed, we have many projects / PoCs / Pilots underway which are adding value by boosting supply chain transparency and automation. Moving from today’s era of POCs and pilots to an era of full scale production systems would perhaps take time and would require further technological development and innovation especially in the area of collaboration of Blockchain with IoT, Artificial Intelligence, Analytics, Robots and more. Lets wait and watch !!!

References:
https://www.logistics.dhl/content/dam/dhl/…/glo-core-blockchain-trend-report.pdf
https://blockgeeks.com/guides/blockchain-and-supply-chain/
https://www.mckinsey.com/business-functions/operations/our-insights/blockchain-technology-for-supply-chainsa-must-or-a-maybe
https://www.forbes.com/sites/bernardmarr/2018/03/23/how-blockchain-will-transform-the-supply-chain-and-logistics-industry/
Photograph (Feature Image): courtesy freepik.com
https://www.freepik.com/free-photo/industrial-port-container-yard_1145654.htm