Blockchain — Transparency Throughout The Supply Chain

Blockchain — Transparency Throughout The Supply Chain


At the time of its invention, that is, about two centuries ago, supply chains were a breakthrough idea that was supposed to improve the observation and control of goods as they move from point A to point B. But old concepts and technologies are no longer able to provide modern production and supply cycles that have become highly fragmented, complex and geographically dispersed.

In practice, modern supply chains are opaque and imperfect and extremely difficult to manage.

It is hoped that the supply chain problem can be solved with blockchain, an emerging technology that has proven to be useful in bringing transparency and efficiency to a range of industries.

Supply Chain Problem

The supply chain represents all the links involved in the creation and distribution of goods, from raw materials to the finished product that comes into the possession of the buyer. Currently, supply chains can be spread over hundreds of stages and dozens of geographic locations, making the process of tracking events and investigating incidents very difficult.

Customers and buyers do not have a reliable way to estimate the true value of the products and services they buy due to the lack of transparency in supply chains, which effectively means that the prices we pay do not accurately reflect the costs of production.

Other aspects affected by or related to supply chains are even more difficult to track. For example, there is currently no way to track the environmental damage caused by the production of goods.

Also, investigating and reporting illegal activities related to supply chains is extremely difficult. This includes activities such as forging documents, forced labor and poor working conditions in factories, or using the proceeds to finance war crimes and criminal gangs, such as in the case of coltan, a substance needed to create capacitors for mobile phones and other consumer electronics.

How Blockchain Improves Supply Chains

As a distributed ledger that guarantees both transparency and security, blockchain has the potential to solve supply chain problems. A simple application of supply chain blockchain technology to might look like this: register the movement of goods in the ledger as transactions that will identify the parties involved, as well as price, date, location, product quality and condition, and any other data important to supply chain management.

The public availability of the logbook will make it possible to trace the production of any product, right down to the raw materials from which it was made. The decentralized structure of the journal will make it impossible for any party to own it and use it for their own personal gain. Also, the cryptographic and continuous nature of transactions will make it nearly impossible to interfere with the log from outside. Some experts already believe that blockchain is immune to hacker attacks.

Some efforts are already underway to harness the power of blockchain while improving supply chain management. IBM has already launched a service that allows customers to test blockchain in a secure cloud and track high-value goods across complex supply chains. The service is being used by the firm Everleger, which is trying to use blockchain to increase transparency in diamond supply chains and thus help eliminate forced labor and the financing of violence across Africa.

London-based firm Provenance aims to build trust along the entire supply chain, from source to consumer, by launching blockchain technology based on Bitcoin and Ethereum. It will allow companies to be more open about how they create their products. This includes the disclosure of all data regarding the impact on the environment, the place where the products were produced, as well as by whom they were produced.

Provenance’s efforts also contribute to the promotion of socially acceptable practices such as making sure that slave labor and exploitation have not been used in the manufacture of a product.

Another relevant initiative belongs to BlockVerify, which will use the transparency of the blockchain to combat counterfeiting, especially counterfeiting drugs, which cause serious damage to the economy and claim thousands of lives every year.

BlockVerify aims to simplify drug authentication prior to scanning the QR code on the box. Each product will have its own identity on the blockchain to record ownership changes. Anyone can easily access this information.

In addition to transparency, there are a number of other benefits arising from the crossover between blockchain technology and supply chains.

Finnish startup Kuovala Innovation is working on a blockchain solution that will enable smart tendering across the supply chain. Pallettes equipped with RFID tags publish in the log book their need to get from point A to point B. Next, carriers send their proposals to win the tender for delivery. RFID will then select the carrier with the most suitable offer, and this transaction will be registered on the blockchain. Further, the shipment will be consistently tracked.

Rebecca Migirov of ConsenSys provides a “supply circle” — a blockchain-based production and consumption system that promotes cooperation in communities and encourages consumer involvement in production. Blockchain and smart contract systems provide local manufacturers with a decentralized platform within which they can share and exchange skills, resources and products without relying on a third party.

The Future Of Supply Chains

Blockchain has the potential to transform supply chains and change the way we manufacture, sell, buy and consume products. Increasing transparency, traceability and security in supply chains could be a breakthrough in a safer and much more reliable economy, by promoting trust and honesty and by preventing questionable practices. Hyperlink InfoSystem is a leading blockchain development company.

Blockchain — Transparency Throughout The Supply Chain was originally published in DataDrivenInvestor on Medium, where people are continuing the conversation by highlighting and responding to this story.