Can Blockchain Technology Help Supply Chain to Become Transparent and Traceable?

Photo by Pascal Bernardon

Undeniably recent non-stop emerging technologies open new opportunities for companies to gain trust among their customers and contribute sincerely to society's common welfare. Among them, blockchain technology probably is the most game-changing one.

Quick research clarifies that everything actually started with the P2P (Peer-to-Peer) transaction model, where simply said information flows from one party to another without the support of any centralized intermediary system, but of course in the presence of an internet connection. In this model since the fragmented data are stored decentrally by the peers (or so-called nodes*), fully protected and censorship resistance data can be achieved. Throughout history, we have had a few practical uses of this model by a variety of file-sharing platforms - e.g. BitTorrent, but their legality has always been questioned, due to copyright issues.

Today, the so-called Blockchain uses the same fundaments of P2P technology but leverages its usage by acting as a ledger or database for transactions between the parties. Here the term itself is made of "blocks" which these blocks contain the transactions, amounts, timing, involved parties etc., and "chain" since all blocks are linked together historically, building secure and transparent E2E (End-to-End) information flow.

If Blockchain technology can be successfully implemented in the supply chain, information like price, date, location, quality, certification and other appropriate data can be stored and delivered effectively. Possible benefits are:

Traceability

Any products or materials can be digitised in Blockchain and tracked easily by businesses and customers via the provided transaction history.

Reduction of counterfeit products

Yearly, the circulated counterfeit materials amount to billions of US dollars**, making it harmful for businesses and most importantly for the end customers. With Blockchain technology companies can understand the source of the ingredients or raw materials and avoid any harmful impacts.

Control over compliance

Since the parties in the supply chain will obtain the same information, any errors arising from the communication will be prevented. Ultimately, businesses can be sure that there is no need for further validation of the information's correctness.

Diminished paperwork costs

Auditing the supply chain in terms of compliance can be time-consuming, but full transparency of the information in the Blockchain ledger can decrease these costs and speed up the process.

Preserving reputation

Companies that are prone to increase transparency are more trusted by the public. Therefore gaining credibility within the society strengthen their position and reputation in the market.

Current Use Cases:

In the market, there are dozens of blockchain companies offering services for Supply Chain Management, including tech companies like IBM. Additionally, new companies emerged lately, which are purely focused on supply chain transparency such as:

1. Ethereum: an open-source blockchain platform that is often used for supply chain management. Its smart contract functionality allows for the automation of supply chain processes, such as tracking inventory and verifying transactions.

2. VeChain: a blockchain platform that is specifically designed for the supply chain management. It provides tools for tracking products and verifying their authenticity, as well as ensuring compliance with regulations and standards.

3. Waltonchain: another blockchain platform that is designed for the supply chain management. It uses RFID technology to track products and provides real-time data on their location and status.

Figure 1: Vechain Ecosystem

Source: Seeking Alpha

Conclusion

On the horizon, we should be ready to see a much more globalised world and the importance of speed and information in the supply chain will be increased drastically. Companies that are visionary enough to invest in supply chain transparency with the help of Blockchain technology will grasp and maintain their market shares confidently.

Alongside the benefits, the implementation of Blockchain technology might have some limitations like system and cultural adaptation risks.

Few statistics:

Nearly 55% of the customers are ready to pay a premium for the effort that companies put into social responsibility

Blockchain technology has the potential to reduce the administrative and logistics time in delivery by 85%

Over 90% of consumers consider that transparency in food products is vital for their purchasing decision

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Source

Wikipedia: Nodes

OECD: Trade in Counterfeit and Pirated Goods

Deloitte: Future trends in supply chain

By bit: Peer-to-Peer Blockchain Network

Seeking Alpha: VeChain Is The Blockchain Investment For The Next Decade

Wikipedia: Smart contract