Updated: Jul 13, 2021
Blockchain was initially introduced to the financial industry for secure and efficient payments and trade agreements. Later on, other sectors such as retail and consumer goods began examining how traceability can utilize blockchain technology. Now, the supply chain is experiencing continuous improvements from rapidly emerging technologies. Apart from transparency improvement and reduced administrative costs, blockchain technology in the supply chain plays a crucial role in advancing traceability.
Generally, supply chain management involves the work-in-progress inventory movement, which is basically the flow of raw materials from their source to the manufacturers and finally to the consumer.
This process should flow seamlessly following the schedule to ensure the products reach the desired consumers when needed. Blockchain, on the other hand, is a digital ledger that's in cryptocurrency and can be distributed. It can be used for tracking smart contracts, payments, and the exchange of agreements. So, all the transactions conducted are usually recorded in blocks that form the blockchain.
Business organizations are going digital in every aspect, and blockchain will be the backbone of digitized supply chains. Customers and businesses are better positioned to track their products from the time of pickup until they reach their end customers with blockchain.
Track and Trace in Supply Chain
The track and trace of the supply chain industry typically involves identifying the present and past locations of products and the history of the product custody. It's a process of following up products via complex strategies, from the raw materials through various manufacturing and processing regions, through regulatory controls, and finally to consumers and retailers. Tracking provenance in the entire process is essential as it ensures product authenticity.
Many supply chains struggle with disjointed data systems and outdated paper processes that tend to slow down communication processes. Problems such as manual errors, compliance violations, counterfeiting, inaccurate supply and demand prediction, and visibility gaps are due to the lack of data compatibility in supply chains.
Blockchain technology is used to create applications on which many parties can directly transact through peer-to-peer networks without the need for central authorities to verify the transactions. Multiple companies have used blockchain technology to document their production updates to single shared ledgers that provide a single source of truth and complete data visibility.
Every participant in the network can access the shared ledger that cryptographically and immutably records all the transactions conducted. Also, there’s no single network owner. At any point in time, a company can query a product's status because the transactions conducted are always up to date with real-time stamps. This helps combat issues such as counterfeit goods, delays, waste, and compliance violations.
Additionally, the ledger audit trail ensures regulatory compliance, and immediate action can be taken in emergencies such as product recalls. Blockchain can also be combined with smart technologies like the Internet of Things to automate tracking in the supply chain. For instance, it helps track the conditions of manufacturing, transportation, and quality controls. Also, to ensure ethical supply chain practices and verify product authenticity, an organization may decide to share the track and trace with its loyal customers.
Use Cases of Supply Chain Blockchain
Being one of the most populated industries, the supply chain has particular use cases where blockchain technology is efficiently applied. Shipment of products usually involves more than ten organizations or individuals in the supply chain, which leads to multiple interactions between all the involved parties, making it a very lengthy process.
Retail transparency. Shoes and apparel have a short product life cycle that quickly passes through multiple processors and manufacturing sites before reaching the retailers. To some extent, it isn't easy to verify product provenance due to the complexity and fast-paced nature of these industries.
An inbound supply chain would need an efficient system to track and trace all the incoming shipments; while customers, on the other hand, want to make sure that their shoe and apparel purchases are in line with their ethics. Blockchain in the supply chains helps retailers document and share the ethical and sustainable provenance of their products.
Automotive manufacturers. These companies incur huge losses from theft, damages, counterfeit car parts, and lost items. They can trace spare parts to their source and question exactly where they were damaged or lost. Subsequently, blockchain offers a solution to the infiltration of counterfeit spares that cost the auto companies money, customer satisfaction and put the consumer at risk. Typically, the companies can use the spare parts' QR codes to trace them on tamper-proof ledgers that ensure part authenticity.
Safety recalls. This is a common burden to the automotive industries that's very costly to automobile manufacturers and is inconvenient to the customers. The inability to confidently narrow down substandard vehicles causes auto companies to recall thousands of vehicles frequently. Blockchain currently helps companies identify vehicles with installed defective parts and issue a recall with an accurate and precise scope. The production phase that produced the error can also be tracked with the network ledger.
The food and agricultural industries benefit significantly from improved traceability. All food companies must know where a particular food product came from and where it’s heading. The visibility of the whole food product's life cycle is obstructed by this system, which lengthens companies' time to trace the outbreaks of foodborne illnesses to their sources. Visibility gaps and manual record-keeping further slows down this time-sensitive process.
Blockchain helps food companies have end-to-end visibility of their supply chains and can instantly trace unsafe products by auditing the immutable ledger. The shared ledger allows companies to identify the contamination sources to control the number of the affected customers. Whether it’s a fruit, vegetable, or snack, everybody wants to know if any food item is not safe for consumption. Blockchain technology is the perfect solution with end-to-end traceability that ensures recalls and investigations are performed without any hassle.
Drugs and Pharmaceuticals
Counterfeit medicine. Every year, the pharmaceutical industry losses hundreds of billions of dollars due to the problem of fake medicines, while putting millions of intended consumers at risk. Pharmaceutical industries can use the unique serial numbers of medicines to track the medications throughout the supply chain.
The network ledgers record production updates by serial numbers and serve as tamper-proof sources of truth that eliminate criminals' opportunity to enter the chain. Data visibility on the blockchain networks also ensures that the pharmaceutical industries detect the weak points that present opportunities for counterfeit medicines to find their way into the supply chain.
Medication recalls. This usually happens when medications are inefficient, contaminated, suffer from manufacturing defects, or are mislabeled. Drug supply chains operate under high stakes from strict FDA regulations, expensive drug development costs, and the risk of patient endangerment. Medication-recalls must immediately be done to avoid patient endangerment and loss of lives. With blockchain, the pharmaceutical industries can identify unsafe medications and discover the contamination points during the manufacturing processes.
From the above cases, we can clearly see that most consumer goods are prone to fraud and counterfeiting. In fact, reports from PwC indicate that more than two percent of the global economic output comes from counterfeiting revenues. The development of hybrid, private, and public blockchains brings traceability, accountability, and transparency into the shipment of commodities.
There is still room to improve the supply chain in terms of product delivery speed, end-to-end traceability, financing, and coordination. The time is already here for supply chain managers on the sidelines to look at the potential of blockchain technology for their companies. They should start taking a closer look at the players in their industry who have already begun experimenting with blockchain as the technology gains momentum.
Blockchain greatly benefits from the network effect, and once multiple parties gather in the supply chain, it becomes easier for others to get on board and enjoy the benefits. So, blockchain is a key innovative technology revolutionizing the management of the digital supply chain. It will transform the supply chain, ecosystems, and industries. Many other companies can also look for opportunities of how to exploit blockchain technology in streamlining their operations. The massive transformation of the supply chain won't happen in a day; however, the already established supply chains can begin utilizing this technology in specific areas of their business operations.
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