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How Blockchain Can Improve Supply-Chain Transparency

By Elena Malykhina

Supply-chain transparency is growing as a key differentiator among companies. In particular, those that offer their partners and customers more visibility into their operations may be establishing a new baseline for trust, and showing they’re committed to ethics and sustainability.1 On the business side, better visibility into all parts of the supply chain can help companies address problems more effectively.2

This is where proponents say blockchain can help. Compared with just a few years ago, companies have more blockchain-based services to choose from that provide supply-chain transparency and help them meet their goals. Proponents of the technology say blockchain can have a positive impact on everything from warehousing to product delivery to payments.3

 

How Blockchain Enables Supply-Chain Transparency

 

Blockchain is a distributed database containing records that cannot be changed or deleted. It can create a permanent and public information trail of transactions.4

 

From the food industry to the car sector, companies using blockchain can better trace their products throughout the supply chain. Parties don’t have to know or trust each other beforehand as they exchange information since a blockchain, as its name suggests, contains a “chain” of “blocks” that house key supply-chain information—including all the parties involved.5

 

By understanding how ingredients and finished goods are passed through each subcontractor, companies can reduce fraud for high-value products, such as diamonds and pharmaceutical drugs, according to Deloitte.6 Blockchain-enabled transparency can also help demonstrate that products are authentic. In addition, it can help protect a brand’s reputation in the event of unapproved subcontracting, where a manufacturer outsources a job to someone else without notifying the main brand.7

 

Deloitte cites improved visibility and compliance over outsourced contract manufacturing as another potential benefit of blockchain. Since all parties within a supply chain have access to the same information, communication or data transfer errors can be reduced. Better data means all parties can make decisions based on real-time information and current conditions; therefore, they can spend more time focusing on product delivery.8

 

Finally, blockchain can help reduce paperwork and administrative costs. A major aspect of supply-chain management today is that record keeping relies on myriad, often inefficient methods that include spreadsheets, emails, and paper documents.9 With blockchain’s distributed ledger technology, a digital record of every transaction is created. Data can be stored globally on thousands of servers, and everyone’s entries can be viewed in real time.10

 

Supply-Chain Transparency and Sustainability

 

Blockchain is not only an effective and inexpensive way to trace products, but it also builds trust among increasingly environmentally and socially conscious consumers.11 By 2021, Nielsen predicts that shoppers will spend up to $150 billion on sustainable fast-moving consumer goods.12

 

With blockchain as the backbone, some companies are moving toward “circular supply chains” that focus on sustainability.13 Early trials of the technology allow consumers to scan a unique digital identifier on a product registered to its maker—such as an independent farmer in Kenya—so they can see the origins of the supply chain.

 

Similarly, the dietary supplements industry, which depends on small global suppliers, is using blockchain-based solutions to identify product quality each time ownership is transferred.14 Supply-chain transparency is achieved through a system that addresses everything from traceability, to data management and regulatory compliance.

 

Dietary supplements manufacturers can use blockchain to help show consumers how a product’s ingredients moved through the supply chain from their original source. They can also share information beyond the package label that helps connect consumers to the product’s back story. Studies show that consumers are more loyal to brands that are authentic and have ethical values.15

 

Blockchain adoption is gaining momentum in the automotive industry, too. Mercedes-Benz, for example, developed a blockchain-based prototype that maps contracts and documents across the entire supply chain, and enables the parent company to vet third-party suppliers.16 If a supplier doesn’t adhere to contractual obligations, human rights, or safety standards, the blockchain can reveal its activity history.

 

That said, blockchain is an emerging technology and still in early trials in supply chains. Some questions remain unanswered about blockchain’s security, cost, and integration with existing systems. Deloitte recommends starting with a prototype on a test network with mock data before piloting blockchain in a live supply chain.17

 

The

Takeaway:

The transparency that blockchain enables can go far in building trust among companies, their partners, and their ultimate customers. As supply chains become more complex and consumers demand sustainable products, blockchain also offers the potential to increase traceability of products, reduce the risk of fraud, and connect consumers to the back stories of the goods they purchase.

Elena Malykhina - The Author

The Author

Elena Malykhina

Elena Malykhina is professional writer who has covered science, technology and business for more than 10 years. Her work has appeared in InformationWeek, Scientific American, Newsday, The Wall Street Journal and Adweek, as well as through the Associated Press.

Sources

1. Supply Chain Visibility and Transparency: How Everybody Wins,” TDWI; https://www.technative.io/blockchain-an-enabler-for-supply-chain-transparency-and-business-growth
2. Ibid.
3. “How Blockchain Will Transform The Supply Chain And Logistics Industry,” Forbes; https://www.forbes.com/sites/bernardmarr/2018/03/23/how-blockchain-will-transform-the-supply-chain-and-logistics-industry/#7af580a65fec
4. “Blockchain, Explained,” Investopedia; https://www.investopedia.com/terms/b/blockchain.asp
5. Using Blockchain to Drive Supply Chain Innovation, Deloitte; https://www2.deloitte.com/content/dam/Deloitte/us/Documents/process-and-operations/us-blockchain-to-drive-supply-chain-innovation.pdf
6. Ibid.
7. Ibid.
8. “Supply Chain Visibility and Transparency: How Everybody Wins,” TDWI; https://www.technative.io/blockchain-an-enabler-for-supply-chain-transparency-and-business-growth
9. “Blockchain will be the killer app for supply chain management in 2018,” Computerworld; https://www.computerworld.com/article/3249252/blockchain-will-be-the-killer-app-for-supply-chain-management-in-2018.html
10. “What is blockchain? The complete guide,” Computerworld; https://www.computerworld.com/article/3191077/what-is-blockchain-the-complete-guide.html
11. Using Blockchain to Drive Supply Chain Innovation, Deloitte; https://www2.deloitte.com/content/dam/Deloitte/us/Documents/process-and-operations/us-blockchain-to-drive-supply-chain-innovation.pdf
12. “Was 2018 the Year of the Influential Sustainable Consumer?” Nielsen; https://www.nielsen.com/us/en/insights/news/2018/was-2018-the-year-of-the-influential-sustainable-consumer.html
13. “Circular Supply Chain: A Model Using Blockchain and Other Technologies to Reward Producers at the Beginning of the Supply Chain,” Accenture; https://www.accenture.com/us-en/blogs/blogs-circular-supply-chain
14. “Core Functionality,” TagOne; https://www.tagone.com/key-functionality
15. From Me to We: The Rise of the Purpose-Led Brand, Accenture; https://www.accenture.com/t00010101T000000Z__w__/gb-en/_acnmedia/Thought-Leadership-Assets/PDF/Accenture-CompetitiveAgility-GCPR-POV.pdf#zoom=50
16. “Mercedes-Benz Launches Blockchain Solution for Supply Chain Transparency,” Business Blockchain HQ; https://businessblockchainhq.com/business-blockchain-news/mercedes-blockchain-pilot-for-supply-chain-transparency
17. Using Blockchain to Drive Supply Chain Innovation, Deloitte; https://www2.deloitte.com/content/dam/Deloitte/us/Documents/process-and-operations/us-blockchain-to-drive-supply-chain-innovation.pdf

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