How Blockchain Technology Will Revolutionize the Supply Chain Industry
Digging deeper into the practical uses of Blockchain
When most people hear the term “Blockchain” they think of Bitcoin and about how badly the cryptocurrency market has performed throughout 2018. Nevertheless, what people are starting to gradually learn is that Blockchain powered applications can go far beyond just decentralized financial platforms like Bitcoin’s. Most have heard the phrase “Blockchain is the greatest invention since the Internet” or “Everything will be Blockchain in a few years”. These phrases tend to leave people more confused then they were previously.. In what forms can Blockchain possibly change the way businesses operate and how our economy runs? In this article I’ll take a step back from Bitcoin and dive into the world of Supply Chain Management, an industry which I believe will be tremendously improved and revolutionized through Blockchain Powered Solutions.
Blockchain in a Nutshell
Blockchain can be understood as a decentralized, distributed database which very securely holds digital records. Furthermore, although all records are transparent and accessible to the public, they are not able to be altered, deleted, or edited. All data inserted into the Blockchain remains imprinted permanently. Each transaction or record inserted in the Blockchain registers a different “Block” on the chain.
Basically, Blockchain provides a method of record-keeping which is highly secure and more efficient for businesses/individuals to work with.
Supply Chain Management (SCM)
Nowadays we have the luxury of having ready made, high-quality products right on our doorstep. It’s easy to go to a store, buy a shirt, and not think of where that shirt came from or how it was manufactured. For that shirt or product to make it to store shelves it must go through plenty of hands stemming all the way from the provider of the raw materials, to the retailer who is giving you the ready made product. The process which links all the parties involved in delivering you the ready made product is called the Supply Chain.
Logistics is a huge aspect within Supply Chain Management, as products are shipped, stored in warehouses, go through customs etc.. The entire process is time consuming, costly, and many times complicated. In addition, since global trade involves dealing with foreign organizations, importers and exporters may have to deal with political outcomes, international law, and high tariffs.
Let’s take the shirt example we used before, and lets look deeper into what its supply chain may look like. Firstly, the shirt requires its unique raw materials materials for it to be manufactured. Therefore, factories must source their materials from different suppliers which can all be in different continents. Once the the materials are assembled the factory will manufacture the shirt and ship it overseas to its buyer who can be a distributor, retailer or wholesaler. The buyer may sell it to another seller, or provide it directly to the consumer. The garment industry is massive and it has millions of players from across the globe.
In short, a shirt’s supply chain will usually consist of:
- Suppliers of Raw Materials
- Manufacturers who assemble the raw materials and create the product
- Shipping companies
- Distributors
- Retailers
- Consumer
Next time you go to a store and view a product, try to visualize all it had to go through before it made it to the shelf!
Issues with SCM
In the previous paragraphs we briefly went through a typical supply chain. However, in many cases a product’s supply chain can consist of hundreds of different players and contributors, from literally all continents of the world. Due to this, it can sometimes be difficult to keep track of all events and investigate occurrences.
Furthermore, due to the lack of transparency in the supply chain, consumers and buyers of products can never be so sure of the origins of their products, thereby possibly being blinded from the true value of the products they are buying. Products we buy on a daily basis may be priced inaccurately, meaning the actual cost of production isn’t properly reflected. It is also very difficult to track, control, and investigate all illicit events which can take place throughout the supply chain. Dishonest intermediaries, and suppliers from third-world countries often can employ forced labor and provide inhumane conditions for their workers. In addition, within the supply chain there may be generated revenues being used for illicit activities and in some cases terrorism.
There is a severe lack of transparency in the supply chain of our products. It’s extremely tough to be able to track a product and its materials from start to finish. Let alone verifying that all activities are honest, legal, and properly handled by the dozens or possibly even hundreds of parties involved.
Consider buying an apple from your local grocery. That apple usually comes with a brand sticker. Nevertheless, that brand may not even be aware where that apple grew or who was the original supplier. Therefore, when something goes wrong with the apple, that brand may not know where to turn to.
The United State’s Center for Disease Control and Prevention (CDC) estimates that on a single year there are 128,000 hospitalizations, 3000 deaths, and over 48M Americans falling ill due to food contamination. Frequently we hear cases of mass amounts of food being contaminated with salmonella and listeria. It can take long periods of time until finally tracing where the contamination is coming from due to the lack of communication and transparency along long supply chains.
Blockchain Stepping In
Imagine a platform which simultaneously provides farmers, raw material suppliers, manufacturers, freight companies, distributors, retailers and consumers, accurate information regarding the status quo of the product/s being dealt with. In addition this platform would be secure, immutable, and fully transparent for all to see. Thereby reducing the likelihoods of counterfeit, fraud, and malpractice. This is where Blockchain comes in. In fact, Blockchain technology has the capability of providing a platform like the aforementioned.
Through the implementation of Blockchain technology in the Supply Chain Industry, products can be tracked and traced throughout their entire process. All parties involved from beginning to end in the supply chain will be aware as the product is transacted and handled from party to party at all times.
Each time the product takes a step forward in the supply chain, a permanent record will be documented on the Blockchain. In turn, a timeline will be created where participants will know exactly where the product is holding and how much longer it has until it reaches the last seller. This would improve communication within all parties, thereby reducing confusion, unnecessary costs, delays, and errors.
How exactly can products be so accurately tracked as they go from hand to hand? Consider RFIDs and IoT.
RFID stands for Radio-Frequency IDentification. The acronym refers to small electronic devices that consist of a small chip and an antenna. The chip typically is capable of carrying 2,000 bytes of data or less. Source.
The best, simplest, and best use case I can think of for RFIDs is at toll posts. You either pay cash, or go through the entrance where a bar code is scanned when you drive through. In the Supply Chain Management industry one can link the physical products to unique bar codes, and tags like RFIDs. Therefore, once a product changes hands all codes would be scanned and the data will be transferred to the blockchain which would create an accurate and transparent digital record for everyone to see. This sort of technology would also provide proper recording and tracking. The amount of products and containers being used and transacted will all be recorded, and in addition, all documents including receipts, agreements, and legal paperwork will all be digitally recorded on the blockchain. This would trigger more transparency and honesty throughout the entire supply chain process. It would also increase the level of communication as all information will be shared across the board.
Furthermore, Internet of Things (IoT) technology can also play a role in Blockchain’s adoption into Supply Chain. Organizations can assign unique IoT tags with ID numbers to each product. As a product goes from hand to hand, these special IoT tags can track a product’s exact location, its temperature at all times, date of expiration, and provide more valuable information! As companies transact products, they scan the IoT tags to notify the rest of the supply chain. All data stemming from the IoT tags is directly inserted onto the Blockchain where all members of the supply chain can see. Solutions like the aforementioned undoubtedly make members of the supply chain become more responsible with handling products properly. If X company doesn’t keep the food products in their proper temperature, the rest of the supply chain will be notified and they will be at fault.
Blockchain SCM Use Cases
Several concepts may still sound somewhat vague. Therefore, lets jump into some real world, use cases where Blockchain technology has been implemented into the Supply Chain Management industry.
Penta Global Launches Blockchain Rice
Penta Global Foundation is company founded by David Ritter (CEO) which aims to build interoperability bridges between Blockchain platforms and networks. In addition, Penta has already been successful in adopting Blockchain powered solutions into the real world. For relevance purposes, I will be only be discussing two of their many innovative projects in this article. Nevertheless I encourage you to take a deeper look into Penta and further research all the amazing projects they have been undertaking, as they have some of the most innovative and interesting projects across the Blockchain Industry.
Penta launched Blockchain Rice introducing “A rice traceability and food supply chain project that allows consumers to ensure food safety using blockchain technology.”
How does it work? When consumers go to the store and buy a bag of rice which uses Penta’s “Blockchain Rice” solution, they are given the opportunity to scan a special QR code which will transparently provide valuable data relating to the supply chain of that bag of rice! The data shows details regarding the bag’s journey all the way from the farm to the store shelf. This gives consumers added security considering where their bag of rice has come from. The project connects with over 30K rice suppliers, all located in China.
Picture a world in which all food products are traced like they are in Blockchain Rice. We’d be able to collect huge amounts of data which can trigger tremendous growth in the food industry and increase its efficiency. Given all the information the Blockchain can provide, we can more accurately match global supply with global demand in order to decrease food waste stemming from excessive production. More importantly, we can more accurately track where all of our food comes from, ensuring quality.
Bext360
Other highly innovative companies like Bext360 have been getting highly involved in their mission to revolutionize the Supply Chain Industry. Bext360 provides a system in which they collect data through a Blockchain at every step of the Supply Chain in order to record measurements, increase efficiency , and security across the entire process. On top of that, using what they called the “Bextmachine” they are able to use IoT, Artificial Intelligence, and machine vision in order to analyze and accurately track produce all throughout. Bext360 is generally known for the projects they have done in the coffee industry. More importantly, their supply chain protocols have already been put to use to trace coffee in partnerships with Coda Coffee and Great Lakes Coffee.
“Bext360’s vision is to impact lives and disrupt global supply chains by utilizing blockchain technology, artificial intelligence and machine vision to access traceability, transparency and sustainability like never before.”
In November 2017 Bext360 launched their pilot program in Uganda, working on a project with Great Lakes Coffee. Bextmachines were sent to Uganda to evaluate the quality of coffee cherries through their machine vision, IoT, and AI, having farmers who brought fresher and bigger cherries better compensated. Bext360 along with their Bextmachines work directly with Stellar’s Blockchain making all data immutable.
IBM
It hasn't only been young startups embracing Blockchain’s benefits for the Supply Chain Industry. Giants like Walmart have began working with IBM this year and joined their “Food Trust Blockchain”. Other big players in the food industry like Nestle, Dole, and Golden State Foods, have also joined IBM’s project. Similar to the two aforementioned blockchain projects, Food Trust uses a special blockchain based platform to track food products through their supply chains. IBM claims that they have a one of a kind system where growers, processors, distributors, and retailers can all share data pertaining to food products in a clear transparent way which creates accountability among members of the supply chain.
The WSJ had reported back in June that Food Trust’s main goal is to aid companies in identifying issues in a faster, more efficient fashion. Thereby reducing probabilities of spreading diseases and end-consumer risk.
In the words of Frank Yiannas (VP of Food Safety at Walmart), IBM’s Food Trust Blockchain can be looked at as the “Equivalent of FedEx for Tracking food”
Conclusion/End Remarks
The Supply Chain Industry is massive, and it has plenty of flaws. Even though all its issues may not be resolved with Blockchain, many of the significant ones could. Furthermore, I hope this analysis gave you a broader perspective to what Blockchain technologies can offer even beyond the Supply Chain Industry and what benefits can be derived from it on a real world, practical level.
As the Co-Founder of LATAM Blockchain Solutions, my mission is to contribute and help implement Blockchain Powered Solutions in Latin America in order to improve supply chain management, quality assurance, banking the unbanked, voting, transparency, and overall economic growth in the region. In addition, through our Blockchain Education branch called Academia21, we aim to further educate Latin Americans ranging from all levels on the potentials of Blockchain, down from the fundamentals all the way to coding in Solidity.
Jaime Gutt.
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