Blockchain overhauling the Supply Chain industry

Do you know whether the shirt you are wearing, the imported wine you are drinking, or the food you are buying from the mart is fair, safe, and not counterfeited? No matter how hard you try, the answer is you don’t know. You trust.

You trust because there is no legitimate way that will answer these questions. So, you trust and opt-in for using the product. If you don’t like the quality, you have the option of either opting-out, or compromising and using it. But what if there was a way that allowed you to eliminate both these options and instead enjoying the things you want? And all that with guaranteed safety and fairness.

Surprising, isn’t it?

Of course. It’s indeed surprising to know that all of this is possibly by simply embracing the Blockchain technology.For the uninitiated, the Blockchain technology was introduced to the world by the breakthrough cryptocurrency Bitcoin. In simple terms, a blockchain is just an open and a shared ledger that is impossible to tamper with. While it started with Bitcoins, the applications of Blockchain are way beyond just that.

Especially in areas like Supply Chain Management, the Blockchain technology is proving to be a boon.

Before we get to the technicalities of how Blockchain enhances Supply Chain Management, let’s discuss what Supply Chain Management actually is.

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In commerce, supply chain management (SCM) is managing the flow of goods and services. It involves moving and storing raw materials, work-in-process inventories, and finished goods from point of origin to point of consumption.

And within SCM, a supply chain can be understood as a connected network of individual resources, organisations, and technologies that come in play during the manufacturing and sale of the product or service. A supply chain starts with the point where raw materials origin and end at the delivery of the product of service to the consumer.

A properly implemented Supply Chain Management is easily capable of:

• Increasing Revenues
• Decreasing Costs
• Improving Quality
• Increasing Sales
• Accelerating Production, Distribution, and Sales

Let’s see what’s in store to help improve the efficiency of Supply Chain Management!

Supply Chain With Blockchain

Supply chain management on blockchain is the solution to all the legacy challenges of SCM. Let’s begin with an example.

Suppose you are looking for an extremely costly, rare, and necessary medicine for cancer treatment from a pharmacist. While checking out the details of the product, you stumble upon a line that reads: “Store the medicine in dry and cold place below 20-degree Celsius, failing which it is not fit to use”.

The pharmacist has set up the store, so he has obviously taken the necessary precautions. But, how can you be sure that the transportation of the product was also under optimal condition? That the distributor has taken the complete care of the situation?

The answer is you don’t know. Like we said earlier, you just trust the process, and hence you compromise and buy it. What if the medicine lost its effects due to mishandling?

This is precisely where Blockchain can lend a mand. Let’s say you have IoT chips (microchip sensors) in the package of the medicine. These sensors record everything about it — starting from the departure to the manufacturing unit — until you lay your hands on it. This data is regularly updated and shared over a completely secure blockchain ledger.

This way, you can easily just scan the medicine to know the entire whereabouts of it — right from manufacturing to delivery. With the merger of IoT with Blockchain, one can easily verify the product and you no longer have to blindly trust the process. There’s no denying that such a solution will greatly increase the sales and provide mandy data for the manufacturer, on which if they act upon, they’ll be able to enhance their operations and the process on transportation.

One more real-life example of Blockchain improving the Supply Chain is Everledger. Everledger has created a diamond provenance protocol using blockchain that can be incorporated into the industry as a benchmark. So, if you see a merchant selling diamonds with this tag, you can simply use your phone to scan the diamonds — this will help you know the entire history of the diamond from its inception to the time it reached your hands.

If blockchain technology allows us to more securely and transparently track any type of transaction, imagine the possibilities it presents across the supply chain.

Every time a product changes hands, this could be documented as one transaction, thereby creating a permanent history of a product — its complete life cycle. This could dramatically reduce time delays, added costs, and human error that plague transactions today.

Although we’ve majorly talked about the transparency aspect of the Blockchain-based SCM so far, there’s a lot more, in reality, that Blockchain brings to the table.

Talking briefly, some of the process-problems that can be easily improved by using a Blockchain-based model include:

• Traceability
• Contract Enforcement & Management
• Damage & Mishandling Management
• Oversight On Counterfeiting
• Supply Chain Auditing

Many supply chains are already using the Blockchain technology and are reaping the benefits of the scene. According to many experts, Blockchain holds the potential of becoming a universal “Supply Chain Management Operating System”.

Blockchain is helping Supply Chain Management by simplifying and solidifying tasks like:

• Recording the quantity and transferring the assets that include pallets, trailers, containers, and more,. As they are transported between various nodes of the supply chain.
• Tracking of purchase orders, changing orders, keeping receipts, shipment notifications, and other trade-related important documents.
• Assigning or verifying certifications or certain properties of physical products; for example determining if a food product is fair trade and organic or not
• Linking physical items with serial numbers, bar codes, digital tags like RFID, and more identification badges.
• Sharing information about the complete manufacturing process, assembly, delivery, and even maintenance of the products with suppliers and vendors and even customers if needed.

Applications of Blockchain in Supply Chain

Let’s see some applications of the Blockchain technology that are actively being applied in the Supply Chain Management today:

Automotive Supplier Payments

One of the most striking benefits of Blockchain is that it allows the transfer of funds between anywhere in the world without the need for traditional banking transactions — as blockchain enables direct transaction between payer and payee. It is also secure and rapid; takes minutes, compared to days for automated clearing house payments, for example.Bitcoin transfers specifically also incur comparatively lower fees. Tomcar, an Australian vehicle manufacturer, uses Bitcoin to make payments to their supplier. Currently, three partners in Israel and Taiwan accept payment from Tomcar using Bitcoin.The supplier agreements of Tomcar use standard terms. The main advantage here is with cost savings.On the other hand, the firm also avoids too much reliance on Bitcoin. While Bitcoin is international by nature, some national governments see it as a way for companies to invest. Companies may therefore be subject to taxation on Bitcoin holdings.

Meat Traceability

Companies can use these distributed ledger-based Blockchain systems to record product status at each and every stage of the production. These records are permanent, immutable, and secure.These records will make it possible to trace each and every project back to its source. Walmart, the Global retailer, uses the Blockchain technology to track the sales of pork in China. Its system lets Walmart see where each piece of meat is coming from, how is it being processed and stored, and in whose hands its landing. In the event of a product recall, the company can also see which batches are affected and who bought them.

Electric Power Micro-grids

Entities of any size can use Blockchain, and this example shows precisely that. In other words, Blockchain is just not for the big players. Smart contracts, an application of the Blockchain technology, can be used to redistribute excess power from solar panels.The Transitive Grid is one application that runs on Blockchain. It monitors and redistributes energy in a neighbouring micro-grid. This program automates the buying and selling of green energy, thereby helping save both costs as well as pollution. The process uses the Ethereum blockchain platform, designed specifically for building and executing smart contracts.

RFID-driven Contracts Bids and Execution

RFID (short for Radio Frequency Identification) tags are finding extensive use in Supply Chain when it comes to store the information about products. IT systems can read these tags automatically and then process them in real-time. Thus, why not use them for smart contracts in logistics?The possible setup could be something like this — RFID tags for cartons or pallets store information on the delivery location and delivery date. The logistics partners then run applications that looks for these tags and bids for a delivery contract. The partner that is offering the optimal price and service finally gets the business. A smart contract then tracks status and final delivery performance.

Cold Chain Monitoring

Medical and food products often have specialised storage needs. Further, enterprises see the value in sharing warehouses and centres of distribution instead of investing in their own. Using Blockchain-based sensors on sensitive products can help record humidity, temperature, vibration, and other critical environmental conditions.These readings and information can then be stored on a distributed blockchain. Since they are permanent and tamper-proof, this will ensure that if the storage condition deviates even slightly from what was agreed, each member of that Blockchain sees it. A smart contract can then trigger a response to correct the situation. For example, based on the size of the deviation, the action may be to adjust the storage. However, it could also be an extensive action such as changing “use-by” dates, declaring products unfit, or applying penalties.

Benefits in a Nutshell

Having talked so much so far, there are some clear cut benefits that Blockchain offers the Supply Chain Management domain. Some such advantages include:

• Improved transparency: Transparency is one of the first things Blockchain brings with it, and it can’t be overstated. In supply chain management, carefully documenting a product or service’s journey helps reveal its true origin and touch points. This information increases trust and helps eliminate the bias that otherwise surrounds the opaque supply chains. This also helps manufacturers also reduce recalls by sharing logs with OEMs and regulators.
• Greater Scalability: Blockchain allows virtually any number of participants accessing from any number of touch points. This is something that was not possible pre-Blockchain. This ensures a lot more scalability than ever.
• Enhanced Security: As we said earlier, a Blockchain is a shared, secure ledger that works on codified rules. Such strictness eliminates the audits required by internal systems and processes thereby enhancing security like never before.
• Increased Innovation: When a new technology is introduced in a domain, its uses only increase with time. Such opportunities abound to create new, specialised uses for the technology owing to its decentralised architecture.

The Blockchain technology will definitely not eliminate all the ills concerned with Supply Chain Management, but it will definitely solve majority of the legacy challenges — like it’s doing for a number of other industries. Also, if the innovators are able to combine blockchain with AI, smart contracts, and IOT-like technologies efficiently, all the ills of the supply chain management can be cured for the most part.

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We, at Minddeft, bring constant technological innovation to your business by leveraging the potential of Blockchain technology.Our expertise lies in Ethereum, Hyperledger, Quorum, Python, React and most popular platforms related Blockchain.

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Originally published at minddeft.com.