Supply Chain X Blockchain

Holding parties accountable through a transparent supply chain

Globalization is crazy and it isn’t stopping anytime soon!

It’s made goods from across oceans accessible to us. If you look around the room, try counting all the things that came from another country! Zero in on one good.

How many hands to do you think touched it before it reached yours?

Something as simple as a cup of coffee will pass through 7 intermediaries.

Unfortunately, we don’t have drones flying products directly from the factory → you …yet

Often there’s dozens of channels an international product goes through before reaching you.

This wasn’t that big of a problem in the past with everything local that, but when we go global things get complex.

As a company, you have to deal with distributors, procurement officers, quality inspectors, the list goes on. Sooo many logistics need to be sorted out: documents need to be signed, payments and invoices need to be managed, the products must arrive on time, on top of dealing with cross border technicalities.

How do you coordinate all the operations efficiently and cohesively, when every lost minute is a lost $.

As a consumer how do you ensure the authenticity of your purchase and the processes involved in getting it to you were ethical? How do I know a diamond advertised as an artisan isn’t a blood diamond?

Right now companies mainly on trust, that all parties will follow through on their obligations. The problem is most have separate databases.

This can be hectic down the line when there’s conflicting records of responsibility. Like a shipment not arriving on time or going missing, this could mess up the entire chain and be extremely costly

Overall the current systems lack transparency, immutability, consensus and accountability.

Theses are all problems a blockchain could solve.

Think of blockchains like a ledger that stores information in these time-based blocks. What makes this ledger special is that is:

• Immutable, meaning the data can’t be modified once it’s on the chain.
• Distributed, every computer on the network has a copy of this ledger.
• on a decentralized network, rather than a central network. There has to be multiple points of failure for this network to be hacked.
• Transparent, all the blocks are visible by everyone on the network*

Smart contracts are code that runs on the blockchain

Smart contracts are just like real-world contracts, if certain predetermined conditions are met then the contract executes other conditions like transferring an asset for example.

The code once deployed can’t be changed because it’s on an immutable blockchain. Smart contracts can host transactions without the need for middlemen.

The most popular platform for deploying these smart contracts is Etherum.

Originally blockchains were created to move cryptocurrency, but now they can be used to facilitate any movement of assets from multiple parties.

These smart contracts can hold funds like an escrow and automatically release them once certain conditions are met.

Blockchains can be used for exchanges, contracts, tracking and payments, all processes of the supply chain.

Heres what a blockchain-based supply chain could look like: say I was an ice cream retailer before my ice cream arrives at my store I need to contact 3 parties: the farmers, manufacturers of the ice cream, and the shippers.

I could have a contract for how much milk the farmer produces, a contract outlining the quality specifications for the manufacture, a contract for how cold I want the shippers truck to be and what time I need them to arrive. As the product moves through each party, they sign off that they’ve met the agreed-upon conditions.

Some parts can be automated; for example, the truck could have IoT sensors inside to monitor the temperature that data would be plugged into the smart contract.

They increase transparency and build trust behind the processes. There is the only ledger and everyone has a copy of it, there’s little room for disputes over transactions because they’re all visible, and can not be modified holding people accountable.

There’s a couple of ways to integrate blockchain. They can be used to store digital ownership certificates, asset tracking, or to integrate financial transactions.

Heres some industries whos supply chances could seriously benefit from a blockchain solution.

The Blood diamond trade

The diamond and mining industry is known to cause exploitation in developing countries, where labour is cheap and often unregulated.

As a consumer, many are reluctant to purchase goods when they’re origins are ethically questionable.

De Beers tracks its stones from mining all the way until it reaches the customer. This way costumers have peace of mind that their not purchasing conflict or blood diamonds and the company gains more reputability.

Cobalt Mining

Companies using cobalt for their batteries are using are mined ethically and compliant with environmental regulations. Most cobalt is mined in the Democratic Republic of Congo which has had many cases of exploitation, dangerous practices and child labour in mining

The worldes biggest mining firm, BHP Billiton plans on using the technology to record data through the mining process.

Tracking Shipments

In combination with GPS trackers, we can maintain a constant record of the whereabouts of a product in real-time. We can trace back who had the product and for how long.

Province tracking can help with tracking all the records involved in international shipping.

Walmart used blockchain to track imported pork from China in a pilot project, recording the farm of the meat, where it was processed and stored and expiry date.

Verifying designer goods

Luxury goods are a big market for counterfeit in the trillion-dollar industry, shoes being one of the biggest targets, accounting for 22% of seized counterfeit goods in the US.

Recently Nike received a patent where users could register their shoes with a unique id number connected to a crypto wallet that stores the digital version of the shoe. This way buyers and sellers can facilitate exchanges with digital proof of ownership.

Incorporating cryptographic serial numbers to a digital copy of the product, every time it changes hands it’s recorded on the chain, we can see who had custody of the product before a counterfeit was switched in.

Pharmaceuticals

In Asia and Africa counterfeit drugs account for 20–30% of all pharmaceuticals and are linked to deaths of thousands. The MediLedger Project in the US is tracking security around pharmaceuticals.

Seafood

Seafood gets a bad wrap for its supply chain, lots of manual recording, below par storage conditions, and mislabeling. An American study found 20% of their fish mislabeled.

With 12% of the world deriving their income from seafood and aquaculture, and double the seafood consumption over the last 50 years.

50% of seafood is discarded during the supply chain and 700KG of meat is stolen every second. The industry’s supply chain needs fixing asap.

Fishcoin is a seafood traceability platform using crypto tokens to incentivize parties in the process to follow through with their conditions.

Manufacturing

SyncFab is a platform for ordering hardware and parts, it gets quotas from manufacturing companies to access manufacturing capacity, keeps all purchase documents in one spot and tracks the shipments.

Blockchain X IoT

Blockchain alone may not be sufficient but when paired with IoT and other tech, like adding RFID tags and sensors it’s superpowered.

Once the data is on-chain it’s secure, but how do we ensure the data getting put onto the chain isn’t corrupted in the first place? This is the Oracle problem but can be combatted with secure IoT sensors.

Key takeaways

• Supply chains are hectic they require mass coordination while lacking transparency, immutability, consensus and accountability.
• Blockchains are immutable, distributed and transparent
• Smart contracts are automatic code that runs on the blockchain, they can facilitate transactions and help eliminate middlemen. We can use them to:
• Track goods to their origins and see where they’re located
• Hold all parties accountable at every step of the supply chain and audit it to find areas for optimization.
• Create digital certificates of the goods to identify illegitimate goods.
• We must consider the oracle problem: how do we make sure the data getting fed onto the chain is correct?

Hope you learned something new! Feel free to reach out on LinkedIn or subscribe to my monthly newsletter!