The future of supply chain on the blockchain
Welcome to the future. Welcome to the Exodus future of supply chain on the blockchain.
For most people, the supply chain industry is something that hums in the background like clockwork. We may purchase a laptop, mobile phone or a car, but rarely think about how it has been manufactured and assembled using raw material and parts sourced from all over the world.
The supply chain is a huge global industry however, and blockchain technology can help the big players save a lot of money.
The importance of the global supply chain and blockchain
Take the iPhone. Assembling this one device is a global, collective effort; with accelerators and gyroscope made in Taiwan, power management components made in Italy, Bluetooth and WiFi components made in Japan, and many many other parts from the USA, Germany and South Korea. All these various components are then brought together and assembled in Shenzhen, China, before being shipped out again to various parts of the world.
This is the case for most global products from automobiles to processed foods.
Then, Covid-19 happened. The pandemic was a massive global shake up that brought the supply chain industry into the spotlight. Suddenly, as borders were closed and factories shut down, manufacturers all over the world were caught empty without the raw material and essential parts they needed to assemble their products. Throughout various points in the pandemic, there were shortages of microprocessors to manufacture laptops and even the precursor chemicals needed to make common medical drugs. Food and other basic commodities such as toilet paper became scarce as global supply chains ground to a halt.
To understand the importance of the global supply chain, imagine consumers unable to get over-the-counter prescription drugs because of restrictions in India, which supplies a quarter of the world’s generic drugs. Imagine cars staying on the assembly line because they are missing the critical parts required to be rolled out. All these were actual circumstances that occurred because of the pandemic.
Supply chains were previously focused on performance standards such as low cost, speed and efficiency, but the pandemic has shifted the sentiment towards values such as resilience, transparency and trust. To tackle this pandemic and any other future global challenges, businesses and governments around the world are realising that resilience in supply chains is critical to survival and sustainability.
Covid-19 has created the perfect storm to usher in the need for deep structural change in the supply chain industry. And that change is coming in the form of…blockchain technology.
How the blockchain will revolutionize the global supply chain
The supply chain industry faces some fundamental challenges that need to be solved. Firstly, the industry needs the ability to accurately track and trace any product on a supply chain at any point of its lifecycle – from coffee beans being harvested in Brazil, roasted in Seattle to being sold in Singapore. Secondly, they require full visibility of all trading partners and the data that comes with it, such as certifications, licenses and approvals. Thirdly, and ideally, all this should be enabled by a single, interconnecting platform that is trustworthy, fail-proof and accessible to all.
Blockchain technology brings to the table its features of:
Being open-sourced and public, blockchain technology allows every partner along the supply chain to have full access and visibility to all transactions on the chain – from the supplier to the warehouse and to the end-consumer. Better yet, everything is located on a single source of truth, providing standards and consistency across a global network that would otherwise be siloed by different systems.
Data and transactions which are recorded on the chain may not be tampered or altered in any way. This prevents forgery and deters theft of data, as certificates of authenticity and licenses are kept on the chain and may be verified or held accountable at any time.
By default, a public, decentralized ledger is highly resistant towards attacks as it is protected by multiple nodes securing the network instead of just one single point of failure. This feature would prevent another Maersk incident, where the entire IT operations of the global shipping conglomerate was held hostage by the NotPetya ransomware in 2017.
Not only are brands able to build further trust with their consumers, a blockchain enables suppliers to collaborate seamlessly through trustless blockchain infrastructure. Any bad actor can be easily identified and traced for accountability.
In terms of food supply and safety, blockchain-based supply chain solutions such as TE-FOOD have tremendous potential.
Why consumers want blockchain supply chain solutions
Customers are becoming more aware and discerning in terms of wanting to know exactly where their products come from, and whether they have been produced according to ethical or sustainable standards. Concerns about product quality, origin, worker rights, animal welfare and carbon footprint are the new demands of the modern consumer, and a blockchain-based solution such as Origin Trail should be able to meet these demands.
With a blockchain-based food supply chain system for example, consumers can simply scan a product code to view its entire transaction history on the blockchain. This will verify its origin, authenticity, and provide digital reassurance of the safety and quality of the product.
This feature is able to add tremendous value to pharmaceutical products, as patients rely on the legitimacy and safety of medical products to get better and lead better lives.
Blockchain technology can also be used to prevent fraud or forgery by authenticating every item on the chain. VeChain, the largest supply chain project in the space, is pursuing this in the designer and luxury goods market, where forgery and theft are rife.
Blockchain technology also has the potential to streamline, simplify and speed up product recall if there’s a fault or safety issue. Costly and inefficient product recalls will be a thing of the past. Tracking peanuts affected by a salmonella outbreak, or recalling faulty ignition switches in cars can be executed with pinpoint accuracy.
Which companies are using blockchain to shake up the supply chain?
Supply chain disruption is already happening behind the scenes, and other than VeChain, some other blockchain companies developing solutions in this space include Hedera Hashgraph, ShipChain, and Waltonchain. Depending on whether enterprises demand a public or private ledger which is decentralized or centralized, or, a hybrid of all the above, blockchain technology is being tested in different permutations for major global supply chain companies.
One example is MyStory, a blockchain-powered digital assurance solution powered by Vechain’s Toolchain and verified by German quality assurance provider, DNV GL. MyStory is currently being used in several pilot programs to trace and verify products such as Italian wines and designer clothes.
Imagine drinking a glass of fine vintage wine and being able to tap into its entire product history and journey from seed to bottle. From growth to harvest and production, storage and transportation, you could be assured of its absolute quality and origin.
The leap from existing supply chain databases and networks to blockchain-based solutions is likely to happen in stages, and the transformation will not happen overnight.
However, Covid-19 has accelerated the journey as stakeholders are re-evaluating future business values. Previous benchmarks such as speed and cost may very well become deprioritized in favor of values such as trust, resilience and transparency, especially as the world looks to rebuild itself and become future-proof against another global black swan event.
Welcome to the future of supply chain. The future is blockchain. The future is decentralized.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.