Using blockchain to drive supply chain transparency

March 20, 2018

Future trends in supply chain
New technologies are presenting promising opportunities for improvement across the supply chain. Using blockchain in the supply chain has the potential to improve supply chain transparency and traceability as well as reduce administrative costs.

Monitor advancements
A blockchain supply chain can help participants record price, date, location, quality, certification, and other relevant information to more effectively manage the supply chain. The availability of this information within blockchain can increase traceability of material supply chain, lower losses from counterfeit and gray market, improve visibility and compliance over outsourced contract manufacturing, and potentially enhance an organization's position as a leader in responsible manufacturing.

Recent developments and outlook
Bitcoin, the earliest blockchain implementation, triggered widespread experimentation of blockchain particularly in financial services. In 2015, Nasdaq and OMX Group Inc. worked with a blockchain startup, Chain, to pilot and test blockchain technology for trading of shares in Nasdaq Private Market.1 Visa Europe, the Commonwealth Bank of Australia, RBS, and many of the UK's high street banks have all announced that they are working on their own proof-of-concepts using blockchain.2,3,4

As blockchain gains publicity, large corporations and startups are exploring uses of the technology outside of the financial services industry. Many organizations are already experimenting with blockchain innovations to fulfill a range of needs. Provenance, a supply chain transparency start-up, recently completed a six-month pilot for tracking responsible sourcing of tuna in Indonesia via blockchain.5 Monegraph, a startup launched in 2014, uses blockchain to secure the usage and sharing rights of digital media such as video clips or brand-sponsored content and enable sharing of revenue across the media creators, publishers, and distributors. Skuchain builds blockchain-based B2B trade and supply chain finance products targeted towards the $18 trillion global trade finance market that involves numerous entities including buyers, sellers, logistics providers, banks, customs, and third parties.6

Blockchain driven innovations in the supply chain will have the potential to deliver tremendous business value by increasing supply chain transparency, reducing risk, and improving efficiency and overall supply chain management.

Blockchain can provide increased supply chain transparency, as well as reduced cost and risk across the supply chain. Specifically, blockchain supply chain innovations can deliver the following key benefits:

Primary potential benefits
Increase traceability of material supply chain to ensure corporate standards are met
Lower losses from counterfeit/gray market trading
Improve visibility and compliance over outsourced contract manufacturing
Reduce paperwork and administrative costs
Secondary potential benefits

Strengthen corporate reputation through providing transparency of materials used in products
Improve creditability and public trust of data shared
Reduce potential public relations risk from supply chain malpractice
Engage stakeholders
Blockchain can enable more transparent and accurate end-to-end tracking in the supply chain: Organizations can digitize physical assets and create a decentralized immutable record of all transactions, making it possible to track assets from production to delivery or use by end user. This increased supply chain transparency provides more visibility to both businesses and consumers.

Blockchain can drive increased supply chain transparency to help reduce fraud for high value goods such as diamonds and pharmaceutical drugs. Blockchain could help companies understand how ingredients and finished goods are passed through each subcontractor and reduce profit losses from counterfeit and gray market trading, as well as increase confidence in end-market users by reducing or eliminating the impact of counterfeit products.

Furthermore, businesses can maintain more control over outsourced contract manufacturing. Blockchain provides all parties within a respective supply chain with access to the same information, potentially reducing communication or transfer data errors. Less time can be spent validating data and more can be spent on delivering goods and services—either improving quality, reducing cost, or both.

Finally, blockchain can streamline administrative processes and reduce costs by enabling an effective audit of supply chain data. Processes involving manual checks for compliance or credit purposes that may currently take weeks can be accelerated through a distributed ledger of all relevant information.

Moving forward
As blockchain gains momentum, companies should keep observing the players in their industry who have begun experimenting with blockchain. Blockchain benefits greatly from network effect; once a critical mass gathers in a supply chain, it is easier for others to jump on board and achieve the benefits. Companies could pay attention to other stakeholders in their supply chain and competitors for indication of timing to develop a blockchain prototype.


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