Supply chains are vital to any business and, as trade is increasingly global, they’re becoming more complex and difficult to manage. Opaque practices, a lack of transparency, and an increasing number of third parties create ample opportunities for fraud, human error, inefficiencies, and greater costs. Moreover, in an era in which global corporations must behave in a more environmentally responsible way, supply chains make up 90% of their carbon footprints. As enterprises around the world scramble to address this problem, the number of blockchain supply chain use cases is growing.
Thanks to its innate qualities of transparency, immutability, decentralisation, and automation, using blockchain in supply chain management has huge potential. In fact, many of the world’s largest companies are actively incorporating blockchain use cases for supply chain management, including Walmart, Ford, UPS, and FedEx. They’re using blockchain to achieve greater visibility into the origin and movement of goods, to eliminate the need for additional parties, to bring down costs, address fraud, and create supplier ecosystems to give them better oversight of the entire supply chain.
Since all transactions can be instantly viewed on a shared immutable ledger that cannot be tampered with or changed, blockchain can foster greater trust and accountability between suppliers. And, thanks to its decentralised design, blockchain offers a much more secure solution to data storage as it eliminates the single points of failure that make centralised servers vulnerable to attack. With all this in mind, let’s take a look at some of the top ways that companies are using blockchain in supply chain management.
1. Track and Trace
Arguably the most prevalent example of a blockchain in supply chain use case is when it comes to track and trace (verifying the provenance of materials from their origin to their final destination). According to a 2020 report by Harvard Business Review, many large food suppliers, including Nestle, Walmart, Carrefour, Drakes, and Albertsons, have successfully used blockchain to trace fresh produce and other food products.
Thanks to its immutable ledger, which acts as a universal source of truth for all participants in the supply chain, should a company discover a faulty product, it can immediately identify the point at which the fault occurred. Further, pairing blockchain with IoT, as we’ll discuss later on, can enable companies to fix problems before they arise. Blockchain can also allay any concerns about the authenticity of a product as all information is easily and instantly verifiable.
2. Ethical Supply Chains
The ability to monitor goods and materials throughout the supply chain has major ramifications across all industries and can help corporations to remove unethical practices. For instance, when it comes to precious gems, so-called blood diamonds have long been a point of contention. What are meant to be symbols of love, commitment, and joy are far too often mined in perilous conditions that include worker exploitation, violence, and environmental degradation.
As consumers have become more aware of blood diamonds and the inhumane settings in which they are mined, they have begun to demand diamonds that are ethically produced. This can only happen with an ethical supply chain in which suppliers can verify the authenticity of goods from origin to end destination.
The world’s largest diamond producer, De Beers, has successfully implemented blockchain in supply chain management to ensure that its diamonds are not from conflict zones or used to finance violence. This is achieved by monitoring and adding the provenance of the stones to an immutable digital ledger that cannot be edited or tampered with, allowing suppliers to verify the information and have complete certainty over its authenticity.
Blockchain can also be used in this way with any type of raw material, from coconuts to coffee beans. Blockchain in the coffee supply chain can help growers receive a fair price for their crops as well as allowing consumers to see where their coffee comes from and make better informed and ethical choices about their purchases.
3. Provably Sustainable Supply Chains
With the climate crisis becoming an increasingly prevalent issue, investment in ESG (Environment, Social, and Governance) companies is set to reach an eye-watering $1 trillion by 2030. If companies want to attract investment, they must demonstrate sustainable practices and, representing 90% of companies’ carbon footprints, the supply chain is a key place to start.
Using blockchain technology, organisations can harness a transparent immutable ledger to ensure that sustainable practices are being prioritised at every stage. Whether it’s verifying ingredients, sustainable farming methods, or improving deliveries by batch sending multiple items. Sustainable supply chains also help corporations to avoid unnecessary costs caused by faulty products, fraud, or expensive product recalls—and demonstrate their ESG qualifications to suppliers, regulators, investors, and consumers.
According to a new study by GreenPrint, almost two-thirds (64%) of Americans are willing to pay more for sustainable products, yet most (74%) don’t know how to identify them. Blockchain in supply chain management can help corporations and consumers alike to be sure about the veracity and quality of the products they buy.
4. Eliminating Supply Chain Fraud
The trading of counterfeit goods is rising steadily, already accounting for 3.3% of global trade in 2019. Fake goods infringe on copyright and trademarks, and profits are generated by organised criminal gangs, siphoning resources from corporations and governments. Purchasing a fake handbag or sweater may not have particularly harmful outcomes for consumers. However, fake medical supplies or poorly wired electronic goods can lead to catastrophic consequences and lengthy litigation. Pharmaceutical companies, in particular, are under enormous regulatory pressure to protect consumers from counterfeit, stolen, or harmful goods.
Thanks to blockchain’s smart contract feature, companies can help to eliminate supply chain fraud by removing the possibility of human corruption, error, or tampering. They can program specific outcomes to be executed when certain conditions are met, thus automating the process of verifying goods. Through QR codes, chips, or encryption codes on products, their authenticity can be instantly verified, delivering transparency to all parties and eliminating fraudulent practices.
5. Real-time Tracking with Blockchain and IoT
As we’ve already seen, blockchain use cases for supply chain management are growing, and, when paired with IoT, the two technologies can help optimise the supply chain further. IoT sensors in smart containers and delivery trucks can provide real-time data that allows enterprises to track goods around the clock. Where goods are perishable, IoT devices can monitor their temperature and record any unsafe fluctuations on the blockchain, allowing companies to take swift action. Blockchain and IoT can prevent damaging product recalls and expensive machine maintenance that costs companies an average of $260,000 per hour.
IoT devices traditionally rely on centralised servers which makes them vulnerable to hacks, manipulation and poor network connectivity, meaning that corporations can’t always trust the integrity of their data. However, when combined with blockchain, the data is verified and secured on an immutable, tamper-proof ledger, and, rather than stored in one central location, is decentralised and distributed across multiple nodes. This distribution further enables a more reliable and efficient network for IoT devices as the computational load is shared and bottlenecks and bloated networks are eliminated.
Final Thoughts
Blockchain’s transparency, immutability, decentralisation, and smart contract functionality can eliminate fraud and unethical practices, introduce real-time tracking and tracing, and create provably sustainable supply chains—and we’re still just scratching the surface of blockchain’s full potential. These top five blockchain supply chain use cases are just some of the ways this versatile technology can help businesses improve efficiencies, reduce costs and carbon footprints, and deliver consumers the authentic and sustainable goods they demand.
If you’re looking to find out more about the benefits of using blockchain in supply chain management, Protokol can help. We deliver robust, scalable, and effective blockchain solutions that allow you to achieve sustainability, transparency, and efficiency in your supply chain. Our customised solutions are designed to integrate with your existing technology stack and we ensure an end-to-end development service for seamless implementation.
Learn more about Protokol’s blockchain services or discover how blockchain technology can make your supply chain more efficient by booking a free consultation with our blockchain experts today.