This article in our series on blockchain use cases examines how blockchain technology is used in supply chain logistics. Our previous articles covered blockchain application in the media and entertainment industry and electronic health records.
In 2016, the global supply chain analytics industry was valued at supply chain logistics. This number represents simply the analysis of HOW products move from production to final sale and gives some indication of the lengths to which major companies in every industry, from food to automobile production, will go to attempt to optimize the efficiency and cost-effectiveness of their product supply chains.
From the time a product is manufactured or produced until the time it arrives at its purchaser, there is a slew of processes, logistics, transportation, and associated companies involved in ensuring the product completes each stage of the journey its intended destination on time and in the best quality. Some of the participants and stakeholders in this process include:
- Logistics Providers
- Retail Stores
- And more…
However, most stakeholders in supply chains do not communicate with one another, a fact that gives rise to a process which is riddled with inefficiencies and often costly errors. In many cases, these problems are the result of informational errors between stakeholders in the supply chain, or, failures to identify and address errors or bottleneck problems in real-time. As a result, supply chains can be slow to adapt and make changes when issues arise.
Increasing Efficiency and Security
While the origin of blockchain technology is firmly rooted in digital currency, its ability to transmit data and information in a democratized and free-flowing way is now set to greatly improve supply chains around the world.
Transmission and sharing of data are traditionally carried out in a centralized fashion, which presents many security holes and threats to information, as evidenced by data hacking which is so prevalent these days. (In fact, even the US government is concerned about supply chain information from US military operations being compromised).
Conversely, data transferred through a decentralized blockchain has key improvements in data security: it is time-stamped and secured by the distributed ledger system where it is impossible for anyone to change or alter.
Furthermore, information can be viewed through permissions secured on the blockchain via smart contracts, alerting key stakeholders in real-time of any problems or updates to a product at any point in its journey from production to final delivery. This method could, for instance, alert a truck driver when the humidity of a cold-storage container moves out of the acceptable range, allowing them to stop and check the problem and potentially save the goods from spoilage.
Blockchain + IoT
Monitoring data about physical objects such as temperature, humidity, and location cannot be done via blockchain alone, and requires integration with other tools. The use case of blockchain in the supply chain necessitates internet of things (IoT) connectivity through the use of RFID and other sensors in order to detect key metrics from objects in physical space, and allow for real-time adjustments and improvements to supply chain processes.
Projects like VeChain and WaltonChain provide blockchain solutions to integrate sensors for a wide range of supply chain applications, such as monitoring the condition of food, livestock, medicine, luxury goods, and more. Coupling blockchain with IoT sensors allows not only for products to be tracked and documented but for all recorded information to be time-stamped and secured on the blockchain, ensuring data quality.
Democratizing the Flow of Information
Data in supply chains is traditionally controlled by one centralized entity (usually a large corporation) which requires each participant in the supply chain to integrate with their specific data management system in order take part in data sharing. This approach is extremely resource-intensive and particularly onerous for small businesses which must sometimes keep up data management requirements across a variety of networks operated by larger partners.
By utilizing a blockchain in the supply chain, information can flow between relevant parties in a secure, decentralized fashion, with no one company owning or controlling the information. This approach allows smaller companies to integrate with multiple distributors and partners at a fraction of the cost of centralized systems, allowing them to maintain and grow their business much more efficiently.
Providing Consumers with Transparency
End-users also benefit from full transparency in supply chains, as they are also able to track and monitor their purchases through the supply chain lifecycle. This can be a significant factor in many industries, such as the food industry where food allergies, dietary restrictions, and contamination are of utmost importance to consumers, and a variety of other industries that prioritize environmental and human-friendly production methods. More than ever, consumers demand transparency in their food system and require more information regarding the food they purchase and the sources it comes from.
Consumer-level interaction with blockchain-based supply chain solutions can be facilitated by decentralized applications (‘dApps’). These such applications can allow consumers to view a detailed history of their purchased products or produce, down to where they were produced or grown, and potentially even finer details such as soil composition on specific farms. Supply chain dApps for consumers will likely become available at a later stage in the development of the technology, but visibility of each and every step in the supply chain may play a key role in establishing and maintaining trust between producers and consumers in future.
A Variety of Use Cases
A wide variety of industries depend upon the reliability and efficiency of their supply chains in order to exist. For the aforementioned reasons, blockchain has the opportunity to integrate seamlessly into each aspect of these supply chains, and provide for far greater stability and help pave the way for growth for these industries. Below are examples of industries set to significantly benefit from the use of blockchain in the supply chain, along with sample use cases for each industry.
|Medicine and Healthcare|
|Luxury and Fashion|
The use cases of blockchain in supply chain logistics reach far up and down the line of production to end consumer. This makes the potential use of the technology one to watch as new use cases arise.