Blockchain for Supply Chain Management
Blockchain for Supply Chain Management
Supply chains underpin the macroeconomy and global markets. Large enterprises and supply chain leaders are recognizing the transformative impact of blockchain technology to provide consumer goods transparency, trace assets more accurately, and enhance licensing of services, products, and software through the use of automated smart contract payments.
The Need for Blockchain in Supply Chain
Global supply chains support everything from consumer packaged goods to product recalls . Even in today’s technologically advanced world, supply chains could dramatically improve efficiency, audible tracking, and limit exploitative behaviors. In the container industry, paperwork can account for half the cost of transport. A nationwide study conducted in the U.S. from 2010 to 2012 by the international ocean advocacy organization Oceana revealed that seafood is mislabeled up to 87% of the time. Mica, which can be found in makeup, electronics, and automobile paint is often sourced from illegal mines by child laborers.
Furthermore, consumer goods, especially electronics, pharmaceuticals, and luxury brands are susceptible to counterfeiting and fraud. In fact, a report from PwC claims that more than 2% of global economic output results from counterfeiting revenues.
Large enterprises and supply chain leaders are recognizing the power blockchain can have on their products in three main ways: traceability, transparency, and tradeability.
Traceability improves operational efficiency by mapping and visualizing enterprise supply chains. A growing number of consumers demand sourcing information about the products they buy. Blockchain helps organizations understand their supply chain and engage consumers with real, verifiable, and immutable data.
Transparency builds trust by capturing key data points, such as certifications and claims, and then provides open access to this data publicly. Once registered on the Ethereum blockchain, it’s authenticity can be verified by third-party attestors. The information can be updated and validated in real-time.
Tradeability is a unique blockchain offering which redefines the conventional marketplace concept. Using blockchain, one may “tokenize” an asset by splitting an object into shares which digitally represent ownership. Similar to how a stock exchange allows trading of a company’s shares, this fractional ownership allows tokens to represent the value of a shareholders stake of a given object. These tokens can be traded, and ownership can be transferred without the physical asset changing hands.
Supply chain management is one of the many use cases for blockchain. Here are what we believe to be the most pertinent blockchain use cases across supply chain sectors.
The Future of Supply Chain
Blockchain coupled with the ability to program business logic with smart contracts will allow entirely new systems to form, economic incentive models to emerge, and global inclusion into the world’s supply chain to be a real possibility.
ConsenSys is a global leader in implementing supply chain solutions, and Treum.io, a ConsenSys company, has been building blockchain supply chain solutions for over 3 years. Furthermore, ConsenSys Solutions builds custom blockchain solutions that can be tailored to address various supply chain opportunities.
The implementation of public, private, and hybrid blockchains will bring transparency and accountability to the movement of goods and commodities. Blockchain enables provenance tracking, otherwise known as the ability to track a product from the source point to end consumption.
Supply chains contain complex networks of suppliers, manufacturers, distributors, retailers, auditors, and consumers. A shared IT infrastructure would streamline workflows for all parties no matter the size of the business network. Additionally, a shared infrastructure would provide auditors with greater visibility into participants’ activities along the value chain.
Blockchain also has the potential to drive cost-saving efficiencies and enhance the consumer’s experience through traceability, transparency, and tradeability.
Watch how Treum, a ConsenSys formation, worked with the World Wildlife Fund and Traseable to revolutionize the tuna industry. By tracking the product supply chain, Treum authenticates sustainable fishing practices and high standards all the way from bait to plate.
Sometimes consumer products or raw ingredients need to be recalled in order to prevent injury or illness. Between lost sales, replacement costs, and lawsuits; recalls on consumer products negatively impact millions of individuals around the world. Recalls become less expensive and more efficient when manufacturers are able to locate affected products quickly and easily. Blockchain technology enables a more transparent and traceable supply chain, therefore, enabling faster and more efficient recalls.
The Global Brand Counterfeiting Report, 2018 estimates that the losses suffered due to online counterfeiting globally has amounted to 323 Billion USD in the year 2017. Counterfeit consumer goods account for nearly 188 billion dollars of lost revenue in prescription drugs alone. Blockchain enables an individual to verify that a product was sourced accurately and ethically.
Documentation counterfeiting and fraud are also common among diploma’s, certifications, and official identification. Blockchain records have the ability to coordinate record keeping and verify certifications and official legal documents to prevent fraud or counterfeiting.
Enhancing Supply Chain Transparency & Process Tracking
Supply chain traceability is one of the top use cases for blockchain technology as replacing traditional process with blockchain could increase trade volume by 15% and U.S GDP by up to 5%. Blockchain provides the ability to track any digital or physical product throughout its lifecycle. Distributed ledger technology has the potential to expand sustainable and ethical production and consumption of any commodity on a global scale.
The U.S. Drug Supply Chain Security Act has mandated unit-level track and traceability for pharmaceuticals by 2023. Dozens of other industries are aiming to meet similar goals to improve the accuracy and overall efficacy of their supply chains. Enterprise Ethereum platforms provide solutions to achieving this shared regulatory and enterprise goal.
Almost every industry uses third-party manufacturers or various products from multiple vendors before creating the final finished goods. For example, consumer goods and pharmaceuticals use various ingredients before producing their final products which are then labeled and branded. In some cases, white-label products are sold to other firms before being repackaged and relabeled under another brand. Ethereum allows producers to control their value chain by guaranteeing the proper handoff of third-party goods and final product labeling.
Blockchain can track the progression of assets, record the information, and show previous asset records. Smart contracts are used to enforce the asset tracking processes on the Ethereum blockchain. Anyone can view the provenance and journey of an asset in real time whether the asset is physical or digital.
Regulatory Compliance & Reporting
Regulatory and compliance reporting is a severe concern for pharmaceutical companies given many patients reliance on prescription drugs. The supply chain must remain efficient while avoiding under or overstocked medications.
Automated compliance and reporting will reduce friction, reporting costs, and eliminate errors associated with manual activities. Blockchain compliance will further enhance corporate governance by providing information in real time and easily distributing data to the proper stakeholders. Lastly, blockchain could improve compliance and reporting for medical devices, prescriptions, manufacturers, and other consumer goods.
Enable Efficient Ownership & Licensing
Verifying past ownership through standardized licensing procedures is vital for numerous industries. Blockchain provides consensus, which means there is no dispute in the chain regarding transactions by design. All entities on the chain have the same version of the ledger, giving it the unique potential to track ownership records for real estate, automobiles, and digital assets.
Additionally, blockchain can be utilized to accurately license services, products, and software through the use of automated smart contract payments. The biopharma industry faces licensing constraints and logistics risk for various products. Enterprise Ethereum manages the complex supply chain and provide the means to track the use of licensed technologies.
Treum is a blockchain-based trust platform focused on traceability, transparency, and tradeability, building the supply chains of the future. Its traceability feature seamlessly records an asset’s end-to-end source information. Its transparency capability allows manufacturers to verify that their supply chain meets product goals. All together, Treum is able to give both companies and consumers the full product story.
Real-World Supply Chain Applications
GSK and Pharmaceuticals
The U.S. Drug Supply Chain Security Act has mandated unit-level track and traceability for pharmaceuticals by 2023. ConsenSys partnered with pharmaceutical company, Glaxo Smith Kline (GSK) and several other firms to achieve the regulatory standards by deploying blockchain-based supply chain systems.
World Wildlife Fund
ConsenSys teamed up with WWF to bring traceability and transparency to the fishing industry in Fiji. The result was immutable, verifiable proof that the yellowfin tuna was caught in sustainable waters, shipped in cold storage, and arrived in a safe window to consume the food.
ConsenSys Social Impact recently partnered with Luxarity to track charitable proceeds. Luxarity acts as the impact investing arm of the Hong Kong fashion retail brand Lane Crawford. Luxarity registered re-sold luxury goods on the blockchain, so donors were able to track their charitable donations.
GenuineWay is a consortium of over 500 authorized suppliers and distributors. The consortium applies QR codes to food and liquor items. Finally, smart contracts are deployed to certify the manufacturer of artisanal food products for end consumers.