4 min read

Blockchain & Supply Chain Management: An Overview

A new technology which is shaping the way we depict supply-chain

Nowadays, the supply chain still operates without the additional functionalities that blockchain offers, wasting a tremendous value for businesses that would increase supply chain transparency, decrease the risks involved, and improve the overall efficiency.

Over the past decades, the business scales have expanded as did the number of geographical locations involved in the production processes. As a result, the supply chain management process has become crucial to secure efficiency while involving more and more parties in the process. Moreover, growing demands and competition have raised attention toward traceability and product diversification.

Blockchain-based applications have potential to improve significantly the supply chain management process. More specifically, the main benefits are:

Advanced traceability: Combined with IoT-based devised, blockchain in the supply chain can automatically collect the item-level data of massive quantities of products in real-time. Additionally, this information is associated with timestamps and collection of locations to form an audit trail that is complete, accurate, and easy-to-access, from the product’s origin to the customers.
Improved transparency: It enables all parties involved to know exactly who is doing what, at what time, and where, collecting and sharing all the data in distributed ledgers accessible to authenticated stakeholders and enabling businesses to make better decisions and forecasts.
More efficiency: Today, supply chain processes are governed and regulated by paper-heavy processes. The self-executing, anonymous, and digitalized blockchain and smart contract application would allow us to replace this old system, eliminate human error, improve flexibility, and then, save money to the companies with a safer and faster process.

Of course, as of today, there also concerns regarding the adoption of blockchain technology to manage the supply chain of an economic subject, namely both firms and public organizations. In detail:

Source visibility: Competitors might be able to view supply chain sourcing details. The identities of parties involved in a transaction or movement of goods are hidden. Only their public keys are visible to the rest of the network, but new public keys can be used for each transaction for added security.
Supply chain security: Using distributed ledger technology could put supply chains at risk of a cyber-attack. As with any other technology, organizations need to have in place a robust cyber defense strategy to tackle any cyber-attack possibility.
Data ownership: The application of blockchain in conjunction with internal local data system allows the ownership of a supply chain to share key information about its business with its core suppliers and partners to foster collaboration and the overall efficiency of their activities.
Transaction Volume: Competitors might be able to estimate the volume of our transactions. This concern has no ground, however, since the contents of a tracking record on the blockchain can be encrypted.

Firms and organizations, taking their attitude toward blockchain, are now experiencing four key supply pain points across the globe: traceability, compliance, flexibility, and stakeholder management.

Blockchain could be the enabler to allow organizations to tackle these issues more effectively.

Supply chain management comprehends a variety of tasks to address, leading to the growth of incentives for companies to increase their efforts leveraging the opportunities technology can offer.

Companies such as SyncFab that take care of the transaction process allowing companies to transparently track their orders, document every transaction, reduce the need for manual input, and enable a system of purchase order management secured by the blockchain.

OpenPort instead, is a mobile platform for enterprise supply chain management in emerging markets, directly connecting shippers and carriers in order to reduce cost, improve performance and drive continuous supply chain optimization via blockchain. It can have a huge impact in the fight against fraud and thefts securing insurance numbers, DOT numbers, and pickup documentation while providing increased visibility of the transaction process. The focus of the company is in the Asian market and it has established offices in Hong Kong, China, Indonesia, the Philippines, India, and Pakistan.

By now, we have discussed transaction among different companies but valuable solutions have been developed also to tackle inefficiencies in inventory management such as the one provided by Skuchain which, by giving all consumers the ability to gather data and track inventory across multiple supply chain tiers, ensures that the company will not incur in situation characterized by scarcity of critical components of the production process. Plus, through smart contracts, it allows to coordinate inventory movement and supply chain transactions, preventing a buildup of excess inventory in warehouses and on balance sheets.

The services these companies are able to provide can benefit a variety of industries: from drug tracking and drug dosage decision making to cycle-life reduction and product quality detection in the automotive sector.

Among those sectors, the food industry is the one that has mainly captured the interest of the Italian market in which, despite some decisive steps forward, projects undertaken by Italian leading companies have only had a minor role. We can recall the project of Barilla with IBM of 2016 that allowed to follow and trace the whole pesto supply chain. From sowing to harvest and the following steps that lead the products to the factory and, in the end, to the shelves as pesto, all using a platform called IBM Cloud.

Take-aways:

We will need to rely on Italian innovation capabilities looking forward to a future of increased “cooperation” between our companies and the everchanging new solutions developed through the Blockchain.

It is true that implementing an emerging technology causes some businesses to hesitate. However, evaluation of the aforementioned considerations will likely alleviate the risks associated with blockchain implementation. Creating a blockchain supply chain strategy will help firms and organizations in managing and developing more efficient solutions remediating existing challenges while fostering even further technological development.

Bocconi Students Fintech Society

Author:

Lorenzo Catale

References:

PwC, Blockchain — an opportunity for energy producers and consumers?

McKinsey & Company, Blockchain Technology for supply chains — A must or a maybe?

IBM Blockchain, A Taste for Collaboration, an interview with Guilda javajeri, Chief Technology Officer Golden State Foods.

Deloitte, Using blockchain to drive supply chain transparency

Deloitte, When two chains combine — Supply chain meets blockchain

OpenPort, https://openport.com/

SyncFab, https://syncfab.com/

Skuchain, https://www.skuchain.com/