Blockchain-based supply chain management solutions

Supply chain refers to a set of processes, tools, rules and participants involved in delivering physical products. This is one of the key elements in the overall business model and global economy. Managing supply chains is a complicated and hard job, as the goods have to pass through numerous stages and locations on their way from the original place of production to the final destination. This procedure generates tons of paperwork (such as invoices and other documentation) and is subject to fraud.

There are lots of potential issues pestering everyone involved. The list includes productivity loss, wasted effort, increasing shipping costs, product damage and communication issues, which lead to customer complaints and reputation failures, or even worse (such as loss of goods and fraud). Due to the sheer amount of stages and participants involved, the information passes slowly and may not accurately reflect the real state of things, so it needs constant thorough checking. Loads of documentation multiply the bureaucracy, spin up costs and cut down the efficiency. Software is not working efficiently either and the information passes and calculations go on much slower than expected, frustrating the participants even further.

Benefits and challenges of blockchain solutions

Blockchain opens great opportunities for supply chain transformation and improvement. The market for such solutions and blockchain adoption grew even more in post-Covid-19 environment. Blockchain offers immutability (the data added to the block is impossible to be altered), and using blockchain in supply chain management provides better transaction flow audit and verification. Transactions in the supply chain become more secure and correct owing to blockchain, and companies and organizations can work in ‘0-trust’ environments without concern. And there is much more.

What are the main benefits of blockchain-based supply chain solutions?

• Unified access and analytics. Blockchain provides unified access for all participants, including recording, updating and reading the data on the supply chain throughout the process. It also supports actors along the chain and helps to share and use analytics data. When retailers make inventory forecasts, these are shared on the blockchain, allowing other actors (manufacturers, shipping companies, distributors, etc.) to adjust their operations and optimize the chain.
• Security. Cryptography helps to secure the data and it becomes immune to falsification, alteration or mistakes. Blockchain technology helps to protect data against cyber attacks and all types of fraud, too. For instance, blockchain can help to solve the problem with counterfeits. With RFID tags and sensors it is possible to guarantee the genuineness of the product, tracking and verifying it to make sure the items are authentic. The use of blockchain oracles can help with verifying the data authenticity, which helps to maintain trust among actors of the chain.
• Product safety and traceability. Product safety and condition are important in some cases (for example, the product with a short expiry date, such as medicinal products). Blockchain helps to build connections between the manufacturer and retailers, and preserves production and shipping history, helping to take due measures on time and mitigate risks (such as negative health effects) arising from a product's characteristics. Traceability of the goods will improve with the use of blockchain technologies and product recalls will become cheaper, as manufacturers will be able to quickly locate affected products and recall or replace them.
• Transparency. Blockchain can help with improving the tracking of both physical and digital goods throughout their lifecycle and to raise the trade volumes. Transparency will help with making fast and efficient recalls of affected products, verify accurate and ethical sourcing and prevent fraud and counterfeiting. Blockchain will also help to carry out transparent verification of goods certifications, legal documentation and other paperwork. Blockchain helps with tracking assets movements and record the data along with presenting previous records. Corporate governance can be improved with stakeholders getting access to accurate, relevant and timely information, seamless data distribution and interoperability.
• Tradability. Blockchain-based solutions can improve ownership and licensing efficiency compared to time-consuming and complicated traditional methods. Blockchain leverages automated smart contracts in payments for service licensing, software and products. Every entity has an exact copy of theledger, which gives better opportunities for ownership tracking.
• Cost reduction. Blockchain helps to cut down extra costs and fees, at the same time providing high-level security for transactions, removing the unnecessary intermediaries.
• Customer engagement. Blockchain helps retailers and customers to get access to updated data regarding the delivery. Data sharing provides transparency and helps to build trust and stronger relationships among the chain actors from the manufacturer to the consumer. 

Blockchain can also make predictions based on previous data analysis. It helps companies to improve and cut down on the supply chain expenses.

However, there is still a long way to go. Blockchain technology can seem too complex from the point of view of software development. Open access to the whole data is not always optimal, because there are situations when some information should not be accessible for all actors, and customizing access may be problematic in some cases. Some supply chains require high data throughput, which some blockchain platforms struggle with. There may be problems with making some external actors (such as customs service or other governmental structures) join in the blockchain-based supply chain. There are issues which have no resolution yet, so they must be taken into account, but the future of the blockchain-based supply chain solutions seems rather attractive.

Use cases examples

To showcase the efficiency of blockchain-based supply chain solutions and how they may be attractive to companies, there are several examples:

• Walmart. The company used blockchain in their supply chains. For example, they use it to trace the origin of mangoes and pork imports from China. The time of the operation reduced from a week to seconds and brought about better traceability (each node stood for an entity that was responsible for a certain food status).
• BHP. One of the leading mineral mining companies used a blockchain-based supply chain solution for tracking and managing mineral samples, replacing the slow and prone to error way of using Excel spreadsheets.
• ADNOC. UAE national oil producer, one of the world largest ones, used blockchain-based supply chain to trace the oil origin along the entire chain from the extraction point to the customer. It opened a wide range of opportunities for other oil companies around the globe.
• UPS. Becoming a part of BiTA (Blockchain Trucking Alliance) and developing a blockchain-based platform for B2B traders (in collaboration with Inxeption) helped the service to improve the supply-chain efficiency. UPS has also filed a patent for a blockchain system which helps with data storage concerning destinations, movements, transportation methods of packages and other relevant data, adding better transparency and interoperability between all participants.
• Ford. A major car producer in relationship with IBM, LG, Huayou Cobalt and RCS Global used a blockchain-based solution for tracking cobalt from the mine to the end user. After the mining the corresponding data is added on the blockchain allowing the companies to track the necessary relevant data, such as location or condition of the ore.

The complete list of examples is much longer. Big companies are trying to use blockchain-based solutions for their supply chains and join in blockchain-based projects. In the future the majority of big companies are likely to take on innovative solutions to improve their business efficiency.