Blockchain's Impact on Supply Chains
The supply chain industry moves raw materials, intermediary goods, and finished products across countries and around the globe to deliver the items consumers want from producers to retailers. Each player in the supply chain specializes in a particular component of production, making the whole process more efficient and bringing lower-cost products to the market faster.
Consider the vegetable supply chain. First, seeds, fertilizer, and pesticides get delivered to the farmer. The farmer then grows the vegetables and sends them to a processor. The processor cleans and cuts the vegetables, then freezes some, cans some, and wraps some in plastic to be consumed fresh. The processed vegetables then get delivered to the store, where consumers can buy them.
Sounds simple enough. But it’s really not. As inputs and outputs move through the supply chain, they can have dozens of touchpoints, and problems can arise at any point.
Supply Chain Industry Challenges Blockchain Can Help Solve
- Opaque and fragmented supply chains mean items lack traceability. These problems cost companies $300 billion per year
- Shipments get delayed
- Deliveries get lost
- Unsafe and recalled products harm consumers and cost companies money
- Fraudulent products contaminated by unethical suppliers damage brand reputations
- Paper documents, which are slow to process and highly susceptible to loss and forgery, are widely used
- Fictitious pickups allow shipments to be stolen as they move through the supply chain
In August 2017, Walmart, Unilever, Nestle, Dole, and several other major food companies joined forces with IBM to see how they might integrate blockchain into supply chain management. Blockchain can help companies in the food industry track origin, temperature, shipment and delivery dates, and safety. A major benefit for all parties could be faster and more accurate recalls of tainted products, whether E. coli-contaminated spinach or peanut-contaminated cookies. The result? Fewer people get sick, and safe food doesn’t get destroyed unnecessarily. Blockchain data could also speed up deliveries, decreasing the amount of food waste from spoilage. Because new blockchain entries are always timestamped, anyone can see where a product was at different points in the supply chain. One application for this technology is to help determine freshness.
Blockchain also helps companies add value for consumers who care where their products come from and don’t want to support problems such as slavery in the seafood industry or child labor in the electronics industry. Provenance, for example, allows companies to add a unique alphanumeric ID to an item through which a consumer can access that item’s digital history. Because every node on a blockchain’s distributed ledger stores an identical copy of the data related to an item’s provenance and its movement through the supply chain, it can’t be tampered with. NGOs are involved to verify things like working conditions. The company says more than 200 retailers and producers already use its service.
As another example, the Tracr platform has allowed major diamond supplier De Beers to track high-value diamonds on blockchain with a unique ID code that contains information about the stone’s weight, color, and clarity. Tracr’s technology can match physical stones to their digital certificates, helping jewelers and consumers ensure that they’re getting what they’re paying for.
How Blockchain May Disrupt the Supply Chain Industry
With blockchain, we can:
- Increase trust and transparency among members of the supply chain and between retailers and consumers by using blockchain as a shared, tamper-proof record of a product’s lifecycle
- Speed up payment settlement for international transactions and standardize documentation and certification for shipping goods across borders
- Create a digital identity for physical products
- Digitize the supply chain from the first mile
- Eliminate the need for letters of credit and cut down on paperwork by using smart contracts
- Employ “smart packages” that use an encrypted device to provide a record of a package’s contents, origin, location history, environmental conditions, and other details
How It May Impact Consumers
Shifting supply chain transactions to a blockchain could:
- Allow consumers to check manufacturers’ claims of ethical sourcing and manufacturing using a website, a blockchain explorer, or by scanning NFC-enabled smart stickers with a smartphone or tablet app
- Reduce food fraud and help consumers ensure that the products they’re buying are what they’re labeled as (e.g., olive oil is really olive oil, “beef” is not horse meat)
- Make it easier for concerned consumers to direct their dollars to trustworthy companies in that good actors will have an incentive to adopt blockchain technology, while bad actors will have an incentive to avoid it
How It May Impact Employment
Blockchain in the supply chain industry may:
- Expand jobs at companies dedicated to ethical sourcing and manufacturing. As blockchain allows consumers to verify companies’ claims, they will increase their trust in those brands and spend more money on them
- Increase employment for people who understand cryptography, information architecture, software engineering, network infrastructure and integration, and user interface/user experience, according to a July 2017 report by Cognizant, a professional services company