Blockchain and the supply chain: Exploring environmental and efficiency gains
As many within the industry realise, the supply chain is a complicated and extensive process which may take several weeks from beginning to end. Long delays in payments between manufacturers and suppliers, extra expenses due to lawyers and bankers required in contractual agreements, and tracing commodities back to suppliers are just some of the issues which hold up the current supply chain management system. Blockchain technologies, however, are increasingly being seen as a way to expedite these blockages.
By incorporating blockchain into their operations, companies can save a lot of time, money, and efforts at various different levels. Many supply chains around the world are already experimenting with blockchain and many industry experts are of the opinion that the technology would soon become the core of global supply chain operating system.
The reason why blockchain is beneficial is that its ability to combine business logic with the use of smart contracts allows transparency into the provenance of consumer goods, accurate asset tracking, and enhanced licensing of services, products, and software. If we look at the container industry, paperwork alone is responsible for half of the cost of transport. A study conducted from 2010 to 2012 by a non-profit ocean conservation organisation found most of the seafood is mislabelled more than 87% of the time. Consumer goods like electronics, pharmaceuticals, and luxury brands, are the most vulnerable products that are counterfeited. In fact, a PwC report claims that more than 2% of the global economic output results from counterfeiting revenues.
In order to tackle these problems, implementing public, private, and hybrid blockchains will bring traceability, transparency, and accountability to the movement of goods and commodities. There are various recent examples showing how blockchain is being used in different industries.
US-based food cooperative Topco is using Wholechain, a solution developed jointly by Mastercard and Envisible – a food supply chain traceability provider — to help its member-owners’ supermarkets trace and highlight the origin of seafood. For instance, the Illinois-based retail company, in collaboration with its member grocery chains, has been using blockchain to offer clarity into ethical sourcing and environmental compliance of the seafood selection that is being sold at their stores. Customers who purchase fish and other seafood can simply scan the QR codes on the packaging through Wholechain’s mobile app, which allows them to see how it got from sea to the store.
At the start of this year, a market report titled ‘DLT in the Supply Chain’ released by the University College London Centre for Blockchain Technologies, with the support of the UK Retail Blockchain Consortium (RBC), studied more than 100 projects related to the use of distributed ledger technology (DLT) in supply chains from around the world. The report highlights five main business areas that are currently using DLT: product tracing, logistics, financial transactions, retail operations, and circular economy.
Blockchain has great potential in transforming supply chain sustainability. Tech giants like IBM and Microsoft have invested in infrastructures to support this technology, which would make it a lot easier for a number of applications to follow the path. When it comes to sustainability, lesser environmental impact and better assurance of human rights and fair work practices are some of the positive results that blockchain brings in supply chain. For example, in terms of human rights and fair work, blockchain provides a better line of sight into a product’s history ensuring buyers that the goods being purchased are coming only from sources recognised as being ethically sound.
On the other hand, there is much more work to be done in terms of reduced environmental impact. Accurately tracing inferior products and detecting their occurrence further in supply chains, for instance, would greatly decrease the chances of revising and recalls and provide significant greenhouse gas reductions and other resource savings. In terms of improved supply chain optimisation, access to a comprehensive longitudinal supply chain database will certainly lead to improved practices like elimination of redundancies and bottlenecks, and eventually, consuming less resources.
There is evidently some way to go yet. A Gartner study, titled “Leverage Blockchain Developments as Catalysts for Strategic Technology Planning Across the Supply Chain”, predicts that 80% of supply chain blockchain projects would either remain proof of concepts (POC) or pilots through 2022.
Andrew Stevens, senior director analyst with the Gartner Supply Chain practice, said: “Today, supply chain leaders have now started to treat blockchain as part of a longer-term technology roadmap and risk management planning. We see that many leaders are adopting a broader end-to-end view across their supply chains and map all requirements – from sourcing across manufacturing to the final distribution.”
Find out more about how blockchain technologies are transforming the supply chain at the Blockchain Expo global series of events.