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The Blockchain Supply Chain: Transparent and Traceable

 

Blog-Share-Image-_blockchain_blog Blockchain has been hyped to be the most pivotal advancement since the inception of the internet. Despite its origins in the financial sector with cryptocurrencies like Bitcoin, this open-source, peer-to-peer ledger system has the potential to change more than just money. Supply chain management is where some of the most interesting applications of blockchain are happening. Modern supply chains are extremely complex. A single product can travel through multiple continents and change custody dozens of times, requiring new invoices and payments for each transfer. Changing hands so many times makes it difficult to verify the sources and authenticity of the goods purchased, much less how long ago they were produced and the paths they took to their final destinations. It also presents safety issues if contamination occurs, taking weeks, even months, to trace. The transparency and traceability that blockchain provides addresses all of these problems.

What is Blockchain?

Blockchain is a system in which multiple computers owned by different entities create and validate a shared record of transactions and updates associated with specific assets. These computers use a shared protocol to verify the accuracy of the information being recorded, and updates cannot be recorded without mutual verification. Once updates are verified, they can’t be changed. The result is a permanent, verifiable ledger of the origin and destination of all assets being tracked – updated in real-time. For cryptocurrencies like Bitcoin, the blockchain ledger keeps track of digital currency transactions. But for supply chains, it can be connected to sensors that track location, temperature, even speed. This creates unprecedented transparency where every participant in the supply chain can verify provenance and follow the chain of custody from production through to the final destination. A blockchain system like this can even be tied to digital contracts, automatically releasing payment once the asset reaches a specified location.

The Future of Blockchain in the Supply Chain

IBM’s 2016 whitepaper Trust in Trade: Toward Stronger Supply Chains theorized that blockchain will “reveal where an asset is at any point in time, who owns it or is handling it, and what state it’s in.” They have since created blockchain-enabled platforms for tracking food and global shipments/supply chains, working with companies including Walmart, Unilever, Nestle, Dole, and Kroger to test the applications [1]. They’re also working on creating multiple types of crypto-anchors, “tamper-proof digital fingerprints” embedded in products that link to the blockchain, ensuring the record is accurate [2]. With the advancements they’ve made, it seems IBM is likely to lead the blockchain revolution. The adoption and implementation of blockchain technology will have some unique effects. Customers will have even more information about the products they buy, ensuring goods are authentic, facility safety certifications are up-to-date, and labels such as organic, free-trade, or sustainably sourced are accurate. Blockchain tech will soon help the diamond industry ensure the “conflict-free” label sought by many consumers is true [3]. Ideally, counterfeit markets and goods sourced using unethical practices will decrease as customers seek to buy blockchain-verified products.

A Blockchain Example

Another potential effect to ponder through a scenario – Joe Shopper goes to a grocer and wants to buy a tomato. But he doesn’t want just any tomato, he wants an organic, fair-trade, sustainably-grown tomato that was picked from a family-owned farm. With blockchain, a grocer can prove their tomatoes meeting Joe Shopper’s criteria, allowing customers to track products all the way back to their sources. But why go through the trouble to create this level of transparency? Well, because modern customers have a lot of options in this new world of information and conscious consumerism. They can avoid the grocery store altogether and decide to buy only from local sources, knowing who and what touched their tomatoes, if it’s important to them. As customers become more concerned with sustainability and accountability, trust and retention will be reinforced through the block. Blockchain technology will soon revolutionize the entire supply chain industry, the way customers shop, and even more beyond that. As technology reporter Sally Davies so accurately compared: “Blockchain is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one.” Supply chain is another. We’ve only just begun to realize the capabilities.  

[1] http://fortune.com/2017/08/22/walmart-blockchain-ibm-food-nestle-unilever-tyson-dole/

[2] https://www.research.ibm.com/5-in-5/crypto-anchors-and-blockchain/

[3] https://www.forbes.com/sites/bernardmarr/2018/03/14/how-blockchain-could-end-the-trade-in-blood-diamonds-an-incredible-use-case-everyone-should-read/#5e3775b5387d

 

Author: Johan Källvik

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