Blockchain is the technology that stands behind the digital asset known as Bitcoin. Even if someone thinks of it as an unsubstantial, illusory matter, the blockchain can have significant effects on something as pragmatical as the supply chain. In this article we are going to explore the reasons why this relatively new resource could emerge as a real game changer in the field of transparency.
Contemporary market relies on a supply chain that is complex, inter-organizational and often internationally-spanning. Consequently, the certification of provenance of physical goods can be very tricky. How can the blockchain prove itself useful in this regard?
When in 2015 The Economist issued an article called “The Great Chain of Being Sure about Things”, they described the blockchain as a resource that “offers a way for people who do not know or trust each other to create a record of who owns what that will compel the assent of everyone concerned. It is a way of making and preserving truths” - but how does it work?
The cryptographic technology consists in a distributed database collecting a list of data records. Its most distinctive feature is being in constant development and making each entry tamper-resistant, that is free from revision. This means that while an almost endless number of users can access and inspect the data (and add new contents as well), the original information cannot be changed or deleted – every segment of the blockchain represents a piece of permanent, public information.
Thinking about the supply chain, blockchain technology can prove useful allowing us to track all kinds of transactions in a more secure, efficient, and transparent way.
Every time a product is subject to processing, transport or changes, each step can be documented in order to create a permanent history of the object that covers its whole existence from manufacture to sale. This functionality comes in handy especially when it comes to assigning and verifying certifications, or when a product is expected to have particular properties that should be verifiable (i.e. organic and fair trade products). Moreover, the blockchain could support traceability making the process of linking physical goods to serial numbers more and more efficient. Finally, we cannot ignore the positive effects that the blockchain could have on the process of sharing information about manufacturing, delivery, and maintenance of products with suppliers and customers.
Customers themselves would find the blockchain extremely useful to consider the real value of the products they buy (or intend to buy), since through the blockchain it would be easier to investigate supply chains and isolate possible unethical (or illegal) practices.
Companies, on the other hand, could use blockchain to increase supply chain transparency and contrast frauds related to the trade of high value goods (i.e. diamonds or pharmaceutical drugs), reducing profit losses caused by counterfeit and gray market.
Moreover, providing all the parties involved in a supply chain with access to the same information, blockchain significantly reduces errors related to communication or data transfers.
Essentially, Blockchain is a sort of universal ledger created by the collective effort of a global peer-to-peer network. Being no central authority over the blockchain, we can consider it highly efficient and extremely scalable.
As far as the supply chain is concerned, this technology can increase both the efficiency and transparency of each step that leads a product from manufacturing to payment, offering us a great opportunity to make the market a better and safer place.
On July 5, 2018 CNRS (Centre national de la recherche scientifique) has published the results of an extremely interesting research about traceability ...
This article revolves around KH Export India Private Limited, a world class tannery that The ID Factory has the pleasure to be working with. They have...