Blockchain technology, a digital ledger media, has become a key disruptor in the world of finance. In addition, blockchain has proven successful as an applicable figure in the area of supply chain logistics, demonstrating the possibility of blockchain traceability with it.
Introduction: what is blockchain and what are its applications?
The blockchain is essentially a decentralized ledger or a digital system recording transactions. Blockchain technology is a distributed database that allows for secure, transparent and tamper-proof transactions. It has the potential to streamline supply chains by providing a single source of truth for all participants.
Here are some of the key applications of blockchain in supply chain:
Tracking and tracing products: Blockchain can be used to track the movement of goods throughout the supply chain. This can help reduce counterfeiting and improve product safety.
Payments and settlements: Blockchain can streamline payments and settlements between suppliers, manufacturers and retailers. This can speed up the flow of goods and reduce costs.
Automated contracts: Blockchain can automate contracts between suppliers and customers, reducing the need for manual processing.
Although the credibility of blockchain-based traceability has been enhancing, it is vital that users also become aware of the limitations. This page provides a brief sketch of blockchain-based traceability with attention to technical details.
Current scenario in Supply Chain Management
The demand for traceability in blockchain technology refers to concerns faced in the existing supply chain logistics sector. The shipping industry spends more than half of operational expenses on paperwork. Furthermore, studies have also shown that products are oftentimes mislabelled. In addition, many products also include ingredients sourced from illicit supply chains. Another prominent issue within the industry of business environments refers to the practice of counterfeiting of luxury products. In addition, around the globe, the production and sale of counterfeit products, such as electronics, makes the call for blockchain traceability.
Supply chain: its inefficiencies and the benefits of blockchain
As soon as we think of traceability in blockchain, the most important thing that comes to our mind is supply chain management. The distributed ledger technology adds higher value to the supply chain management and the offering of traceability is of greater significance. Combining the programming ability with the business logic and using the power of smart contracts could bring about traceability.
Blockchain technology coupled with the ability to program business logic with the use of smart contracts enables the following:
· Transparency into the provenance of consumer goods— from the source point to end consumption
· Accurate asset tracking
· Improving efficiency of the supply chain
· Enhanced licensing of services, products, and software
In the modern-day world, supply chains could improve efficiency in a way which would allow for vocal tracking, and avoid wasteful unnecessary behaviors. In the container shipping industry, paperwork is typically responsible for half the expenses in transporting goods. A nationwide survey undertaken by the international maritime advocacy organization Oceana from 2010 to 2012 showed seafood companies often eliminated regulations to intensify the exploitation of the environment.
Oceana realized that seafood is typically mislabeled up to 87% of the time. Mined alongside mica, makeup, electronics, and auto paint, minerals that are frequently used in crafting frequently come from illegal mines by children.
High-end consumer goods, as well as pharmaceuticals and consumer electronics, are particularly susceptible to counterfeiting and fraud. A report from PricewaterhouseCoopers states that the economic output from counterfeit goods revenue is closer to 2%.
The application of a public, private, and hybrid blockchain will mean perceptibility, openness, and accountability in the movement of goods. The technology will soon be applied to logistics in order to enhance business processes and increase efficiency in supply chain infrastructure.
Blockchain and supply chain management getting more efficient
Supply chains contain intricate networks between suppliers, manufacturers, distributors, retailers, auditors, and consumers. A blockchain creates a shared IT environment, which all actors are able to take advantage of regardless of their network size. In addition, a shared infrastructure enhances data for auditors, allowing them to look closely at every participant’s activity along the value chain.
The challenge of trust
When it comes to the partnership between two supply chain management institutions, it takes a bit of time for trust to develop between the two entities. It takes time for people to learn how the other partners carry on their business and conduct activities and it also takes time for them to get used to one another’s documentation styles. Once some time passes, they also understand whom should they raise an issue to.
Life today is more complex and competitive, regardless of the industry or the scale of the business involved. In the midst of a trade, players are less familiar with one another because we’re seeing complex situations with lots of variables that are constantly changing. As a result, the participants often don’t get to know each other. Lacking visibility over each other’s activities and data, they do not possess control over each other. This lack of trust in another way helps facilitate participation.
In addition to just existing, trust has to be verifiable, and this too is not easy. Performing supply chain due diligence can be a slow, paper-intensive process, underfunded, invasive, lacking information, uncertain of product quality or applicable legislation, and constantly changing with increased requirements such as those for modern slavery, working conditions, and fair pay.
For example, it isn’t unusual for a shipping crate shipping cargo from, say, China to Europe, to require multiple sign-offs from dozens of various businesses, involving numerous interactions. This is why understanding, collecting, and accessing the existing data on the chain of custody of or traceability of goods throughout the flowchart is important.
Consumer needs and their implications
If operational excellence is a regulatory necessity, it is also being influenced by increasingly demanding customers. People have a preference for products to be affordable and accessible, but there are growing public worries concerning the origin, quality, and validity of items. In this regard, consumers believe labels are trustworthy and the big brands serve as solid surfaces, so they trust the products and the company.
Consumers want to know they can trust label certifications and that the environment credential of the product and the companies have substance.
The COVID-19 crisis has intensified these twin requirements. Consumers need more rapid traceability features and a higher-quality product, but they want these features to be rapidly implemented. For instance, they want face masks immediately, but at the same time they need to know where they’ve come from and know if they are reliable.
Companies need to constantly reinvent themselves to adapt to new technologies and advancements. They include these changes in what they’re doing.
Uninterrupted monitoring – Control towers are absolutely fundamental in coordinating business operations. They facilitate tactical and operational decision-making, improve resource distribution, and enable demand forecasting that is more precise.
Flexibility and agility in production and logistics schedules – Companies can adjust their production and logistics schedules to prioritize client product lines according to new restrictions or discrepancies in supply and demand.
Full visibility and transparency – Creating visibility into the operations of providers and logistic partners, companies can achieve a better understanding of anticipated supply disruptions.
Traceability issues
The dearth of sufficient information is one of the difficult aspects of traceability. But, that problem is one of the complications inherent in the conventional product trail; it is easier to replicate, and not always easy to navigate all the needed info simultaneously. There does not exist a single data recording that holds all the details necessary. Differences between external partners in the supply chain, plus the added variation and the standard between departments, give rise to the use of distinctive criteria in the presentation and evaluation of any information. Another factor to be aware of is that in some cases the information handling methods may not be effectively performing. The players within a supply chain may include manufacturers, suppliers, shippers, intermediaries, transportation companies, warehouses, and wholesalers as well as end-customers or consumers. Blockchain technology allows many different individuals to participate in a network-wide marketplace. Transactions are broadcasted onto the network.
In supply chain terms, blockchain technology divides participating organizations into two classes Active companies that need to write orders (such as suppliers, transporters, OEM, and warehouses)
Passive outsiders, such as those who are allowed to write read-only access (including public sector bodies, banks, and insurers), and additionally customers
Today, blockchain traceability initiatives are being adopted by retail, insurance, and finance service providers in large volumes.
Blockchain and the Supply Chain Management
Improved transparency is offered through blockchain to the product’s origin. Provenance contrasts with the mechanism of the chain of custody of a product from the moment of its origin to the moment of its consumption. With blockchain, inventory tracking all through the item’s life cycle can be improved. Blockchain may help in supply chain management, regardless of the existing technological environment. At the same time, blockchain could also assist with verifiable tracking of assets while also preventing exploitative behaviors.
Implementing blockchain traceability in supply chain
Supply chain traceability is one of the primary use cases associated with blockchain technology. Apparently, the advancement of conventional supply chain procedures to blockchain can potentially boost the trade volume of the US by 15%, which would in turn multiply the US GDP by almost 5%. Blockchain technology could support shelf-life management processes for any physical or digital good in any area or stage of its entire life-cycle. Blockchain traceability might help promote sustainability and ethical production and international use of any material.
Industries also exist because of independent manufacturers or a number of sellers prior to the preparation and labeling of final finished products. In many cases, white-labeled products are sold after repackaging or relabeling. In contrast, the value of traceability in blockchain refers to the transparency in the process. This leads to the manufacturer being able to have a clearer picture of the chain’s value, making the whole procedure much more efficient.
Blockchain allows for the tracking of the movement of assets, recording important information, and showcasing records of previous assets. Blockchain makes use of smart contracts to ensure that assets can be traced through their chain of custody. So you can maintain a record of an asset’s whereabouts throughout its life cycle with a blockchain. Chain of custody can be tracked in blockchain to make sure that an individual can clearly understand the journey of an item from the source through the supply chain.
Let’s take a look at two potential ways you can implement blockchain traceability in a supply chain.
Centralized trust
Organizations may be looking for systems to compensate for or even replace the management of transaction records and financial statements traditionally referred to as AML/CTF. Such organizations may include hospitals, human resources departments, and payroll departments tracking changes to the employee’s salary [and other compensation data]. These organizations are pleased with getting one centralized ledger for their operations.
For example, let us consider a government agency that oversees automobiles. It will be in possession of a proper collection of all vehicles in its territory. It will also have historic data. For consumers like these, it’s feasible to construct what has been referred to as a quantum ledger database. This has two components. The current state and the index of both transactions and activities, as well as the current value and historical state of the data are recorded in a logbook that includes cryptographically validated and sequenced detail. Activity blocks are sequenced, meaning that when one application changes data, it gets added to the current block in the log without changing the previous block.
Decentralized trust
On occasion, there may be a set of complex workflows in organizations that span several groups. Often, in these cases, the groups need to collaborate with each other, but none of them can rely on a unique member to establish a centralized system of record, either because they don’t want them to outmaneuver each other, or because they do not want them to be dependent on each other. Foremost among these are financial institutions involved in peer-to-peer transfers, companies like mortgage lenders handling syndicated loans, retail firms streamlining customer rewards programs, of course, supply chains, along with transacting with their suppliers and distributors.
Before blockchain, lots of industries had been forced to mail repayment requests on old-fashioned paper forms, because a much more elaborate system would still be inhibited by different forms of reluctance to share or to relinquish control. Now, however, a fully managed service, such as Amazon Managed Blockchain, makes it simple to create and manage scalable blockchain networks using popular open-source frameworks.
Blockchain – traceability benefits
Blockchain can efficiently take care of challenges related to traceability. Blockchain applications can help construct a complete tracking and handling network with the help of a shared ledger, which provides complete information visibility and a single source of truth. We have already seen it described as a technology that can be described as an open, distributed ledger technology.
· Documenting all revenue, from start to finish, to a product offerings base
· Providing all necessary records to support operations and automate transaction sequences
· Linking systems and automating functions to enable efficient operations of creating records that confirm their validity and incorruptibility.
· A singular and shared source of truth is made available.
Blockchain-based traceability in action
Let’s see how blockchain-enabled traceability can work in practice, across a global enterprise serving a fast-moving consumer market. In this case, we’re looking at a major coffee brand.
Consumers revel in tasting coffee. They want to see what kinds of attributes are related to its taste, such as where it is grown, how it is processed, its grade, how recent it is, how it was roasted, and for how long. They also want to be sure it was created ethically, considering the environment.
The business also has interests of its own, but it also has informational needs. It is necessary for the business to learn about the production process and quality over time. It is required to know the address and phone number of suppliers and retail outlets at various points throughout the supply chain. The business also needs to know about business practices broadly. What’s most, the business should know that in real-time. Coffee is best consumed within six weeks.
The challenge for consumers and retailers alike is that there is such a wide range of participants. Coffee is obtained from a number of different regions, cities, and vineyards. Then there are the hundreds of coffee grading facilities, brokers, roasting plants, wholesalers, packaging providers, and dealers.
To guarantee that the product and every step of the production process are top-notch, the company might want to track not just the product itself but also the distinct raw components that go into making it. In a supply chain as lengthy, wide-ranging, and complex as this, blockchain technology meets the company’s traceability needs, its customers’ demands, and that of the top executives throughout the supply chain.
Transparent – all the parties involved in the supply chain has access to every piece of information and data stored on the node, with easy access to and the queries of the distributed ledger
Immutable – users can have access to the well-organized data sharing structure
Verifiable – participants in the supply chain can verify the information and also audit the data facilitated by each other based on certification.
Blockchain enhances supply chain transparency and process tracking
One of the most relevant use cases of blockchain in the supply chain is the supply chain traceability. The trade volumes with the use of the blockchain technology could spike up by almost 15% and U.S GDP by up to 5% when the conventional systems are replaced with this advanced distributed ledger technology. Furthermore, the capabilities to monitor and check any digital or physical asset throughout its lifecycle are enhanced with the introduction of blockchain. With the use of the blockchain, one can scale up the production and also maintain a sustainable, ethical distribution as well as consumption of any commodity on the global scale.
In almost all industries, it is quite common to source the finished products from multiple vendors or third-party manufacturers. The goods received are then labeled into final finishing products and in certain cases the white-label products are repackaged and re-labelled to be sold with another tag of a brand. The tracking process transparency allows manufacturers to have a clear view into their value chains, thereby letting them guarantee the appropriate handoff of third-party goods and finished goods labeling.
Besides recording the data for every transaction, blockchain also allows monitoring the progress of assets and also shows the previous asset records. Use of smart contracts helps to ensure the asset tracking process on the Ethereum blockchain. The assets can be viewed in real-time and provenance can be tracked to assess if the asset is digital or physical.
Blockchain Achieves Product Traceability
The transport of nearly any type of item from a rural village to the largest business on the planet is more possible thanks to globally situated supply chains. In addition, the global supply chains also handle internal investigations when certain products need to be recalled in order to prevent injury or illness. Traceability is potentially the answer to what’s blockchain in consumer asset recall. Blockchain is used by businesses and manufacturers to streamline recent product recalls as well as protect against counterfeiting of their products.
The landscape around the concept of traceability in blockchain technologies includes chains of blocks where each block represents a group of transactions. Each block is added to the existing chain of blocks in blockchain-based software to run a cryptographic hash function. To access the data of a block, you must decrypt the hash function using the keys to access that data. Each block in a blockchain contains the time of transaction, along with information about the parties involved in the transaction. As a result, it offers a complete tracking trail on which you can discover the various events that an asset has gone through along the supply chain.
Zeeve as a partner for ensuring traceability in supply chain
Blockchain start-ups and enterprises looking to deploy, build and manage trustworthy decentralized apps and blockchain networks can partner with the leading blockchain infrastructure service provider – Zeeve. We are a no code automation platform supporting blockchain protocols and cloud agnostics with advanced analytics and monitoring of nodes and networks. Find a powerful set of APIs to build DApps for a plethora of use cases across industries when you partner with Zeeve. Give us a call today for designing enterprise blockchain solutions and setting up nodes.
