Lesson 6: Blockchain use case: Supply Chain Management (SCM)

Lesson Learning objectives : What problems can Blockchain solve in Supply Chain Management ? This lesson address this important topic in a simple and efficient way, to allow the participant understand how Blockchain is relevant for the Supply Chain 

As blockchains are able to track any asset they are uniquely equipped to manage the movement of goods along a supply chain. Thus ensuring customers know whether their food is organic or fair trade, respectful of workers rights and is the genuine article. This allows companies to protect their brands through employing honest practices, increasing the accountability of large companies whist simultaneously benefiting their customers. Like with business networks blockchain technologies have the potential to increase efficiency and reduce costs in Supply Chain Management (SCM) regardless of industry.

Main benefits for supply chain management provided by blockchain technology are:

Ease paperwork processing

The international container industry has a costly paperwork problem. Not only is their duplicity in financial records but additional paperwork is required for regulated goods and goods moving across boarders. For example the shipping of refrigerated goods from Africa to Europe requires the stamps and approvals of over 30 organizations that must interact with each other at least 200 times. The cost of which is estimated between 15% – 50% of the physical good being transported.

IBM and Maersk began work on a permissioned blockchain solution by augmenting their current IT systems. The system is known as Tradelens, ( https://www.tradelens.com/  ) . and was able to demonstrate a decrease in transit time by upto 40% .

Facilitate origin Tracking

If faced with a food borne disease outbreak, retailers have a hard time figuring out where the bad ingredients came from and to which stores they were delivered. It can take weeks to track down the source of the contamination and restore consumers’ confidence in food safety.
Blockchain technology can be offer a transparent, super ordinate ledger which tracks the movements of food items. Information such as farm origin, batch numbers, factory and processing data, expiration dates, and shipping details can be included thus making them visible to all members of the network at any given time. With a food borne disease outbreak, this data enables businesses effected to track down the origin instantaneous.

Identify counterfeit products

The exchange of high value items (fine art, wine, cars) is often accompanied by paper certificates to authenticate the items. These certificates are subject to being lost or tampered with, even with a recorded trail it can be difficult to track and locate stolen goods. By recording various additional information about the item into a ledger a buyer can quickly check and compare if the seller is the real owner before purchasing.

In the medical industry counterfeit drugs are a serious problem, with patients not receiving the correct medications. An error in the medical supply chain can lead to the patient receiving incorrect medicine or dosage with lethal side-effects,

Blockchain technology with the aid of bar-codes and auto Id technology would increase patient safety by establishing supply chain transparency and making it harder to tamper with or channel in items of illicit origin.

Operating the Internet of Things

The Internet Of Things (I.O.T) refers to any product connected to the internet through electronics (such as a fridge). It has been estimated that by 2020 more than 20 billion devices will be connected this way. The main problems with this and our current legacy systems is that central servers exist as central point for failure and the required processing power is likely to bottle neck out as it exceeds transferable speeds.

Blockchain not only distributes the center point of risk but also the processing requirements as devices are able to query each other for spare processing power rather then each of them querying the same source.

Delivery drones operating withing warehouses or between self owned businesses is nothing new, however with the use of a blockchain and decentralized payment system, drones would be able to interact and pay one another for various services they require to go about their daily routine. For example an automatic car stopping off to refuel in between destinations.

For more information on decentralized payment systems check out our Education course on Cryptocurrencies

In the next lesson we will look at the use case for blockchain technology in identity management.

Back to: What is Blockchain ? – Complementary Course