What Can Blockchain Do for Supply Chain Management?

Current Supply Chains don’t operate at the cadence of business. Blockchain could change that.

When we are asked about “killer” use cases for blockchain within enterprise systems, Supply Chain is the usual suspect — and for good reason. Supply chain management — and where it’s headed — ticks off the blockchain use case checkboxes:

✅ multiple, non-linear relationships that must be managed within a vast, a-symmetrical, and complex ecosystem

✅ a critical need for truth and transparency between 3rd parties that can’t trust each other

✅ an industry move towards digitization

✅ a need for decentralization and democratization of data

✅ a need for a distributed, harmonized repository of data with real-time synchronization between all nodes (stakeholders)

✅ an opportunity to greatly reduce fraud/counterfeits as well as associated auditing costs.

Before we get into blockchain’s potential entry points into the supply chain ecosystem, let’s take a look at the two current trends in SCM *(Supply Chain Management):

1 – Dynamism
SCM has evolved to become a huge, global ecosystem. Multiple manufacturers, multiple relationships, multiple distribution models, multiple contracts. These complexities, layered with globalization, shorter product life cycles, and associated volatility in demand planning, has produced the most dynamic supply chain landscape we have ever experienced. In essence, the modern day supply chain is a complex system with non-linear, multi-tier relationships.

2 – Digitization
Supply Chain Management, like many other industries in the past decade, has iteratively undergone transformational periods of digitization — shifts to digital processes essential for remaining competitive and profitable in the global marketplace. Manifesting this trend is the terminology and concept of Digital Path to Purchase — the omni-channel, tech-focused approach to supporting and acting on a consumer’s purchase. Supporting an efficient digital path to purchase requires comprehensive digital collaboration.

Because of the many parties involved in a supply chain, digitization brings with it stakeholder integration issues, with data harmonization and permission models at the top of that list.

Entry points for Blockchain

A compounding set of technological need is born out of the emerging trends in Supply Chain Management — with digital collaboration as the key theme. As the logistics industry remains fragmented, riddled with data silos, low-transparency, and archaic manual processes, blockchain can empower a revolution towards digital collaboration.  

Blockchain Use Cases for Supply Chain

Blockchain provides stakeholders with a decentralized ledger that can store an entire history of transactions across a shared database — the perfect solution for multi-tier collaboration within the context of a dynamic and digital supply chain ecosystem. Here are just a few entry points:

Distributed and Decentralized Records Management

With a complex and dynamic supply chain management landscape, stakeholders need one harmonized data repository on which to rely for updated information. The distributed ledger component of blockchain provides an integrated digital platform for nodes in a supply chain system to share and query information as developments occur in real time. Instead of having to deal with an ineffective point-to-point communication system like EDI and the complexity of reconciling multiple data sources with multiple permission models, Distributed Ledger Technology (DLT) provides a singular mechanism to securely integrate, harmonize, and synchronize data for all participants. This distributed ledger provides grounds for better (and more) digital automation across the supply chain, as well as concurrent optimization.

Outcomes: A sped-up delivery process as the result of a streamlined, automated, and more error-free flow of goods.

Concurrent Optimization

Developments in the chain both upstream and downstream can play a critical role in process efficiencies and planning. DLT provides a dramatic decrease in data latency and an equally dramatic increase in data reliability. This newfound visibility allows participants in a supply chain to proactively optimize components of their processes (like inventory management, staffing decisions, and a thousand more) to support an efficient and agile product path. In other words, stakeholders in a supply chain can react quickly to event information and automate their responses.

Outcomes: less waste in time, energy, and money; preparedness for unexpected events (resistance to disruption in the chain); ability to identify issues quicker and with more accuracy; streamlined recalls.

Blockchain Technology can Facilitate Concurrent Optimization

Demand Synchronization

Shorter product life cycles, unprecedented demand volatility, and ineffectiveness of traditional demand planning techniques are a few among the many reasons why decentralization of Real-Time Data is a necessary step forward for supply chains. Democratizing purchase orders or predictive analytical data such as Point of Sale information can dramatically improve demand visibility, while reducing the negative consequences of poor forecasting such as the Bullwhip Effect.

Outcomes: improved inventory management; More accurate determination of re-order points; Better on-shelf availability.

Decentralizing the Ledger for Transparency, Trust

The consensus, immutability, and finality provided by blockchain technology allow for a decentralized ecosystem — where no single party can control or alter the data, and no two parties can collude together to commit fraud. This ability for completely trusted peer-to-peer interaction allows for a facilitation of direct relationships between participants in a supply chain as well as the termination of reliance on third party intermediaries (insurance, brokers, normative compliance, settlements, etc.)

In addition, the distributed nature of the ledger as well as the blockchain hashing mechanism reduces potential for cyber attacks with no single point of failure.

Outcomes: a transparent and trustworthy supply chain, eliminating reliance on third parties to facilitate trust and reducing associated auditing and security costs.

A simple example is that of a cold chain using blockchain to hold a transport node accountable for mishandling:

Cold Chain Monitoring on the Blockchain

Tracking provenance

Like in the example above, a supply chain infrastructure blockchain can interface with RFID tags, digital manufacturing equipment, sensors, drones, IoT, and other write-enabled technologies to provide real-time transactional value — which can be leveraged for a more efficient production schedule, better food safety, and stronger anti-counterfeit efforts. Tracking the lineage of a product — from parts manufacturing to lot codes and destination points along the chain — not only supports concurrent optimization, but also ensures the integrity of the product (fair labor, anti-counterfeit, and socially responsible.) We see this manifesting as tracking blood diamonds, ensuring proper disposal of waste, and eliminating the possibility of child labor.

According to the ICC, counterfeiting and piracy are expected to drain $4.2T from the global economy by 2022. [Source] Blockchain can help mitigate these losses and their associated disputes.

Outcomes: increased reduction in fraud/counterfeits, resolution of disputes quicker, elimination of double-spending, ensuring that CSR responsibilities are met, and other audit-related benefits.

Retailers can show consumers the historical lineage of the product’s path

Digitize and secure cross-border document workflows on the blockchain

Currently, an overwhelming amount of redundant paper-based documentation plagues importers, exporters, and intermediaries in the global transportation process. There lies an incredible friction in global chain processes — shipping leader Maersk stated in 2014: “a single, simple shipment of refrigerated goods from East Africa to Europe can come into contact with nearly 30 people and organizations, generating more than 200 different interactions and a four-inch stack of paper along the way.”

Blockchain provides the ability for compliance/legal/customs documents to be digitally signed or notarized at different stages of transport — all located on a central blockchain (stakeholders may include transportation providers, governments, customs, brokers, freights, importers, ocean carriers, ports, etc.)

Outcomes: reduction in delays/human error in paperwork, visibility into procurement, international compliance

Digitizing Transport Documents on the Blockchain

Implementing a blockchain-empowered supply chain with Fluree

When we discuss use-cases — particularly for blockchain and similar emerging tech — a “this is what it could look like” tone tends to dominate. And for an understandable reason — we find time and time again that the current cost, complexity, and lack of resources surrounding blockchain technology have left it an impractical or unreachable asset for business applications. More specifically, the data needs of an enterprise application are far beyond that of a practical public blockchain — storing a single Gigabyte of data on Ethereum would cost you over $10M.

Fluree is on a mission to turn use cases into tangible, deployable solutions. Here’s a few reasons Fluree — our scalable graph database with a blockchain core — bridges that gap between potential utility and real-world implementation:

Data Centric — Fluree brings blockchain to the data-tier — allowing for flexible and scalable full-stack application schemas.

Graph Style Query —highly-functional relationship-rich queries for a relationship-rich, dynamic supply chain. Graph Databases are best known for capturing complex relationships within vast webs — the perfect supply chain use case.

Permission model — ability for comprehensive, flexible, but easily administered permissions for read/write access, down to a single entity + attribute level. This benefit is very relevant with a complex web of supply chain players — especially with multiple assets to manage and multi-tier relationships. Many players in a supply chain just need limited read access, while others need advanced schemas for write abilities.

Highly Scalable — supports a seamless process of integration as new stakeholders enter and leave a product chain.

Composite Consensus — with varying relationships and diverse data, supply chains need to partition information to be read by only the appropriate parties. Fluree allows data to be segmented onto multiple blockchains — both publicly and privately held — but join together to query as one set from an application point of view. This means a singular application from a vendor, retailer, transporter, or supplier can keep private information out-of-sight, but still leverage blockchain without having to figure out multiple re-integrations.

Distributed Ledger — Fluree’s distributed capabilities paired with a rich and granular permission model makes it the perfect choice to decentralize and synchronize data across nodes in a supply chain.

Blockchain — Fluree builds every transaction into a block within a blockchain. It is an append-only immutable log of all events.

ACID Compliance — Fluree’s single and separate transactor double ensures finality of data.

Time Travel — Fluree allows applications to query the blockchain as of any “block,” or point in time. This allows supply chain managers to quickly examine and re-adjust applications during chain disruptions.

Familiar to Developers— Fluree is first and foremost a powerful database with modern features and familiar syntax. Any development team would be able to set up a blockchain database without having to learn a complex set of new skills.

Bottom Line

Fluree can provide a single source of truth for harmonized data to be stored, queried, and transacted with blockchain immutability, distributed ledger finality, and the query benefits of a modern Graph Database. Fluree enables a distributed ledger to be paired with embedded permissions to support the dynamic, multi-tier relationships and workflows of a supply chain.

Fluree supports the modern supply chain demands, with a perfect infrastructure solution to digital path-to-purchase models and a comprehensive answer to the modern day dynamic, non-linear, complex system of relationships of large-scale, multi-faceted supply chains.

Currently, the supply chain does not operate nearly at the cadence of business. While this may never be fully achieved, Fluree can be leveraged to take a large step forward towards an efficient and transparent supply chain.

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