So, we’ve read all the hype around blockchains and how they are set to revolutionize the way we make transactions and smarter contracts across industries. While there are a few startups creating products and testing the concept of blockchain, the technology is still in the early stages of the hype cycle and will probably take another 5+ years to reach the plateau of productivity and be proven for wide applications.

Here, I list 3 pain points in supply chains today and how blockchains, if proven successful, could be definitely revolutionary:

  1. Product origin and true value:

You walk into a retail showroom and pick up a cotton shirt which says it was made in India… how can you confirm if it was really made in India? Is it made by fair and ethical manufacturing practices? How can you ensure that no children were employed in the textile factory in India in making this shirt? These questions become even more important in high value (e.g. diamonds) or high risk (e.g. food, milk powder) goods. Today, all you can do is trust the tag on the product and the take the manufacturer’s word for it.

What blockchain aims to do is that each product can be tagged with a unique identifier and at every step in the supply chain that the product goes through, the system captures relevant data (e.g. location, time, cost..) about the product. The data at each supply chain node is captured in a block and all the blocks are connected in the chain – making sure that the integrity of data in the previous nodes cannot be tampered or changed without being recognized by the system. So the next time you walk into the store and look at the unique identified on the shirt, you can actually verify the origin on a mobile app and be sure of the real product origin. An example company bringing this technology is Provenance in the UK.

What would be even more interesting is to determine the true value of the product through the supply chain, identify the steps that are increasing the value and how can the supply chain be further optimized to reduce total cost of product for end consumer.

  1. Product tampering/ counterfeit

Counterfeit is a real problem in industries with high value products like technology (e.g. fake iPhone or leaked prototype), luxury retail (e.g. counterfeit branded bags) or even high profile books (e.g. the next Harry Potter being released before due date). The Prada bag you just bought from a leading online ecommerce website – how can you verify that it is not a fake product? Till recently, counterfeit in retail and tech industries used to be a parallel supply chain and you could be reasonably sure that the product in the showroom is safe to purchase. However, with increasing ecommerce purchases, that line is getting blurred. Another industry dealing with counterfeit and where the impact is much more dangerous is pharmaceuticals. About 10% of all medicines sold worldwide are estimated to be counterfeit and because they are usually cheaper than real drugs, low income consumers might be tempted to purchase them instead e.g. vaccines in Africa or Indonesia.

Blockchain can ensure that the product integrity is captured at every point in the supply chain and made visible to all participants in the supply chain, thus increasing transparency and making it easier to track down the point where the product might be replaced with counterfeit or stolen or tampered with.

This also helps with integrity of temperature controlled products, like pharma and food, where it can be pinpointed at which point/ entity in the supply chain did the temperature go beyond the required thresholds and future corrective actions can be taken.

  1. Financial security checks

An SME today has to go through multiple credit and financial checks before getting supply chain credit financing or being accepted as a valid customer by a large logistics company. The centralized processes of validating the credit rating, default history, payment credibility of the customer can take anywhere between a few weeks to a couple of months.

Blockchain brings the history of transactions of any customer on a distributed, secure ledger. This implies that the time it would take for the system to approve an SME to start transacting would reduce significantly and also the process becomes more decentralized. Identities are protected by cryptography thus making the system secure.



Picture credits pixabay