How Blockchain Will Transform The Supply Chain And Logistics Industry
Our current supply chain is broken in several ways. Over a hundred years ago, supply chains were relatively simple because commerce was local, but they have grown incredibly complex. Throughout the history of supply chains there have been innovations such as the shift to haul freight via trucks rather than rail or the emergence of personal computers in the 1980s that led to dramatic shifts in supply chain management. Since manufacturing has been globalized, and a large portion of it is done in China, our supply chains are heavy with their own complexity.
It’s incredibly difficult for customers or buyers to truly know the value of products because there is a significant lack of transparency in our current system. In a similar way, it’s extremely difficult to investigate supply chains when there is suspicion of illegal or unethical practices. They can also be highly inefficient as vendors and suppliers try to connect the dots on who needs what, when and how.
What is blockchain and how could it help supply chains?
While the most prominent use of blockchain is in the cryptocurrency, Bitcoin, the reality is that blockchain—essentially a distributed, digital ledger—has many applications and can be used for any exchange, agreements/contracts, tracking and, of course, payment. Since every transaction is recorded on a block and across multiple copies of the ledger that are distributed over many nodes (computers), it is highly transparent. It’s also highly secure since every block links to the one before it and after it. There is not one central authority over the blockchain, and it’s extremely efficient and scalable. Ultimately, blockchain can increase the efficiency and transparency of supply chains and positively impact everything from warehousing to delivery to payment. Chain of command is essential for many things, and blockchain has the chain of command built in. The very things that are necessary for reliability and integrity in a supply chain are provided by blockchain. Blockchain provides consensus—there is no dispute in the chain regarding transactions because all entities on the chain have the same version of the ledger. Everyone on the blockchain can see the chain of ownership for an asset on the blockchain. Records on the blockchain cannot be erased which is important for a transparent supply chain.
Examples of blockchain being used in supply chains today
Since blockchains allow for transfer of funds anywhere in the world without the use of a traditional bank, it’s very convenient for a supply chain that is globalized. That’s exactly how Australian vehicle manufacturer Tomcar pays its suppliers—through Bitcoin.
In the food industry, it’s imperative to have solid records to trace each product to its source. So, Walmart uses blockchain to keep track of its pork it sources from China and the blockchain records where each piece of meat came from, processed, stored and its sell-by-date. Unilever, Nestle, Tyson and Dole also use blockchain for similar purposes.
BHP Billiton, the world’s largest mining firm, announced it will use blockchain to better track and record data throughout the mining process with its vendors. Not only will it increase efficiency internally, but it allows the company to have more effective communication with its partners.
The transparency of blockchain is also crucial to allow consumers to know they are supporting companies who they share the same values of environmental stewardship and sustainable manufacturing. This is what the project Provenance hopes to provide with its blockchain record of transparency.
Bloomberg analysis highlighted in the Blog of Víctor Vilas, Business Development Director of AndSoft
Convinced that blockchain is on the brink of transforming the package-delivery business, FedEx Corp. is testing the technology to track large, higher-value cargo. “We’re quite confident that it has big, big implications in supply chain, transportation and logistics,” Chief Executive Officer Fred Smith said at a blockchain conference in New York on Monday. “It’s the next frontier that’s going to completely change worldwide supply chains.”
Blockchain uses computer code to record every step of a transaction and delivery in a permanent digital ledger, providing transparency. The ledger can’t be changed unless all involved agree, reducing common disputes over issues like time stamps, payments and damages.
FedEx’s interest in blockchain and the Internet of Things are part of the company’s strategy to improve customer service and fend off competition, Smith said. FedEx is working with an organization called the Blockchain in Transport Alliance that is attempting to set industry standards for using the technology in transportation.
Blockchain has the potential to lower transaction costs, speed up processes and free up working capital, according to the alliance.
FedEx is also experimenting with a small bluetooth-based, low-energy tracking sensor called Tron, Chief Information Officer Robert Carter said at the conference. The company has taken out more patents on Tron than any other technology in the company’s history. FedEx is also part of a team announced on May 9 that will test small drone flights at the Memphis International Airport. Unless a company embraces new technologies such as blockchain, it will face “probably, at some point, extinction,” the CEO said.
Blockchain is no longer a technology of study, analysis and possibilities. Today, Blockchain is already applied in companies interested in obtaining the best results for their supply chain. We highlight, then, two Success Stories: Diamonds and Oil.
Zandi Shabala, editor Hugh Lawson, publishes in Business o Fashion: Five diamond manufacturers worked with De Beers to develop the blockchain platform called Tracr, which will be launched and made available to the rest of the industry at the end of the year. Anglo American’s De Beers said on Thursday it had tracked 100 high-value diamonds from miner to retailer using blockchain, in the first effort of its kind to clear the supply chain of imposters and conflict minerals. De Beers, the world’s biggest diamond producer by the value of its gems, has led industry efforts to verify the authenticity of diamonds and ensure they are not from conflict zones where gems may be used to finance violence.
“An immutable and secure digital trail was created for a selection of rough diamonds mined by De Beers as they moved from the mine to cutter and polisher, then through to a jeweler,” De Beers said in a statement. Five diamond manufacturers worked with De Beers to develop the blockchain platform called Tracr, which will be launched and made available to the rest of the industry at the end of the year, the company said.
The manufacturers involved in the pilot were Diacore, Diarough, KGK Group, Rosy Blue NV and Venus Jewel. The pilot was announced in January and had an initial focus on larger stones. Blockchain is a shared database of transactions maintained by a network of computers on the internet that is best known as the system underpinning bitcoin. “The Tracr project team has demonstrated that it can successfully track a diamond through the value chain, providing asset-traceability assurance in a way that was not possible before,” De Beers chief executive Bruce Cleaver said.
Blockchain and Supply Chain Management Oil and Gas
Petroteq Energy Inc. a company focused on the development and implementation of proprietary technologies for the energy industry, today announced components and features of its proposed blockchain based oil & gas supply management platform.
The Company has received numerous expressions of interest from industry participants and the trade press. In an effort to describe the applications of blockchain in a more granular way to develop an understanding in the industry, Petroteq would like to unveil some of the targeted capabilities of its PetroBLOQ platform.
At the plant level the Company believes that PetroBLOQ’s platform will make oil production, the facilities maintenance and capacity upgrades more cost efficient and transparent. Additionally, PetroBLOQ intends on the platform providing a safer working environment for its users and its employees. These intended benefits will come from the deployment of a network of Internet of Things (IoT) sensors throughout the plant to monitor its operations. In addition to being able to monitor operations PetroBLOQ also intends on being able to use blockchain to start and end processes and adjust parameters using the data collected by its IoT sensor network.
This capability has the added benefit of eventually reducing the manpower required to operate as the components of a blockchain enabled plant will be able to communicate as a network at the facility and be controlled remotely. PetroBLOQ believes that these technologies will extend to wearable devices, and smart analytics that will maximize production efficiency.
“PetroBLOQ recently opened its development labs for blockchain solutions for the oil & gas industry and looks forward to being at the forefront of the deployment of technologically advanced solutions for our industry,” stated Mr. Blyumkin, Petroteq’s CEO.
Could Blockchain Be the Future of Your Supply Chain?(
Supply chain is one of the most evolving areas in business technology, with trillions of purchase orders, invoices, certifications, and payments sent every day between companies.
In a lot of cases, suppliers and sellers have agreements on quality, speed, service levels and more, when one of these transactions doesn’t meet specification, it can cost both parties time and money to figure out the problem and come up with a timely solution.
According to Accenture, ten percent of freight invoices are problematic. These can include duplication, wrong freight mode changes, and incorrect fees. With the complex supply systems companies have, it can also take one side a while to figure out who is at fault.
One solution to this ever-growing list of invoices and other pieces of certification is the blockchain. The open ledger has been cited a potential solution to a lot of the tech-worlds problems, and a new report suggests that it could significantly improve communication and understanding between supply chain partners.
Instead of having companies send thousands of documents at each other every day, all information would be stored on the blockchain. The transparent nature of the blockchain also removes the need to send a purchase order of materials, as the other party will know how much inventory the supplier has, what service level is required and the rate they will consume the material.
Going further, the blockchain could also introduce “smart contracts” for business partners. These contracts detect infractions in the supply chain and prevent the record being entered, thus removing the need for a party to investigate what went wrong and how much is owed.
This puts the onus on the seller to correct bad invoices, not the purchaser. With the blockchain, all the information to correct is openly available and, if secure through encryption, cannot be tampered with by either party.
Another plus to the blockchain it is a single system, replicated for all partners. When a new partner joins, there is no need for a unique implementation process.
Your supply chain has changed an awful amount in the past decade, as Amazon and other marketplaces have made one-day shipping and other backend marvels the norm. But all of this additional data — delivery confirmations, transport order, inventory numbers, invoices — has led to major data redundancies across trading partner networks, something that could be reduced with the blockchain.
Adopting of the blockchain in the supply chain may take a while to come along, but early adopters could be looking at a decrease in redundancy and an increase in all of the things partners aspire towards when they first shake hands—communication and good contract standards.