3 ways blockchain can revolutionize global supply chains

Farm to table. Fair trade. Ethically sourced. These recent trends are evidence of consumers demanding to know more about the products they’re buying – from who made them to how they were sold.

At the same time, the modern supply chain is global and complicated. While unlocking the potential to share goods across the world, globalization has also created inefficient processes that can involve hundreds of stages, multiple countries and numerous parties in each transaction. The resulting system is one that is difficult for both customers and service providers to navigate.

One technology has the potential to disrupt supply chains and create more efficient processes: blockchain. We won’t get in to technicalities in this post (you can do that here) – but blockchain has important qualities that hold a great deal of promise for supply chains, including a high level of transparency and auditability. “On the surface, the supply chain of the future very likely looks like those we know today,” a new report from the World Economic Forum states. “Yet under the covers, we can anticipate far-reaching changes that enable better communication, fewer disputes, higher system resiliency and substantial gains in operational efficiency.”

Noting its potential, some of the key players in the industry – from governments to start-ups to multinational corporations – are looking into blockchain solutions for a variety of uses. Here are three potential applications.

Whether they’re buying food or diamonds or car parts, consumers are looking for ways to prove the authenticity of items. Since data can be made visible to all participants who have been authorized to view it – and in general cannot be altered by a single entity – customers can have confidence that data has not been tampered with along the way. On top of this, time-stamping can provide a single source of truth on the product’s history, from the harvesting of the materials to the shelving in a store. Knowing the full journey of a product comes with several benefits, including improved product safety, a reduction in fraud, and an increased accuracy in forecasting and collaborative planning within the industry.

To give an example: in 2018, the US faced its largest E. coli scare since 2006 when 210 people became ill and five died due to infected romaine lettuce. The panic resulted in a widespread recall of stock, until the Centers for Disease Control and Prevention were able to pinpoint the source as a producer in Yuma, Arizona. Blockchain, however, would enable a complete knowledge of each lettuce’s history, so details from the initial cases could be used to quickly pinpoint the outbreak’s origin. Rather than a widespread recall, only those with the potential for E. coli infection would have been taken off the shelves.

This isn’t a far-fetched scenario. Companies like Louis Vuitton and Nestle have already announced efforts to track everything from luxury goods to baby food using blockchain.

Any given product moving through a supply chain can pass through hundreds of hands. Since many of these processes are manual, it’s difficult to achieve end-to-end integration of data documentation. Instead of the murkiness caused by a chain of bilateral interactions, there would be multi-party access to data and documentation, allowing for increased efficiency. In fact, with new access to information within the supply chain, there may be opportunities to repurpose information or use it to make better business decisions for all involved.

In fact, blockchain may be the key to unlocking “paperless trade” – a concept that may seem elusive in a document-heavy system. For instance, solutions now exist to digitize and automate the “bill of lading” – an essential trade document that is largely processed manually. Under previous iterations of the system, all parties involved in the transaction would have to physically sign the document to indicate the goods had switched hands. With this system, a signature could be disputed or not having a pen could delay the transaction.

Large port community systems, such as the International Port Community Systems Association, are already looking into blockchain-based approaches. Under the new model, transactions can be templated and executed seamlessly between multiple parties, on an interface that looks like an email inbox and is backed by cryptographic signatures.

Because every transaction builds on previous transactions, corruption may be more readily visible to network participants. This higher level of accountability creates barriers to players behaving opportunistically or unethically. The full audit trail of spending could also be useful in humanitarian settings, particularly where financial aid was not reaching – or was perceived not to be reaching – end-users.

Imagine that someone does want to behave fraudulently and skim 10% from donations. Though the transaction could take place, the delinquent actor would not be able to delete it from the decentralized record. The record would allow the organization to: 1) register that the full amount did not reach its intended recipient, and 2) follow the audit trail to the fraudulent actor.

The World Food Programme has already begun experimentation with this use case in the Azraq refugee camp in Jordan. Under the Building Blocks pilot project, 10,000 individuals receive food from entitlements recorded on a blockchain-based computing platform.

Blockchain is poised to upend the way we consume – from what we wear to what we eat. As solutions come to the fore, it’s vital they’re deployed in a responsible manner, because with all these hopes come fears over hype, data security, interoperability and access.

As with other technologies, this doesn’t happen accidentally. It’s designed. That’s why we’re teaming up with over 95 individuals from around the world to co-create decision-making tools for supply chain actors. The goal? Moving supply chains towards solutions that are inclusive, are interoperable and have integrity.

The World Economic Forum’s new report on blockchain's use for supply chains is available here.