Current supply chains rely starkly on trust relationships, as monitoring and compliance is limited
Supply chain management could benefit greatly from blockchain technology’s potential to increase traceability, visibility, and provenance.
One could establish a common information exchange and tracking system, in which stakeholders and customers could verify provenance, the manufacturing processes, transportation, and compliance to certain standards and codes of conduct. Such a system would also allow for easier certification. Provenance and authenticity could be certified with the assistance of IoT devices by recording every step and transformation in the value chain leading to the end-product. In addition, all transactions could be shared among stakeholders and even executed through a blockchain network. Transactions would then also be recorded in a secure and immutable manner.
In the end, a blockchain application could provide a competitive advantage to employ such a system in regard to consumer preferences and possibilities of inclusion, and simplify the interaction between all stakeholders involved providing a cryptographically secure, transparent, resistant, and auditable solution that could increase efficiency and cost reduction.
Blockchain technology could already unleash potentials, if only implemented for capturing, storing, maintaining, and validating important information.
The aspects mainly of interest in regard to blockchain solutions in supply chain management are:
- transactions are settled quickly and executed simultaneously on their corresponding sides,
- the ledger is updated automatically, transparent, and auditable,
- computational power as input factor helps maintain the running costs quite low,
- the number of intermediaries, like for example trust keepers and brokers, is reduced extremely,
- security of the system is given through cryptographic means,
- trust costs are reduced as trust is inherent to blockchain systems,
- transactions can be traced to specific addresses,
- the network is reliable, resistant, transparent, and immutable due to its architecture and because it does not have a single point of failure, and
- information has a high degree of continuity, can be shared among participants, and is accessible at all times.
In a global supply chain blockchain could become key in ensuring traceability and reduce inherent risks, code of conduct violations, and fraud. With it, reputation risks and financially costly errors can be avoided. Moreover, massive amounts of data can be effectively leveraged due to improved data gathering and accessibility. Accurately tracking data and linking it together will in the end lower business risk and open up areas for further improvement.
IoT as a mean to assist blockchain implementations
Combining blockchain technology with IoT tools could assist in linking the physical flow of materials and the transformation processes they undergo with the informational flow. In addition, IoT devices (for example sensors or beacons) could be attached to objects or be implemented independently to increase data availability. Devices could be connected to the blockchain network and automatically introduce information on like for example storage and other environmental conditions, transport tracking, and other relevant aspects.
In general, IoT can be conceptually reduced to 3 main functions:
- it collects and aggregates data;
- it communicates information;
- it makes information available to other systems and programs, and users.
Whereby, data can be managed in two general forms: at rest or in motion. At rest, data is captured, stored, and then analysed. In motion, data is dynamically collected, aggregated, communicated, and analysed.
Because of IoT’s functions, decision makers can adapt strategies, assessments, and behavioural patterns for workers, machines, and data management in an informed way. Supply chain management could rely more on increased intelligent data analysis and informed decision-making.