Three Ways to Use Blockchain in Supply Chains

For many people, when they hear the word “blockchain” they immediately think of Bitcoin or any of the other cryptocurrencies in existence. However, blockchain technology offers benefits to industries other than finance. In this article, we will examine three ways that blockchain can optimize supply chains. The three examples we will consider are:

  1. Food Industry Supply Chains

Food Industry Supply Chains

I take our first example of how blockchain technology can improve supply chains from the food industry. An organization called IBM Food Trust leverages blockchain technology to improve the supply chain of food products, a tracking and verification tool is used to reduce food waste and increase safety. Food Trust allows companies to provide real-time information regarding where their products are in transit, meaning that someone can quickly address any potential issues with food contamination or spoilage and efficiently.

The California-based Golden State Foods (GSF) is one example of the use case. GSF provides a variety of food ingredients and other products to retail outlets and quick service restaurants around the world. They partnered with IBM to pilot a solution that used radio-frequency identification (RFID) tags to track fresh beef’s movement through one of its hamburger patty production plants to shipping, to the distribution center and to the restaurants. IoT devices monitored the temperature at critical points in the process and automatically uploaded it to IBM Food Trust’s blockchain, making the data available in near-real time.

GSF’s pilot showed the importance of improved precision and speed in achieving a smarter supply chain, including benefits such as reduction in shipping and labor costs, less waste, higher quality products with better rotation management. All of which are facilitated by using blockchain in their supply chains.

Pharmaceutical Industry Supply Chains

Blockchain technology also has many applications within the pharmaceutical industry. Which is good news, because according to the International Air Transport Association (IATA), “25% of vaccines reach their destination degraded because of incorrect shipping.”

However, by using blockchain technology, prescription drugs can be tracked from the manufacturer all the way through the supply chain before they get to the consumer. In this way, blockchain reduces pharmaceutical fraud by providing consumers with assurance that the medication they are receiving is legitimate–because blockchains are decentralized and immutable. The blockchain solution, and others like it that are in use or under development, have the potential to reduce pharmaceutical expenditures by billions of dollars annually.

One use case is Sonoco Thermosafe. Sonoco Thermosafe is blockchain-based supply chain management software that tracks pharmaceutical shipments from manufacturer to pharmacy. This blockchain technology provides a secure, encrypted blockchain ledger that records each step of the supply chain process–making it easy for businesses and consumers to track products throughout the entire journey (from source to sale). All parties can verify transactions in real time, with no single party holding all the information needed to compromise the blockchain network.

This blockchain solution has several benefits: enhances trust among trading partners; reduces product counterfeiting and theft; shortens the supply chain overall, which increases enterprise efficiency and profitability; and ensures regulatory compliance when tracking temperature levels during transportation. It also helps prevent tampering with prescription drugs by allowing participants in the blockchain network.

Automotive Industry Supply Chains

Finally, let us examine how the automotive industry has seen benefits from using blockchain in their supply chains.

Many applications of blockchain utilization are possible within the automotive supply chain. First, blockchain allows for decentralized tracking and assigning transparency to each component in a vehicle. This can be especially useful when multiple parties take part in providing the same piece of equipment. Thus, vehicle component manufacturers can trace the origin of their products.

Another potential use for blockchain is enabling car manufacturers and their dealers to track used cars through the supply chain in order to help consumers make informed decisions about how they acquire second-hand vehicles. A blockchain platform like IBM Blockchain can be implemented with auto manufacturers and dealers to improve transparency along the transaction process. Each part of the vehicle would have an integrated “chip” that stores its history in a secure blockchain that only authorized users can access via certified applications or websites designed within smart contracts on top of a permissioned blockchain infrastructure for enterprise solutions. This allows vehicle owners and prospective buyers alike to verify accurate vehicle.

Automotive companies can also use blockchain technology to provide immutability in product ownership records, such as insurance claims; permanent storage of vehicle identification number (VIN) information from the manufacturer so no one can alter a VIN plate without detection; and immutable transaction logs that record subsequent automotive maintenance and repair steps, making it easier to detect fraud or tampering with a vehicle’s history.

Also, blockchain technology makes it easier to track and verify compliance with government regulations. For example, when used in a supply chain involving the transport of parts between countries or states with different environmental standards, blockchain could record how vehicle manufacturers comply with emission legislation, helping them avoid fines.

Customers might also have an interest in seeing how their vehicle is being produced using blockchain technology. The technology provides consumers with the ability to view production progress and documentation for each step in a vehicle’s life cycle at any point during the process. When combined with cameras inside modern plants that can stream data directly from production lines into customer accounts online, customers could see which plant and assembly line processes are being performed on their vehicles–yet another reason they would want to use blockchain.

In the end, vehicle manufacturers can use blockchain technology to prove vehicle compliance with local and federal regulations. This could translate into higher vehicle resale value for consumers, as well as fewer surprises from new cars that have latent defects; both of which are valued by today’s vehicle customer. It also seems likely that customers might appreciate having a vehicle production process they can track in real time through blockchain technology.

As we’ve discussed, blockchain technology is more than just the backbone of cryptocurrencies. The food industry, pharmaceuticals, and automotive industries have all seen benefits from incorporating blockchain into their supply chains. Indeed, it’s an exciting time to live through a blockchain revolution!

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Lawrence Matthews II

Lawrence specializes in moving organizations forward through the use of technology. He writes about Supply Chain Transformation, Analytics, IoT, and Blockchain.