The supply chain represents all associations creating and distributing goods, from raw materials to finished products. The supply chain ends when the product is in the consumer’s possession.

Currently, supply chains contain hundreds of phases and dozens of geographic locations. Therefore, it makes it very challenging to track events or investigate incidents. 

Customers and buyers cannot reliably confirm and validate the origin of products and services purchased. So, the price paid for such derivatives and services does not mirror the actual cost of production. 

Moreover, the lack of transparency in the supply chain makes it extremely difficult to investigate. Therefore, holding people accountable for any illegal activities along the chain is challenging, which explains multiple cases of fraud, forced labor, and scandals in supply chains.

 Thus, the issues stain the reputations of these businesses and cost millions to the companies involved.

In short, the sophistication and non-integration of supply chains have significantly hindered wide-ranging end-to-end traceability and assessment throughout the chain.

In this article, I aim to explain what bargain blockchain and IoT technology can fetch and how they can assist with providing answers to the challenges of traceability and supply chain sources.

Current Challenges and Risks in Supply Chains

Businesses have difficulty handling sudden changes in demand and face embarrassment in mastering acquisition and information flows in their suppliers’ operations. Therefore, companies fail to seek transparency throughout their supply chain while outsourcing for business leverage.

Numerous examples of fraud in the food, pharmaceutical, or automobile industries result in increased financial losses due to recalls and a decline in sales.

In this logic, Deloitte’s current Global Supply Chain Risk survey determined the following influences, challenges, and risks:

  • Erosion of profit margin and sudden changes in market — unstable conditions require quick reactions to sudden changes in direction because, with globalization, stronger competition has squeezed profit margins.
  • Alterability effects due to the comprehensive value chain — today’s extensive supply chains, pushed up of multiple layers of stakeholders, significantly increase fluctuation risks in the supply chain.
  • Supply chain inefficient risk management — elaborating supply chain risk management schedules is critical to observe, provide decisive predictability of hazards and acquire a proper reaction.
  • Lack of end-to-end visibility — the absence of transparent visibility in the supply chain, both interior, and exterior, uncovers companies to additional hazards.
  • Technology obsolescence — advanced supply chain administration tools are a considerable challenge for most businesses. They require elevated investments continuingly, which also involves intrinsic performance risks.

The Implications of Reliability and Framework for an Optimal Supply Chain

As details flow in a supply chain, trust in the information is virtually collected and made known through the information networks of several stakeholders. It is evident that the entire system leans on trustworthiness.

Reliability, in turn, can be determined in the four aspects described below:

  • Trust – stakeholders should entrust each other concerning their readiness to share accurate information.
  • The significance of the lowest common denominator, the most vulnerable link in the supply chain, determines its effectiveness.
  • Since there is no continuity in providing data, each participant must intervene in the lack of data to ensure accuracy and efficacy.
  • Information flow limited presentation, the power of collected data to actually and accurately illustrate real-life entities or circumstances, is specified by procedures placed in supply chains to observe and track reserves.

Thus, by assessing influences, challenges, and risks in the supply chain, except the significance of reliability, it is achievable to determine which conditions are for excellent supply chain fulfillment.

Framework for an optimal supply chain:

  • Trust
  • Flexibility
  • Transparency
  • Control

How the integration of IoT into Blockchain can Help?

Blockchain and IoT capabilities can increase the traceability and reliability of Information in the supply chain.

As the purpose here is to provide you with a brief analysis of how technologies could add value to the supply chain, I will stick to some possible functions only. However, I will discuss the qualities without delving into the difference between Blockchains and Distributed Ledgers that deserve their own article due to their expanse and breadth. 

Observing blockchain technology is the distributed open-source architecture that allows digital and permanent commerce records in a P2P network.

Qualities of blockchain technology, which are accountable for improving the creation possibility of all major initiatives, can be rephrased as low cost, transparency, auditing, and trustworthiness (resilience). In the supply chain, such components help decrease the number of arbitrators (trusted validators), resulting in improved efficiency and reduced expenses.

The Internet of Things (IoT), in turn, connects the physical world to the digital world. As such, it allows safe decision-making behaviors to be effectively adjusted through real-world data collection, communication, a collection of said data into knowledge, and, finally, the presentation of assertive results.

 IoT acts complementarily to blockchain technology, allowing systems and users to aggregate data, analyze trends, and perform preventive monitoring. It should be noted that IoT covers not only devices (things, sensors) but a whole system (architecture, infrastructure) that should be practically implemented with sensors and things, networks, integration layers, etc.

Blockchain and IoT solutions can provide the following:

  • Continuity in information sharing.
  • Helping companies reduce operational risk and ensuring continuous reliability.
  • Invulnerable global flows.

They add value to the supply chain because they increase the capacity to control and verify flows from suppliers. They also enable reliable and shared tracking systems to distribute and certify with significant benefits to the consumer. For example, they can ensure that the transportation of their goods is done in proper conditions and time, verify the origin of goods and trace the whole manufacturing process in blockchain, verify and prove the authenticity and origin of goods through IoT devices, etc.

Blockchain and IoT Use Cases for Supply Chain Management

There are already numerous possible cases of blockchain and IoT application use in supply chain management. In this topic, I bring some of them, seen through the lenses of different industries.

In the agricultural food supply chain, production is fragmented (due to planting mainly occurring in remote and developing areas), with volatile prices, under constant threat of climatic variations. Both blockchain technology and the Internet of Things may not solve all these problems, but they can contribute to transparency and increased efficiency in the coffee supply chain, for example.

 In this context, Bext360, a software platform (SaaS), focuses on critical supply chains, such as coffee, cocoa, seafood, palm oil, minerals (coltan, cobalt), wood, and cotton. After data collection across all stages of the supply chain puts them in the blockchain, creating a permanent record to better track the entire chain, from producer to consumer, thereby increasing supply chain productivity and efficiency.

Similarly, there is Pacific Tuna, a Pacific Island tuna supply chain traceability project that seeks to eradicate illegal fishing and human rights abuses. Soon, through Blockchain technology, simple scanning of tuna packaging utilizing a smartphone app will tell the history of that tuna. It allows you to know where and when the fish was sourced, by which vessel, and the fishing method. Assuring consumers will be secure buying legally captured and sustainable tuna without using slave labor or oppressive conditions.

In the pharmaceutical industry, issues related to drug safety in the supply chain are incredibly relevant. Tracing “active” pharmaceutical ingredients during manufacturing is a complicated process. Failure to identify drugs that do not contain active ingredients can ultimately cause harm to patients or even the death of the final patient. Hence, the importance of Blockchain application development, which can provide the basis for the complete traceability of drugs, from manufacturer to final consumer, and the power to identify precisely where the supply chain fails during a situation.

Blockverify emerges within this context. It is a solution that proposes using blockchain traceability and transparency to detect and effectively combat fraud in the pharmaceutical industry through IoT resources, “widely discouraging” the distribution of counterfeit drugs.

Finally, Riddle & Code develops security for IoT features using distributed accounting technologies to keep data and communications confidential.

Final considerations

Blockchain technology, coupled with IoT (Internet of Things), is a great promise to improve Supply Chain efficiency and reliability across industries drastically. International Data Corporation (IDC) suggests spending on blockchain solutions worldwide will reach US$ 2.2 billion by 2023, more than double the US$ 945 million spent in 2022. By 2023, the expectations of annual spending should reach US$ 9.7 billion.

The potential for applying said technologies to the supply chain is significant. Leaving the concept and pilot tests to implement feasible solutions effectively will require blockchain technology to be developed more deeply, in addition to the need for organizational transformation and the desire for collaboration among all those involved.

For now, IoT and blockchain technologies are evolving and need to mature to ensure effective traceability throughout the supply chain and reduce risks via increased efficiency.

However, this evolution will not occur without the joint efforts of all the various actors in the supply chain and an open environment leading to the implementation of said technology.

Aniket Warty

Aniket Warty

Adventure Capitalist. The creation of wealth is merely an extension of my innate freedom to produce.

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