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Pavan Nanjundaiah
Senior Manager
Tredence


Supply Chain Comment

Pavan Nanjundaiah is a Data Science enthusiast and a Senior Manager at Tredence who is helping his clients solve complex business problems using advanced Analytics and Technology.



May 17, 2018

Blockchain: Transforming the Supply Chain and Logistics Industries

Use Cases to Show how Blockchain Technology has Solved Supply Chain Problems

 

Advancements in e-commerce and technology have made online shopping so seamless that approximately 44 cents out of every e-commerce dollar spent in the U.S. last year was spent on Amazon.com. As an end customer, we are completely removed from the complex world of supply chain that resides behind the scenes, while the package arrives at our door step. If we peel the onion of supply chain management, we will see the many layers of complexities involved in sourcing, manufacturing, distribution and logistics.

Although enterprises strive to streamline and optimize their supply chain processes, most of them are faced with certain challenges:

Pavan Says...

...According to industry experts, 2018 will be a milestone year that we will see the adoption of the first set of blockchain solutions in enterprise applications..

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  • Lack of visibility into the current location of shipped goods and authenticity of products when dealing with global vendors.

  • Loss of inventory in the food industry due to perishable items. Hence, the ability to trace each product to its source (product lineage) is critical for companies.
  • Difficulties of managing paper work and different logistical touchpoints in a multi-party transaction between jurisdictional authorities and vendors.  This can be a big roadblock for efficient supply chain management.

One solution that holds good across the above challenges: Blockchain Technology.

Blockchain is an open, distributed ledger system that can record transactions between parties in a permanent and verifiable way using cryptography. Information is not stored in a single, centralized database, rather stored in multiple locations making it truly decentralized.

 

Here are some use cases to show how blockchain technology has solved supply chain problems:

 

1. The diamond industry has been historically plagued with ‘Blood Diamonds’ and counterfeit diamonds. Tracking the origin of a diamond from inception until sale has not been a transparent process. Companies like De Beers are now using blockchain technology to track precious stones from the point of mining until the time it’s sold to a customer. The secure and immutable properties of blockchain coupled with machine learning, Internet of Things (IoT) and state of the art encryption are helping companies to establish authenticity and get visibility into the sale of diamonds.

2. The recent outbreak of E. coli in Oregon and Washington states were potentially linked to food consumed in Chipotle restaurants. This not only affected the health of people but also dented the image of Chipotle. Loss of inventory due to spoilage of perishable goods with limited shelf life is a common problem in the food industry and companies are now using technologies like Hyperledger Sawtooth based on blockchain technology to solve this problem.

Let’s take an example to understand this in more detail. A big restaurant chain which specializes in sea food is usually faced with questions such as: how fresh is a vendor’s sea food; how did it get to the restaurant; is it really the same sea food that the vendor is claiming, etc. These are critical questions as they directly impact its customer’s health and the reputation of the restaurant. These questions can be answered by using a combination of solutions offered by Sawtooth blockchain technology and IoT. Sensors attached to the fishes send constant sensor data and this along with Sawtooth’s trackability blockchain technology will give complete visibility to the restaurant about when was the fish caught, and how was it stored and transported.

 

3. When a manufacturing unit in China ships goods to its parent company in the U.S., there could be hundreds of logistical touch points like moving the cargo from the factory in China to a nearby port; getting the clearance and approval from local authorities; working with other vendors to move the goods while in transit; getting customs approval in US; and finally loading the items in a warehouse in the U.S. A lot of time and money is spent on manual paper work, working with local jurisdictional authorities and other vendors. Most of this can be avoided by using Smart Contracts built on blockchain technology using a cryptocurrency like Ethereum. Smart Contract is a piece of software that uses data and analytics to store rules for negotiating the terms of contract, automatically verifies the contracts and executes the agreed terms. This creates a visible workflow so that all parties on the blockchain network can see the history and next steps in the execution pipeline, thus improving the overall supply chain efficiency.

 

Blockchain technology is not only impacting Supply Chain industry but also other industries like Retail, Real Estate, Banking, and Healthcare. There is immense potential in Blockchain technology and according to industry experts, 2018 will be a milestone year that we will see the adoption of the first set of blockchain solutions in enterprise applications.

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