Blockchain that strengthens the links in the supply chain
Cryptocurrencies and non-fungible tokens (NFTs) tend to grab most of the headlines when it comes to blockchain, but those behind the technology understand how powerful it can also be in transforming important aspects of commerce, such as the supply chain.
The supply chain lends itself to blockchain-based solutions because it is becoming increasingly complex. This creates challenges around communication and end-to-end visibility that can make processes ineffective – at a time when expectations around efficiency are increasing.
Blockchain is emerging as a solution to help organizations meet these supply chain challenges.
But what is blockchain, exactly? At its core, it is a shared database. The term itself refers to a secure and decentralized record of data that cannot be changed, formed over a peer-to-peer network.
Blockchain has great potential in logistics
Some experts see great potential for blockchain technology to be used across supplies, particularly within logistics functions. But the truth is that it will never be a panacea for problems. It’s a technology that enables data to be shared across digital networks safely, efficiently and with traceability, and that’s where the power really lies.
In a general sense, the use of blockchain in the supply chain is seen as an alternative to traditional methods of collaboration, which are usually manual and offline. This approach creates a lot of friction and vulnerabilities when it comes to sharing information.
Blockchain is seen as a solution that can improve supply chains in the following areas:
Transparency – by providing a flow of information to support supply chain planning, including production and distribution.
Speed and efficiency – by helping to get the right goods to the right place at the right time, through digitized tariff processes and other means of establishing the origin of a shipment.
Traceability – by allowing the reconstruction of the origin and movement of goods in all parts of the value chain, including audit trails and certifications.
Adoption of blockchain in the supply chain in its infancy
A PwC report on blockchain shows that while blockchain is generating interest, it has yet to see a massive amount of traction, with only 5% of companies and 27% of so-called “digital masters” implementing blockchain solutions, either in supply chain or other business areas .
One company that is helping to drive the adoption of blockchain in the supply chain is IT consulting giant Tech Mahindra – part of the Mahindra Group, founded in 1945 and one of the world’s largest multinational conglomerates, with 260,000 employees in 100 countries.
Tech Mahindra meets the needs of global customers by leveraging next-generation technologies – including 5G, blockchain, cybersecurity and AI – to enable end-to-end digital transformation for global customers.
Rajesh Dhuddu, Global Head of Blockchain & Metaverse Practice at Tech Mahindra, was heavily involved in a recent blockchain project with a multinational car manufacturer. The goal of the project was to address challenges in procurement, orders, shipments and accounts payable that caused a lack of traceability, excess inventory and unreliable processing times.
Digital ledger solutions fit the supply chain
Using blockchain technology, Tech Mahindra helped the client implement a distributed ledger-based solution that has cut costs across operations and administrative activities.
The solution implements real-time tracking that eliminates all duplication in invoices and, says Dhuddu, improves operational efficiency by 30%.
Dhuddu said of the issues the customer faced: “Their inbound supply chain for procuring production parts involved multiple stakeholders from different regions.
“There was a lack of traceability, caused by a large volume of physical invoices and documents alongside traditional processes such as manual payments and approvals, printing and submissions.”
Dhuddu says the client wanted an end-to-end supply chain network “to ensure a secure digital ecosystem, improving both process efficiency and supplier relationships”.
“In extensive design-thinking workshops, we helped establish a private peer-to-peer blockchain network for asset tracking among original equipment manufacturer (OEM) ecosystems,” he says.
They did so by connecting various virtual machines and nodes in the Azure cloud, AWS Cloud and on-premises servers to the various stakeholders for network setup.
Data security and privacy important with blockchain
“Computer security and privacy were central,” says Dhuddu. “We ensured that no data leakage occurred across stakeholders by bringing in role-based access, supported by blockchain.”
The distributed ledger automates the automaker’s:
- Existing workflow for business processes
- Connected OEM core supplier systems
- Third party logistics providers
- Customs brokers and banks
Dhuddu explains that this enabled real-time tracking of key data sets, such advanced shipment notices, landing slips, entry slips, goods receipts and invoices. “All necessary shipping documents were digitized and the workflow was automated, which reduced time and costs. We empowered business stakeholders with accurate shipment visibility with the electronic travel authorization details coming from another blockchain network in the ecosystem.
Tech Mahindra then created a payment network that targeted accounts receivable and payable pain points “by creating smart contract-based automation to reconcile supplier and logistics providers’ invoices”.
“This meant there was minimal manual intervention from the business users,” says Dhuddu. “All transactions and audit trails were made available to all participants.”
Panacea Blockchain also helped the automaker gain efficiencies around its minimum viable product (MVP), which is the version of a product that has just enough features to be used by early customers, who can then provide feedback for future versions of that product.
Dhuddu says: “For the MVR run, we brought on board five global suppliers, a logistics provider, a customs authority and a trading company to consolidate orders and send the shipment to manufacturing facilities in South Africa.
“The onboarding process was designed to enable stakeholders to be onboarded quickly and efficiently. This also meant they had a business case to take to the extended ecosystem.”
