How can blockchain drive transparency in the supply chain

Supply chain transparency, in today’s competitive market, means that each business knows exactly what is clearly happening at every step of the supply chain, and communicates clearly stated, fact-backed information about its supply chain operations internally and externally.

That may have been the case ten years ago, where organizations that understood the benefits of supply chain transparency could have used chain transparency to gain an edge over their competitors. In today’s ethically conscious consumer culture, transparency is fast becoming the norm and often the demand of the end consumer.

In fact, in today’s hyper-aware consumer culture, with more concerned customers about food safety and purchasing, transparency in supply chains is increasingly important to consumers, who want to know what is in their food and where it comes from. Several major food brands such as Nestlé have started releasing information about their supply chains for their 15 key products, using blockchain technology.

The lack of transparency has measurably affected brands and reputations in the minds of customers, and it has directly affected a brand’s consumer loyalty and trust. Events such as pop stars like Beyonce being publicly called out, and consumers switching to secondary brands because they offer products that are sourced from more socially conscious, fairly traded sources are all evident of this shift in trust in big brands.

In an age of news reports about human rights abuses, climate change, supply chain crises and food and product recalls, it’s no surprise that consumers are calling for more transparency about the origins of their goods.

One reason why the process has become increasingly important is that more consumers are demanding it.

Historically, innovation has often disrupted supply chains in various, significant ways. For example, the introduction of the PC in the 1980s led to dramatic changes in supply chain management. Organizations increasingly adopted PCs for word processing, day-to-day operations and accounting, while map-based interfaces and flexible spreadsheets enabled more efficient logistics and supply chain planning.

The next step in market innovation in greater transparency is blockchain.

Blockchain is a distributed ledger technology, or DLT, that keeps records of digital data or “exchanges” in a way that makes them tamper-proof, primarily through the use of immutability. When a transaction is requested on the system, it is sent to a peer-to-peer network consisting of several interconnected computers called nodes. Each of these solves equations to check and validate the transaction for consistency across the network. Once the transaction is validated, it is grouped with other transactions to create a block of data for the general ledger.

Blockchain is called a decentralized trustless system, because each node can have an identical copy of the ledger, all records are time-stamped, and none of the transactions can be deleted or edited.

Because the ledger is completely distributed across the network, it is very difficult to corrupt. To make a change to the ledger, you must log the change on every node across the entire network simultaneously. If this is not done, the network recognizes that one record does not match the rest and flags the transaction as corrupt.

Blockchain technology allows businesses to track all types of transactions more securely and transparently. The potential impact on supply chain function is enormous.

Using blockchain, companies can trace the history of a product right from its origin to its location. Every time a product changes hands, the transaction is securely documented, creating a permanent history, from production to sale.

Using this powerful blockchain technology, parties collaborating on one shared platform can dramatically reduce supply chain time delays, resulting in additional costs and human errors often associated with transactions. The reduction of intermediaries in the supply chain can also reduce the risk of fraud. At the end, where fraud occurs, comprehensive decentralized records enable organizations to trace the source.

A shared blockchain ledger is ideal for multiple stakeholders providing a reliable and tamper-proof audit trail of information flow, reconciling inventory and making finances transparent in a supply chain. Using a shared blockchain also means that companies can synchronize logistics data, track shipments and make automated payments easily. Moreover, they can facilitate all this without significantly changing their legacy systems while only sharing the most relevant data.

Blockchain makes global supply chains more efficient by allowing companies to complete trade transactions directly and without third parties. It also makes it easier to increase the integration of both financial and logistics services, which enables more fluid data collaboration between stakeholders.

Integrated payment solutions via blockchain can help reduce the time between order and payment, and ensure the correct transport of products. In addition, blockchain and smart contracts can help companies improve compliance, reduce high-profile lawsuits and legal fees and fines for late payment of taxes, and limit product counterfeiting and fraud.

Since records on the blockchain cannot be deleted, it provides a transparent supply chain. What’s more, every step in the supply chain is securely logged, meaning logistics problems can easily be traced back to their source. The same applies to the procurement of components or raw materials, which can be traced back to their origin, which increases accountability and transparency, and reduces illegal activity.

One study has estimated that leveraging blockchain’s ability to prove product provenance could increase global GDP by $962 billion. Providing more information about a product’s manufacturer, origin, transfer and use can establish trust and confidence in the supply chain.

In conclusion, blockchain will not only make the supply chain more transparent, they will also have a positive impact on the global GDP by approximately one trillion dollars.

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