Supply Chain Management (SCM) is a chaotic process. A major factor contributing to this mess is the use of obsolete technology. Moreover, there are still is a lot of manual processes that are employed to get things done, which costs a lot of time and money. For instance, presently it takes days for reconciling the proof of delivery of shipments and settlement of payments. The lack of trust between the stakeholders involved in the supply chain adds fuel to the fire.
One of the key problems in such a multi-party business arrangement is that each stakeholder manages its own ledger in a localized fashion. This makes it difficult to get an end to end visibility of the shipments and transactions. The contractual obligations involved between the parties is also managed manually. In many cases, this involves a third party like a lawyer or banker. This is clearly a case of too many intermediaries getting involved in the business process. Further, it causes a lot of inefficiencies in day to day management of the supply chain. With the world advancing towards globalization, such inefficiencies are an impediment for global export/import based businesses.
Blockchain Plus IoT: A Credible Combination
The duo of ‘Blockchain’ with ‘IoT’ is disrupting a lot of industries at the moment. Blockchain makes the transaction records tamper-proof, and IoT establishes a connection between the physical world and the digital world through sensors.
The combination of Blockchain and IoT can effectively reduce friction between stakeholders of a supply chain network by enabling an automated and end to end process visibility. When processes are automated, there is no chance of manual errors which can elicit a lack of trust. Further, the data stored as a Blockchain transaction is tamper-proof so nobody can question its veracity. Also, thanks to the smart contracts, many ancillary activities can be automated along with the main processes.
Consider a simple scenario of an ice-cream shipment being recorded on a Blockchain. The container carrying the shipments is IoT enabled. While on transit, the container records the current temperature and location and continuously transmits this data to a cloud-hosted Blockchain network. If the end customer, which is an ice-cream parlor sets up a smart contract such that "If the temperature of container rises above -2 degree Celsius, then the container will be rejected”., this condition can be provisioned in Blockchain and if it is violated then the customer rejects the shipment and supplier is held accountable. Since Blockchain is a distributed ledger, the recurring records of the container temperature values are visible to all stakeholders including the supplier and customer. Since the process of measuring the temperature is automated through IoT and data storage is governed through tamper-proof Blockchain transactions, it is difficult for someone to challenge the verdict.
In this way, all the intermediaries involved in the supply chain can be kept in check right from the supplier to the end customer.
Applications of Blockchain & IoT in Supply Chain
In a global supply chain system, tracing the product all the way to its origin is a real need. This is especially relevant for the food supply chain. What if someone tells you that you can check where your meat is exactly coming from? If a customer gets an insight into the provenance of the product he/she is consuming, it’d certainly enhance the customer experience. By capturing the actions performed on the product during the transfer via the supply chain, Blockchain creates an immutable trace. One can simply scan the product ID, usually in the form of a barcode, and get the entire chronological history of the product. This is a great way to combat fraud and counterfeited products, particularly for cases related to food fraud.
2. Automated Contract Execution
Smart contracts can be designed to take inputs from IoT devices. One of the common application of IoT is to track shipments based on RFID technology. It is already being deployed for tracking logistics movement. With the help of IoT enabled RFID scanners, all entry and exit points in the warehouses and stock premises can be tracked and stamped with the date, time and consignment information to provide complete visibility of the movement of shipments.
Apart from RFID, which is used for localized asset tracking, there are technologies available for real-time location tracking using telematics devices. When integrated with smart contracts, the customer can enforce that a transporter follows a certain route to deliver the consignment, which gets tracked via GPS. Any change in the route causes a breach of the geofence which is recorded on Blockchain and relayed back to the customer.
3. Quality Assurance
The ice-cream shipment scenario presented above is the best example of quality assurance. This is also applicable for perishable food products. Such products have certain aspects that define their quality. In the case of food, parameters such as temperature, humidity, and transit time play an important factor. By using automated data logging devices to capture these parameters, end to end quality check can be enforced through smart contracts. This provides a way of ensuring quality assurance during the entire journey of the product within the supply chain.
Blockchain along with IoT can transform supply chains. However, this transformation won’t occur over night. It’s going to be a long show. Companies may experiment with Blockchain and IoT on a little segment of their supply chain in the induction phase and later extend it based on the success and RoI they achieve. This approach also works with smart contracts. Initially, contracts will only be used to ensure certain checks for process adherence. But later on, smart contracts can help eliminate costly delays and wastage due to manual handling of paperwork. This opens up the door for smarter supply chains of the future.