Blockchain In the Supply Chain: Real-life Use Cases and Examples

Blockchain technology has numerous applications in the supply chain sector. Blockchain technology in supply chain operations ensures that transactions are transparent, decentralized, safe, rapid, and low-cost. Paperwork is reduced by eliminating superfluous third parties and incorporating more daily life operations into digital platforms. Blockchain promotes trust between trading partners. Making more detailed data available through blockchain enhances supply chain monitoring and safety. This decreases the risks associated with insurance. Smart contracts and automated payments have the potential to transform the landscape. They improve efficiency by removing bureaucracy, particularly in insurance and traceability. They also allow for escrow payment, which involves retaining money until the parameters of the agreement are completed and agreed upon and then automatically releasing it.

Supply chain management can benefit significantly from blockchain technology. Despite the technology's widespread association with cryptocurrency, non-financial uses like supply chains, power, and the food industry also show promise. A permanent, shareable, auditable record of items along their supply chain can be produced via blockchain, which more economically enhances product legality, authenticity, and traceability.

1. Blockchain in the Food Industry

Blockchain is an effective tracking tool during every stage of the supply chain due to its transparency and immutability. Blockchain ledgers can record and update food product data as it passes various checkpoints, allowing consumers to follow the product's journey in real-time. Distributors and merchants may easily identify a shipment's last handlers, locations, and documentation times if it is missing or appears contaminated. Supply chains have several moving components, particularly when it comes to food. Blockchain seeks to automate and streamline the complex and time-consuming process of managing food laws, compliance, and deliveries through automation and smart contracts. 

Example: Nestlé has been using blockchain technology since 2017 to enable customers to track the provenance of goods like its Mousline purée and Zoégas coffee brands. Nestlé can monitor farmers and harvest data for the cocoa beans used in Zoégas coffee by partnering with the Rainforest Alliance. This helps to improve sustainability for farmers and natural resources while offering customers transparency.

2. Blockchain for Diomond Tracking

When it comes to security, transparency, and trust, the diamond sector has many difficulties. In the past, the diamond business has had difficulty keeping true, accurate records regarding the origin and provenance of diamonds and recognizing lab-grown stones sold as real diamonds through deception and dealings between buyers and sellers. Blockchain technology has a lot to offer the diamond business in these areas.

Every diamond goes through numerous hands, from the mine to the buyer. The route takes the reader through the diamond supply chain, starting with the mining firm and ending with the retailer after a protracted manufacturing process and rough purchasing tenders. The blockchain data about the diamond is permanent, meaning that even when it is resold in the secondary market, its provenance and digital record will not change. Blockchain could be the best answer for a sector that has frequently battled declining consumer confidence.

Example: The De Beers Group has launched Tracr, a blockchain initiative. Early in 2018, the pilot program got underway. Later in the year, the full launch will take place. The diamond company De Beers tracks the origin and development of every natural diamond they mine using Tracr's blockchain-based tracking features. Despite significant international attempts to clean it up, diamond mining is still a notoriously hazardous and toxic industry, both for the environment and the people who work in it. To allay consumer worries over the ethical source of its jewels and ensure that they are not from conflict zones where gems may be used to support murder, De Beers uses Tracr.

3. Blockchain in the Oil and Gas Industry

New technologies like blockchain have the potential to increase the oil and gas industry's operating efficiency significantly. According to a recent report by Gazprom Neft, a Russian oil business, digital technologies can boost an oil and gas company's output by 10% to 15%. High security, secrecy, and quick data processing are necessary for the highly standardized and quality-sensitive trade of oil and gas products like gasoline and diesel. Most systems created to oversee and control trade in the petroleum sector are highly non-transparent, centralized, and unreliable. Blockchain is a highly efficient, transparent, and trustworthy transaction database safeguarded by cryptographic hash methods. Users of oil and gas utilize it. According to a study by Shell, BP, and Statoil, the oil and gas industry may save 30% on transaction execution times by implementing blockchain technology. 

Example: The Abu Dhabi National Oil Company (ADNOC) implemented a Blockchain-based automated oil and gas production system along the whole value chain. The innovative system offers a secure platform for tracking, validating, and executing transactions at all stages, from production to the end customer.  

According to ADNOC, using Blockchain technology reduces the time it takes to conduct transactions between ADNOC's operating entities while dramatically increasing operational efficiencies across the whole value chain. It will also increase the reliability of production data by allowing for better transparency in transactions.

4. Blockchain in the Luxury Sector

Among the most resilient economic industries, luxury is also one of the oldest. A material's or object's rarity justifies its high cost and adds to its worth. The unmatched perfection of these luxury artifacts is credited to collectors, nobles, or passionate individuals who appreciate beautiful things. Luxuriousness is like a cosmos connected to pleasure, desire, and taste, whether the worth is monetary or symbolic. The refined aesthetic of the series entices. The large industry offers many job options, from ready-to-wear to jewelry, perfumes, and leather goods. An estimated $4.5 trillion worth of counterfeit goods are in circulation, with between 60 and 70% being luxury items. It goes without saying that fake goods are a big issue for the luxury sector.

The fashion industry has been using blockchain technology for a considerable time. Data tracking throughout the supply chain was initially employed to address the issue of brand items' legitimacy in the marketplace. Generally speaking, a unique chip is integrated into the label of branded apparel, bags, or footwear, and consumers may use the chip to track the product's full manufacturing history and verify its authenticity.

Example: Prada, a luxury brand, is among the first to use blockchain technology. The first-ever Prada Timecapsule was introduced in Europe9, and a new item is available only online for a full day each first Thursday of the month. Rem Koolhaas's architectural office, OMA, identifies every drop with a unique logo. It also comes with a serial number and elegantly designed packaging, which gives each release an air of refinement and individuality.

5. Blockchain in Supply Chain Finance

Blockchain technology can overcome three major challenges in SCF implementation. First, the Know Your Customer (KYC) compliance requirements. Blockchain records distinct information using advanced cryptography that can identify offenders and transactions. For financial institutions like banks, a valid and secure KYC data verification simplifies and increases the effectiveness of the supply chain process. The second is Standard Accounting Rules, which comprise numerous stakeholders' reconciliation of accounting standards. Among these stakeholders are bank loans obtained through different agreements between buyers, sellers, and investors for the SCF's execution. Blockchain will influence the accounting regulations and audit techniques employed during the deal process, preventing reclassification. 

The third is trade issuance, clearing, and settlement. Important procedures, including issuance, clearing, and settlement, call on the assistance of numerous middlemen who match data between buyers, sellers, and financial institutions. Blockchain enables directly recording digital data from assets into a distributed ledger. Smart contracts can lower contract term risks by automatically storing ownership information and transaction history.

Example: we.trade, a trade finance platform, has partnered with IBM Blockchain to establish a connected platform that simplifies and enhances international trade processes. The collaboration aims to leverage the benefits of blockchain technology to provide transparency, efficiency, and security throughout the trade finance ecosystem.

How is blockchain revolutionizing your industry? Share your thoughts on the game-changing potential of blockchain in supply chains!

FAQs

1. What is blockchain's role in the supply chain?

• Blockchain in the supply chain ensures transparency, traceability, and efficiency by creating an immutable, decentralized ledger of transactions.

2. How does blockchain benefit the food industry?

• Blockchain enhances food safety by providing a transparent record of each product's journey, helping in tracking origins, handling, and compliance.

3. What challenges does blockchain overcome in supply chain finance?

• Blockchain addresses KYC compliance, standard accounting rules, and trade issuance challenges, simplifying processes and increasing the effectiveness of supply chain finance.

4. Can blockchain be used beyond financial transactions in supply chain management?

• Yes, blockchain's applications extend to transparency, traceability, and efficiency across various industries, including food, diamonds, oil, and luxury goods.