Blockchain can reduce supply chain risks

The supply chain is focused on distribution and most organizations will try to adopt good distribution practices. For large organizations, distribution is something that occurs both upstream and downstream. According to the Supply Chain Management Review, upstream are suppliers that create goods and services used in their business activities, such as components or raw materials. The downstream supply chain efficiently distributes a company's products or services to its customers. Each phase, both upstream and downstream, must be managed proactively to minimize the risks of quality, financial, confidentiality, operational, reputational and legal.

The challenge faced in the modern and interconnected world is the increasing complexity of supply chains. This complexity presents risks, including goods that do not fall within the required storage parameters and the risk of contamination or counterfeiting. It is up to the manufacturer to carry out a risk assessment, which may involve:

Understanding which products are transported and where.

Break the transport chain in steps.

Evaluate each step from the sender to the recipient. Consider what will happen if delays occur at any stage of the transport journey.

Evaluate how long the load remains at each step.

Evaluate the effectiveness of anti-counterfeiting measures and how to evaluate them? For example, using anti-tamper locks or gaskets.

Considering the environmental conditions at each step (this may have to be extended to seasonality).

Understanding the impact of temperature and humidity.

Understanding the suitability of the container.

Understanding the impact of shocks and vibrations on goods and packaging. For example, how robust is the package? Have crash and rotation tests been performed?

Many companies are now trying to address these risks with blockchain technology. Blockchain is a form of distributed ledger technology, with the distributed digital ledger functioning as a database, kept, controlled and updated by each of the users who have access to it.

As far as supply chain risks are concerned, blockchain allows the transmission of data and information to all users of the supply network in real time. This means that when goods move from point A to point B, all those in the supply chain are made aware at the same time. If a change occurs, such as switching to another distributor, each actor is made aware and the system can be configured so that each party needs to agree that change.

A second advantage is the secure transmission of correct information among the users of the supply network. The cryptographic nature of this builds security in the exchange of information. A third example concerns the connection to the Internet of Things and devices such as radio frequency identification transmitters (RFID). This is a technology whereby digital data encoded in RFID tags or smart labels are captured securely and digitally by a reader via radio waves. Blockchain can be particularly useful in connecting physical goods to serial numbers, barcodes, digital tags such as RFID.

Based on these benefits, some distributors are looking for ways to exploit blockchain innovations to increase profits and strengthen relationships throughout the supply chain.