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Blockchain for the Supply Chain

by Kami Holtz
in , on Apr 05, 2018

Telephone GamePlaying the Telephone Game

Can you remember when you were a kid playing the telephone game?  You’d start with a phrase or a few words and then you’d whisper it to the kid next to you.  This kept going until you got to the last kid and they announced confidently what they had heard.  Inevitably, the phrase had changed dramatically.  You may have had some completely different words, or a few words were missing and the more kids you added to the chain, the more distorted the phrase became at the end.

Your Supply Chain Shouldn’t Be a Telephone Game

Similarly, as supply chains have evolved and grown over the years, they have increased in complexity.  We have moved away from simple localized supply chains and have advanced to globalization. Today’s supply chains can span over hundreds of stages and locations all over the world. That is a lot of things changing hands tracked across many different systems resulting in increased risk of fragmented or missing data.

Organizations need accurate data in real time to be able to react quickly to today’s fast changing markets and consumer demands. Organizations must have confidence in their suppliers and extended chain partners to ensure they meet regulatory, quality, and customer demand requirements.

Stated differently, the supply chain industry is impacted by challenges in the following three areas (1) transparency needed for trust, (2) flexibility needed to adapt to changes, and (3) visibility needed ensure compliance.

Supply Chain Series
How do these three challenges impact supply chains?

  • Transparency – Openness creates the foundation to build confidence in suppliers, third parties, and other extended partners regarding their practices, scalability, operations, compliance, and quality.
  • Flexibility – Market demand changes quickly and it is essential for supply chains to respond rapidly. High inventory generates negative pressure on margins.  Low inventory can result in a loss of business weighing on revenue growth.  The organizations that win will be able to adjust to meet these demand changes.
  • Visibility – Increasing regulatory and security requirements make visibility into operations even more critical than in the past. One example in the supply chain industry is the 2013 Drug Supply Chain Security Act. This act imposes more stringent requirements for the traceability of prescription drugs as they are distributed in the United States.

Your Supply Chain on Blockchain

So how can blockchain technology help with these challenges?  Before answering that, let’s briefly review what we talked about in our last blog post regarding blockchain.

Blockchain can be described in just three words: distributed, immutable and ledger.   It is distributed or shared because it works on a peer-to-peer basis and does not rely on a centralized entity to verify a transaction.  It is immutable because it uses complex cryptography to ensure the integrity of data and to prevent changes being made to transactions once they are committed to the blockchain.  It is a ledger because it is a database that can be used to store any type of transaction.  Combining these attributes means a diverse set of participants can work with the same set of data seeing new transactions within minutes, or in some cases, seconds while having confidence in the integrity of the data.

Blockchain GlobalWhen a supply chain moves to the blockchain, products can be tracked as they enter the supply chain and each transaction can be documented in a distributed immutable ledger.  Instead of relying on third parties or centralized clearing houses to certify changes to the data, certifications can occur by consensus among the blockchain participants.  This creates a permanent history of the transactions from end to end.How does this solve challenges around supply chain transparency, flexibility, and operation visibility?  Having an immutable record of the end-to-end supply chain can provide visibility to all parties regarding each transaction in real time significantly impacting overall efficiency.  Businesses can evaluate suppliers and third parties within the chain making real time decisions and having confidence in the quality of the end product and the ability to deliver on schedule.

 

How can this be used in the consumer market?

  • Food Safety – Blockchains can provide early detection and containment of contaminated or at-risk food items. For example, Walmart has done a pilot program with China to track meat on a blockchain. In the event of a product recall, the company can quickly identify the source of the contamination. This not only increases safety but has the potential to reduce food waste in the recall process.
  • Provenance – A blockchain can be a record of ownership that is used as a guide for authenticity and/or quality.  With the efficiency and transparency of blockchain, provenance could be expanded beyond just high-ticket items such as art, to more general purchases resulting in consumers being able to make more informed purchasing decisions.
  • Product Availability – Blockchains can give more confidence that the products we want and need will be available when we need them due to a more agile supply chain model.

Revisiting the Telephone Game

Let’s look back on our telephone example from the beginning.   Think of how we could mitigate the risk at the end if we recorded the phrase each time it was passed and then documented it in real time.  The documented recordings would be visible to everyone in the chain and the source of any inconsistencies could easily be identified. Adjustments could be made allowing the chain to be more flexible if one member of the chain consistently struggles with the phrase. This would provide trust and transparency that the phrase is accurate as it moves through the chain, ensuring higher quality and reliability when the message gets to the end.

Want to see how your use case fits with blockchain and what solutions will work for your business?  The time to evaluate blockchain for supply chain and other use cases is now.  At Coherent Solutions we continue to research different blockchain technologies and solutions.  We are ready to help you start this journey.  Let’s Innovate!

Kami Holtz

Kami Holtz

Service Delivery Manager

Kami's experience is a unique blend of leading business and technical teams. Her expertise includes system engineering and development, operations, project management, security, consulting, and delivery. At Coherent Solutions, she leverages her strategic perspective of aligning business drivers and technical solutions to deliver software products and platforms. Kami holds an MBA in technical management from the University of Phoenix.

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