Feature Story

Blockchain meets the supply chain

by Anne Field

blockchain

Companies use the technology to boost security and trustworthiness.

Supply chains these days can be bewilderingly complex. Depending on the product, they can involve everything from countless players and transactions to multiple regulations. Plus, most systems are highly opaque and often inefficient.

So how can supply chains get better? For a growing number of companies, the answer lies in blockchain technology.

"There are tremendous applications using blockchain for addressing supply chain issues," says Rohini Srihari, chief data scientist of PeaceTech Lab, a nonprofit that uses technology, media and data to create peace-building efforts.

See also: Blockchain for business with Cisco's Anoop Nannra

Often described as a digital ledger that's distributed over many nodes, or computers, blockchain systems are highly transparent. And while many users may have access to the data, they can't tamper with it. The upshot is a secure and public digital trail of transactions.

For supply chains, that means the potential for creating a permanent and safe record of each time materials or products move from one stage of the chain to the next. The result: a reduction in delays, fraud, human error—you name it—and a potentially foolproof system for end-to-end tracking.

"Blockchain driven innovations in the supply chain will have the potential to deliver tremendous business value by increasing supply chain transparency, reducing risk and improving efficiency and overall supply chain management," is how a recent report from Deloitte puts it.

Traceability

Clearly, one advantage is the ability to trace every product down the line to the original source. It's particularly important for the food industry. Walmart, for example, recently started using blockchain technology to keep track of pork sourced from China. The system records the original source of the meat, as well as where it's processed, stored, and its sell-by-date. At a blockchain conference in Cambridge, Mass, Walmart Vice President of Food Safety and Health Frank Yiannas described the company's ability to reduce the time it takes to track produce from six days to two seconds using a system developed with IBM.

But the food industry isn't the only sector that can benefit from an accurate tracing system. Take BHP Billiton, the global mining, metals and petroleum company. The copper, iron, coal and nickel it extracts from around the world have to travel across many parties and a host of information is required every step of the way to comply with regulations. With that in mind, the company recently developed a web and mobile blockchain application allowing their employees and partners to track information about mining samples in one real-time system.

Ensuring sustainable supply chains

The transparency of blockchain technology can also help companies establish their supply chain bona fides as supporting environmental stewardship and sustainable manufacturing. Consider London-based Provenance. Started in 2013, the company aims to allow environmentally-minded consumers to make sure the supply chain for the food and beverages they're buying meets their standards.

"Consumers want to know about the provenance of products at different stages—where things come from, who made it and from what," says founder Jessi Baker.

See also: The many applications for blockchain

In one early pilot, for example, fishermen used text messages to register a catch on the blockchain. Then, the blockchain ID was tied to every step along the chain and could be used to track and audit information establishing that the fish was caught not just legally, but also sustainably.

Some companies are taking advantage of streamlined, blockchain-based supply chain systems to create more-efficient marketplaces. For example, Pavo, a web and mobile app, creates an agriculture trading space where consumers, families, distributors, local restaurants and grocers can connect directly with farms to buy food and other agricultural products, all the while having a clear view of their provenance and maturation.

Protecting against bad actors

Then there's the ability of blockchain-based systems to stop bad actors and protect against anything from money laundering to child labor. The gold market is a case in point. 

"The reality is bad gold gets into the system and the industry knows it's got to stop this from happening," says Matthew Keen, managing director and head of responsible gold trading at Emergent Technology.

Its supply chain platform uses blockchain technology to track gold from miners, where it's tagged and sealed, and then through the chain to the refiners and vaults. In addition, the system uses what it calls its G-Coin, a digital certificate of title to responsibly sourced gold that is equal to one gram of gold. G-Coin tokens can be bought as an investment and moved easily to others to transfer wealth or make payments. Buyers also can redeem G-Coin tokens for physical gold.

"It's impossible for bad gold to get into our ecosystem," says Keen.

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