The more complex the supply chain, the more black holes there can be. Even if companies have been working with their suppliers for years, their supply chains can be full of surprises.
The retailer Target partnered with their luxury bedding supplier for years. The supplier provided Target with sheets made from Egyptian cotton‒the most expensive in the world. But in 2016, their cooperation came to an end. Target discovered that, in reality, their premium sheets were made from lower-quality cotton blends.
This was also an unpleasant surprise for the bedding supplier. They tried to figure out what had gone wrong, but it wasn’t easy. Over the years, the company had bought materials from several suppliers who claimed to be supplying real Egyptian cotton. It was unclear whether it was a deliberate scam or an oversight. As a result, the company lost their market share and reputation.
This story could have gone differently if the company had used blockchain supply chain management systems. In this article, we describe how the technology helps businesses avoid this kind of problem. Keep reading to discover four use cases of blockchain in supply chain networks.
Blockchain for Supply Chain Management Explained
Blockchain is a system that stores data in a special way. It records it as separate blocks and seals it with a digital signature, or a hash. Additionally, each block contains a digital signature from the previous block. In this way, the blocks are connected as a chain. This mechanism makes a blockchain immutable: once recorded, the data within a block can’t be modified. You can read this article to find out how it works in more detail.
As for supply chains, blockchain makes them transparent and traceable. The technology captures every event along the entire value chain. It contains data about raw materials, processing, and logistics. In other words, blockchain brings to light what may be hidden in complex supply chains.
Let’s go back to the example of Target’s supplier. What would have happened if the supplier had used blockchain for supply chain management? They would have been able to control the quality and origin of the raw materials they bought from each of their suppliers and this incident would not have happened at all. The company would have been able to maintain their position in the market.
Now, let’s take a look at other real blockchain supply chain examples.
Use Case 1: Blockchain and Food Recall Management
Food recalls happen when there’s a risk that a product may cause a foodborne illness outbreak. The most common reasons for this are bacteria, parasites, and improper packaging. In this situation, food companies have to remove dangerous products from supermarket shelves as soon as possible to minimize the public health risk and save their reputations.
However, tracing affected products isn’t so easy. On average, it takes about two months for food companies to do this and even longer with global supply chains.
Blockchain technology in supply chain networks helps businesses respond to recalls quickly. It logs all the events that food products go through on their way to the supermarket shelves. Companies can source defective products within seconds as a result. In addition to improving public safety, this also results in less waste and lower costs.
Real-Life Example
Since 2018, Walmart has been using blockchain to manage their suppliers of leafy greens. Their goal is to ensure the safety of the products they sell and to reduce the time it takes to provide evidence in the event of a claim.
The solution gathers data about every step the greens go through, from when the seeds are planted. Once the greens are on the shelves, the company can continue to add data to the platform. For example, Walmart can specify how long the greens have been in the store and at what temperature they are being stored at.
With this information, Walmart can quickly determine the origin and location of compromised products. For example, sourcing the origin of sliced mangoes in their US stores takes two seconds with blockchain, while using traditional tracing methods would take a week.
Benefits at a Glance
- Reducing costs. Companies can manage recalls quickly, minimizing legal and investigative costs.
- Minimizing waste. Businesses can localize contamination precisely to remove only the damaged products.
- Saving reputation. With blockchain, food companies can respond to recalls before they become reputational disasters.
Use Case 2: Blockchain for Consumer Loyalty
There’s another problem with food recalls: they can affect all the companies in the segment. If a recall has already caused too much damage, it’s almost impossible to stop a scandal. And this becomes a problem even for brands with perfect reputations. For the sake of their health, consumers become wary of all products in the segment.
This was the case with a food incident called the Chinese milk scandal. In 2008, the chemical melamine was found in baby powder. This resulted in kidney damage, which affected 300,000 children. A long investigation traced the chemical to local farmers: they were adding melamine to their milk to boost protein levels. Since then, the government has increased control over milk quality, but parents’ confidence is yet to be restored.
What can other honest brands do in a situation like this? They can use blockchain for supply chain management to prove the safety of the ingredients in a transparent way. The technology stores precise information about each ingredient and operation performed on the product. Using a mobile phone, consumers can access this information to make sure the product is safe.
Real-Life Example
Nestlé wasn’t involved in the incident with baby milk, but their business was affected by it. They decided to use blockchain to strengthen their position in the Chinese market. The solution records the journey baby formula takes on its way to the supermarket shelf. With a mobile phone, a consumer can scan a chip located on the formula package to see the ingredients, their source, and the organizations that produced them.
Nestlé also provided the milk packages with antennas that will break if someone tries to open them. This helps reassure customers that products haven’t been tampered with on their way to the supermarket.
Benefits at a Glance
- Strengthening a brand’s position after an industry incident. With blockchain, brands can prove their products are safe.
- Increasing customer loyalty. The technology makes brands transparent and responsive to their customers.
Use Case 3: Blockchain in Logistics for Cold Chain Control
Some products require special care, where even the slightest temperature changes can affect quality. These items include some medical products, chemical reagents, and foods. They are usually shipped in high-performance insulated packaging to minimize potential damage from exposure to heat or cold. But, in many cases, this isn’t enough. The resulting damage can still be significant. For example, one in five pharmaceutical products is damaged during transport due to cold chain disruption.
This is possible for several reasons. Refrigerators can break down or be disrupted by power outages. Or, drivers can leave refrigerators unattended or leave their doors open, preventing the appliance from maintaining the right temperature.
Blockchain paired with IoT can be useful in all these situations. IoT sensors track location, temperature, and other parameters during shipping. Blockchain records the sensor data as the product moves through the logistics network. As a result, companies gain full control over temperature conditions during transportation. This means that they can quickly find weak spots in the cold chain and fix them.
Real-Life Example
SkyCell used blockchain to create smart refrigerated containers for the transport of medicines that are equipped with IoT sensors. The sensors monitor the drugs’ geolocation in real time from anywhere in the world, as well as the temperature and humidity they are being stored in. The solution relies on blockchain to record these parameters. Blockchain also stores all the logistics documents for each container in a digital book. This data can’t be deleted or forged, and it may serve as evidence.
One of SkyCell’s clients used the solution to transport medicines from Brussels to Mumbai during the pandemic. At that time, flights were often canceled at the transfer point, so medications had to be stored at the airport until an alternative route could be found. This took days in some cases. With outside temperatures ranging from +41°F to +111°F, this was a big problem. Using the SkyCell solution, it was possible to maintain the temperature inside the containers between +37°F and +55°F. As a result, the medicines were delivered to India in a state that was safe for use, which was confirmed with blockchain. The use of this technology not only prevented financial losses for the company but also ensured the safety of the medicine they delivered.
Benefits at a Glance
- Controlling temperature conditions. The technology captures all temperature changes as the product moves through the logistics network.
- Improving cold chain management. Blockchain helps businesses identify and address weak points in the cold chain.
Use Case 4: Blockchain for Sustainability Control
Today’s businesses have to take care of the environment. Their environmental impact influences their reputation and investors’ decisions. Sustainability credentials are also valued by consumers who tend to buy sustainable goods, even if they cost more.
But, in order to label a product as sustainable, businesses have to be sure they’re using 100% sustainable products coming from other suppliers. This isn’t easy for companies that are toward the end of the supply chain. And the longer their supply chain is, the harder it is to find out.
So, how can features of blockchain support sustainability efforts? The technology can create a supply chain model for any product. Each record along the blockchain will contain the necessary data on this product. It will also record every event and condition. For example, for a vegetable, it will record data from the vegetation period all the way through to processing and transportation. This enables companies to see how sustainable the products they want to buy really are.
Real-Life Example
Unilever aims to achieve a deforestation-free supply chain by the end of 2023, so they need to know how sustainable their supply chains really are. Existing systems for sustainability certification are not enough to provide this information, so the company decided to use blockchain.
They started a pilot project in Indonesia to trace the palm oil they bought. Their first-mile suppliers created digital tokens, which mirrored the flow of palm oil through the supply chain. As a result, Unilever could get information about the product, including the conditions in which it was grown and harvested.
Benefits at a Glance
- Verifying that the origin of raw materials is sustainable. Businesses can check how sustainable the raw materials they want to buy really are.
- Increasing consumer loyalty. Companies can prove the sustainability of their products to consumers for whom this is a priority.
Summing Up
Blockchain in supply chain networks helps companies manage their suppliers more efficiently. The technology makes supply chains transparent and traceable, enabling businesses to
- Manage recalls more efficiently
- Strengthen their market position after major incidents in the industry
- Monitor conditions during transportation
- Prevent cargo theft
- Verify the origin of raw materials
If you are looking for experts to create a blockchain solution for supply chain, Softeq is here to help you. We can build the entire blockchain infrastructure or any of its individual elements, including blockchain core, nodes, or ecosystem applications. With Softeq, you can add blockchain to your business to boost trustworthiness and safeguard your reputation.
