Blockchain within supply chains
Leveraging blockchain technology in the supply chain overcomes challenges with faster and leaner logistics in global trade, comprehensive transparency and traceability, and improved automated commercial processes backed up by smart contracts, which are agreements that are automatically executed by nodes once certain precoded conditions are fulfilled.
Global trade is highly complex and involves many parties with conflicting interests. A simple shipment with a cooling chain from East Africa to Europe involves more than 30 nodes including over 200 interactions and communications - many still paper based, and all in different systems where the data needs to be reconciled after every update. Storing the relevant data on a shared and secure database based on blockchain technology would allow records to be accessible by all stakeholders in near real time and would reduce mistrust and costs. On the other side, it increases efficiency and accelerates logistics as it enables direct communication between all parties without the need to rely on intermediaries.
Imagine a supply chain where the complete history of a product is available - from the source of origin of the raw material, to the procession within production until the arrival at its final point of consumption. This information, stored via blockchain technology, improves supply chain transparency and enables monitoring provenance, giving supply chain participants more comprehensive track-and-trace capabilities than ever before. Companies can use this information to provide proof of products' legitimacy, for example, proof of the authenticity of consumer products and goods. Not only companies could profit from blockchain - consumers can learn about the products they are buying, for example, their ethically correct sourcing, their authenticity and the preservation of correct conditions.
This type of transparency and verification to the point of origin could also save lives. According to Interpol, more than 1 million deaths each year are attributed to counterfeit pharmaceuticals entering the supply chain. It is estimated that 50 percent of pharmaceutical products sold via unauthorized websites are fake, and up to 30 percent of pharmaceutical products sold in developing countries contain ingredients that are ineffective. Besides the serious effects on people and their health, this can also have a negative impact on pharmaceutical companies' reputation and revenue flow. Capturing the complete history of a unit of medicine, via the blockchain, as it moves from the point of origin through warehouses and onto the shelves of authorized distributors, would reassure customers that the medicine they are taking is authentic.
DHL and Accenture have developed a solution to overcome this major challenge in the health and life sciences industry and help consumers verify the legitimacy of pharmaceutical products with a blockchain-based track-and-trace serialization prototype. In a lab simulation, the system monitored each step that a pharmaceutical product takes from the manufacturer to the end consumer.
Bureaucracy is another driver of supply chain complexity. This complexity can be reduced with the use of smart contracts. If conditional triggers are added, the contract is executed each time the conditions are met, e.g. when contract parties have fulfilled the required tasks written in an underlying contract. Automated processes could replace paperwork such as letters of credit, bill of lading and other functions, for example transportation management, route planning and delivery scheduling.