As consumers become more conscious of their choices in supermarket aisles, multinational companies, including Walmart, Carrefour and Nestle, have turned to new technologies to engage their customers, discover efficiencies in their existing supply chains, and reduce a considerable manual workload. These industry leaders have already begun deploying Distributed Ledger Technology (DLT) for blockchain supply chain management. This article will explain the appeal of this implementation, while exploring its relationship to Digital Identity.
Even simple supply chains can be problematic. Large international companies must manage complex webs spanning a multitude of countries, time-zones, shipping routes, and organizations. Blockchain can be used to automatically trace time and place of origin, delivery stages, time of sale, and more; advantages that could prove highly beneficial in Fast-Moving Consumer-Goods (FMCG) markets. Furthermore, blockchain supply chain management systems could potentially be used to bring about highly synchronized production and delivery between factories around the globe.
The vast majority of today’s supply chains are reliant on centralized IT systems. There are objective advantages of these systems which have been serving us well for some time, such as ease-of-data tracking, as well as security and quality control. Yet by requiring shipping to centralized hubs, these systems are limited by their geography — increasing employment difficulties and carbon footprints. In an age of supply, climate, and automation concerns, there is a growing need for a new system.
By automating or mitigating key supply chain processes, DLT offers unique advantages; it:
· Removes reliance on paper documentation (still prevalent in incumbent shipping industries)
· Minimizes need for manual data input (slow and subject to error)
· Provides advanced traceability to company and end-user
· Delivers a tamper-protected, technologically trustless solution
The last of these advantages is arguably the most revolutionary. By effectively making every node in the supply chain into a node operator, single nodes cannot have their records changed or tampered with without other nodes’ detection. Consensus mechanisms allow organizations to onboard new participants with more confidence — knowing that participants responsible for error can be identified and held accountable.
Utilizing blockchain supply chains therefore brings the advantages of decentralization, immutability, and transparency. There are trade-offs too — including the need for data storage at each node and potentially longer wait-times while nodes reach agreement. For more on DLT’s scalability issues, read our previous blog series — it explains how modifying the way in which ledgers operate can allow people to circumvent these concerns.
How Digital Identity Intersects with Blockchain Supply Chains
Digital identity plays a key role in two aspects of DLT-powered and blockchain supply chains: the identification of the supplier (including credentials and certificates) and identification of the asset (such as a product or component).
Traditionally, supplier certification is handled via somewhat centralized third-party entities or KYC (Know-your-Customer) verification. Decentralized alternatives are already being implemented. One solution being tested in British Colombia and Ontario is VON (The Verifiable Organizations Network). VON takes advantage of the Sovrin Network, a leading provider of distributed digital identity solutions. A 100% open-source code, VON works through local government issuance of digital identities that can be used to conduct global operations.
Blockchain supply chains can integrate existing asset-identification techniques, including barcodes, RFIDs, NFC or QR codes. Having been identified with these techniques, the assets can be tracked as non-fungible tokens on a blockchain.
There are exciting ideas proposed to advance this technology further. Including a novel idea shared on sciencedirect.com suggesting that ‘token recipes’ could track relationships between products and the components used to manufacture them.
Operational DLT Supply Chain Solutions
VeChain is a well-known blockchain-based company implementing supply chain solutions using these methods. They assign products with digital identities using physical tagging techniques such as NFC, RFID and/or QR codes. These identity tags correspond to SHA256 hashing functions. Their ‘VeChain Identity’ technology then translates all product and supply chain activity from the real world to the ledger.
The technology is already being pioneered by a Walmart China and PwC project focused on food-product tracking. According to VeChain, 23 products are already successfully listed and tracked, with an estimated 100 products to be covered before the year is over.
Walmart is a heavy investor in supply chain blockchain solutions. Their partnership with IBM is even more ambitious; they are attempting to create a fully transparent food system, precisely tracking the origin of grocery products through IBM’s Hyperledger tech. Though the project is effectively still in its infancy, they have announced some impressive results — claiming that they have reduced the duration of product-origin authentication from an average of 7 days to 2.2 seconds.
With results like these, it is unsurprising that they have extended their cooperation beyond fruit and vegetables. A recently announced initiative, partially mandated by the US Food and Drug Administration (FDA), requires companies to identify, track, and trace prescription medications within the USA. KPMG and Merck are participating in the project alongside IBM. Walmart are simultaneously experimenting with Mediledger’s Ethereum-based technology, which was developed primarily for usage in the pharmaceutical supply-chain
The corporate benefits of securely tracking goods are evident. Successful outcomes in these ventures have the potential not only to increase efficiency but safety. Other companies are focused on the technology’s customer-facing opportunities. Through the use of mobile apps, users are able to track the origins of the products they purchase. This could grant users with the ability to discern between products based on information such as its carbon footprint, its promotion of sustainable development, and its compliance with organic or fair-trade standards.
In spite of, or perhaps because of, its controversial supply chain legacy, Nestlé are testing various user-focused solutions. As well as spearheading the IBM Food Trust initiative, Nestlé are trialing a solution developed in partnership with OpenSC to track milk from farms in New Zealand to Nestlé’s Middle-Eastern facilities. They have announced intentions to later expand the trial to another highly controversial product in the supply chain — palm oil.
More recently, Carrefour have experienced sales-increases after deploying a small-scale customer food-tracking service. Carrefour customers were able to use their smart-phones to scan products’ QR codes in-store. Doing so presented them with useful information about the products, including harvest date, farm-location, packing date and shipping duration. The solution was trialed in China, Italy and France where users spent up to 90 seconds reading merchandise information.
IBM also helped Carrefour with this project’s implementation. With further blockchain trials being explored by companies such as Deloitte and AT&T, supply chains appear to be one of the most promising areas of early-adoption for distributed ledger technology.