blockchain

The application of blockchain in supply chains

09-01-2018

The recent hype around Bitcoin and other cryptocurrencies has brought a lot of attention to blockchain technology and how it will contribute to the future of how we do business. It is becoming clear the technology goes far beyond a decentralized and secure network for peer-to-peer financial exchanges (i.e. cryptocurrencies), and at Ecomatters we like to keep an eye on emerging technologies.

For us, blockchain is particularly interesting when it is applied in the context of supply chains. One of our top services is performing Life Cycle Analysis (LCA) for which it is critical to have detailed data on a product’s entire supply chain. Blockchain offers, among others, a system for collecting and storing data detailing the influx of inputs and outputs along a supply chain, which can in turn make the whole process more efficient, more secure, and cheaper.

Transparency

One of the most promising factors blockchain technology can bring to enhancing supply chains is by providing an enhanced level of transparency. How a product is made, where the materials come from and how the conditions of the employees are in these stages, can be made clear by applying a blockchain structure. Increased data on these aspects not only increases the accountability of companies and individuals, but also makes falsification of material movements impossible. This is particularly relevant for supply chains where developing nations are involved (mostly as raw suppliers), since instances of corruption and fraud attempts tend to be higher.

Increased transparency also means increased ability to detect and identify inefficiencies which can greatly decrease waste along a supply chain in association with a specific product. As material transactions can be tracked and inefficiencies more easily identified, the overall environmental impact of a supply chain also benefits as unnecessary energy use can be reduced or eliminated. This ultimately streamlines the supply chain making the entire process less costly, passing the savings on to the consumer.

Security

The distributed network ledger of a blockchain provides is constantly checked for accuracy by all of the other nodes in the network. Effective control and security in the supply chain safeguards consumers from substandard production and counterfeits, as it cuts out attempted falsifications. This benefits many stakeholders including investors, consumers, producers and businesses, while also discouraging malpractice.
Security benefits go beyond that of just quality of a product to include credibility of a products certification. These days, there are thousands of labels and certifications for products denoting the ethics and values that went into the production and manufacturing of a product. It is difficult to not only keep straight what they all mean but more importantly check a label’s accountability. With blockchain, verifications for working conditions or production methods can be hardcoded into the products within a supply chain so that customers can be sure the associated labels and certifications are accurate.

The direction of Blockchain
Blockchain has a lot to offer supply chain management particularly related to enhancing the sustainability of a product. This technology makes it easier to identify the components of a product’s supply chain, which streamlines the data collection phase for LCA, and the security and verification network is critical when applying sustainability labels and certifications. Here at Ecomatters we are eager to see how this technology continues to develop and be implemented into mainstream supply chain management as it presents a big potential for increasing efficiency, and thus making it a big win for sustainability in this area.