Blockchain adds security link to supply chain management
Being able to track the whereabouts of goods on a map is great, but the deeper issues in supply chain management are trust and provenance. Customers need to trust that the goods received match the expectations of their order. The origins of those materials are important too. You might not realize it as you bite into a tuna sandwich or drive around in future electric vehicles, but blockchain could be making a positive contribution in both scenarios.
UK organization Provenance, which enables supply chain transparency, has demonstrated the use of blockchain to confirm responsible tuna sourcing in Indonesia. European legislation will require battery makers to demonstrate the origins of energy pack constituents – for example, to show that human rights haven’t been violated during mining.
AI digests supply chain risk
In 2019, the Ford Motor Company, Huayou Cobalt, IBM, LG Chem, and RCS Global announced plans to use blockchain technology to trace and validate ethically sourced minerals. Requirements on producers also take into account the circular economy, as battery passports should confirm required levels of recycled materials.
More companies are taking an interest in the use of blockchain to facilitate improvements in supply chain management. Linking all elements with immutable record-keeping helps to eliminate blind spots. Fashion brands have reached out to blockchain-backed identity providers such as Everledger to deliver digitally-enabled anti-counterfeiting solutions.
In the transportation sector, shipping giant Maersk has teamed up with IBM to develop a blockchain-enabled supply chain management tool dubbed TradeLens. Members can be thought of as ‘trust anchors’ and are known to the network based on cryptographic identities. Fully digital, TradeLens can replicate all of the functionalities of original paper bills of landing. And the solution is based on Hyperledger Fabric – an open-source framework – which moves our discussion onto standards and compatibility.
The Blockchain in Transport Alliance (BiTA) and related BiTA Standards Council (BSC), brings together freight, transportation and logistics firms, together with other stakeholders. And its activity highlights the direction of travel in the sector. BSC’s goal is to standardize data formats on transport blockchain platforms to increase interoperability between and among platforms.
BiTA members include big names such as FedEx, UPS, Canadian Pacific Railway, as well as Salesforce, and trucking management specialist McLeod Software. Walmart has famously integrated blockchain, working with IBM on the pilot project, into its food supply chain. One of the benefits was being able to track the provenance of meat products.
US-based ‘BeefChain’ – which has its origins in Wyoming – continues the meat-tracking theme, giving ranchers the means to upload information on cattle (linked to RFID chips) to its blockchain. Again, the value proposition to food producers is that customers have a much clearer understanding of where products come from. The data should also better support farmers that prioritize animal welfare.
How a blockchain works
Naturally, it’s much easier to picture how supply chain management benefits from having a digital ledger once you understand how a blockchain works. So, let’s run through the basics. Each protocol will have its variations, but the common ground is that blockchains record transactions in a way that makes it impossible to modify individual entries. Also, the information is distributed rather than centrally controlled, which motivates stakeholders to reach a consensus.
Underpinning the whole process are digital signatures. Parties digitally sign blocks of information to confirm that they approve of its contents. And this functionality is enabled thanks to the public and private key pairs issued to support the protocol. The signer generates a digital signature using their private key and anyone can confirm the validity of that block via the public key.
What’s more, because the signature is a function of both the signer’s private key and the supply chain information itself, if anyone changes the entry then the validation step will fail. You can see this in practice by having a quick play with hash functions – the mathematical tools used to codify details on the ledger. For example, using SHA256 (a popular choice of hash function) ‘Made in the UK’ corresponds to ‘e6d4c775a70ea335908f4252c9e995a219f67734152c0b7947585730fc0815bd’, whereas ‘Made in the USA’ corresponds to ‘9954dd7400781aac78102db77b473e0f2e0d8f69be7f1037becfab9130205934’ – a totally different value.
The clever part about blockchains is that the hash function digests not just the current transaction, but all the entries that go before it. And this makes it impossible to modify historical information. Doing so would mismatch the hash value calculations and corresponding digital signatures would fail – the integrity of the ledger would be broken.
Having the capability to self-report any tampering makes blockchains a useful mechanism for establishing trust across a series of nodes. In terms of supply chain management, blockchains can help (as we’ve mentioned) with food origins – for example, validating that produce is organic. They can also validate so-called ‘cold chains’ confirming that goods have been stored below a certain temperature throughout their journey from origin to destination.
As consultancy Deloitte notes, using blockchain in the supply chain can help participants record price, date, location, quality, certification, and other relevant information to improve supply chain management. Also, blockchain doesn’t just put the spotlight on bad actors, it can also facilitate error-checking and quickly highlight any systems failures.
Finally, accurately recording all steps in the supply chain in a manner that’s trustworthy will be invaluable to firms when it comes to environmental tracking. Blockchain is likely to play a much bigger role in demonstrating compliance with sustainability policies and aiding firms in their carbon footprint calculations.
20 September 2023
20 September 2023
20 September 2023