With the implementation of blockchain in the supply chain industry, it brings about the discussion of visibility- especially within end-to-end procurement processes. Over the years, this has encompassed not only domestic operations but also global operations, procuring and delivering assets to multiple cities and countries. Transparency in this area yields enormous benefits and is critical in the management of global supply chains. Without such platforms and visibility, there is arguably an inherent risk that could lead to fraud and violations of code of conduct by individual parties within the chain, as each has its own underlying agenda. The lack of trust, and ethics violations here, would snowball externally, further leading to a loss of clients and a good reputation.
Transparency in the Supply Chain
The supply chain process entails substantial collaboration between entities in order to fulfil the demands of consumers. The implementation of blockchain systems would allow for each party to access this shared network, to track sources and materials sent out to the respective client, ensuring trust and accountability between participants throughout the end-to-end process. This ultimately converges towards complete accuracy resulting from the use of the system by the members of the network.
This internet-based network would allow parties to receive and send updates immediately and securely, as with blockchain technology any input is fixed and cannot be changed. This would also assist with regards to security, particularly when detecting fraudulent parties, as seen generally observed in the food supply chain, where issues with product fraud arise.
The visibility in this sector would allow for several Improvements and would improve the entire operation of the supply chain. Providing that each and every participant updates the system regularly, this would be easier to hold individuals accountable as the source of any information (or misinformation) can be immediately identified and resolved within the blockchain mechanism. The accuracy of the system, as well as the speed, allows for all participants to be adaptable to the ever-changing environment and circumstances, such as this current pandemic.
One of the discussions that arise with the implementation of blockchain is the type of network the participants would use and the level of compatibility. Although some networks are public, such as Bitcoin or Ethereum, this is easily accessible by unknown users and may lead to little to no privacy. Both public and private networks are quite similar in the sense that the records are fixed, there is no possibility of tampering with the system records and they are both decentralised using a peer-to-peer network.
The key difference between public and private networks is the type of access to the participants. In the context of supply chains, a private blockchain, also called a permissioned blockchain, would be more applicable. Private blockchains are usually more suitable for the corporate and financial sectors as, due to the nature of the blockchain, companies would know exactly who the participants are in the network, and which entities have a particular type of access.
Another feature that aids transparency in the blockchain is the ability to complete transactions through the use of smart contracts, a set of protocols embedded into a blockchain system. This feature allows each party to update the network, without amending or deleting any information. Every single input in the system is secure and accessible by the network, allowing for a greater amount of trust and accountability.
With these advantages in mind, implementing blockchain systems into the supply chain industry sounds alluring, and if implemented effectively would change several operational aspects for the better. The issues that would need to be considered are the skills gap in the sector and the technical limitations within the industry.
“OCI is committed to the adoption of technologies in order to better serve our clients and indeed our wider partners, across end-to-end global supply chains. Conceptually, the benefits of incorporating blockchains are evident and OCI continues to work with its partners, and technology partners, in order to unearth the potential benefit yield.”
Oliver Chapman, CEO
Many skilled developers that specialise in blockchain are already picked up by fintech or startup companies, which brings about the issue of the lack of talent in the supply chain environment. The need for developers is further required depending on the firm’s technical limitations, as well as the computational costs in completing smart contracts.
Developers will also have to consider data security and privacy challenges that come with blockchain systems. With transparency in the network comes reluctance by some companies, with regards to sharing their confidential documents and strategies, as others within the chain can access that information. Although private blockchains grant certain types of permissions to the participants, it would be better for individual companies within the chain to keep physical storage for confidential information unrelated to the transactions.
Although blockchain technology is fairly new and the implementation for supply chains would be lengthy, ignoring and avoiding the implementation of such technology would be disadvantageous for the sector. Here at OCI, we hope to start using the advantages of blockchain to progress domestically and globally. Assisting our partners with quicker communication, transparent processes, and pioneering in the existing market.