5 Ways IoT and Blockchain are Transforming Supply Chains
Today’s customers demand superior product experience, better customer service, greater transparency, improved safety standards, and faster delivery. Rightfully so! On the other hand, supply chains are rife with inherent risks, including theft, counterfeit, product damage, incorrect storage conditions, and regulatory non compliance. In pharmaceuticals, for example, 14-35 percent of vaccines are at risk of losing potency due to incorrect storage and handling. Therefore a variety of technology innovations are infusing global supply chains, end to end.
Internet of Things (IoT) and blockchain are two such technologies that deliver business value for modern supply chains, along several dimensions. This technology combination brings richer tracking and shared access to trusted, precise, real-time data about how a product is sourced, manufactured, handled, stored, transported, and delivered to customers.
IoT is an umbrella term for a variety of tracking and monitoring solutions using open standards-based connected sensors. Asset monitoring, fleet monitoring, worker safety monitoring, and manufacturing production monitoring are among the most common use cases for IoT today. Next, blockchain is a peer-to-peer distributed ledger that offers an immutable, validated, confidential, and common version-of-truth for the participants in a given blockchain network. Supply chains use permissioned blockchains, as they offer greater granularity in confidentiality, privacy and security that businesses need.
Together, IoT and blockchain are a powerful force: For instance, while IoT is used to track and monitor, when an incident of interest happens (say, a spike in truck temperature in a cold chain shipment), the pertinent parties that would be interested in this incident could access reliable, verified information of this incident from the blockchain ledger.
Internet of Things (IoT) and blockchain are two such technologies that deliver business value for modern supply chains, along several dimensions
Let’s now take a closer look at five key ways blockchain and IoT will help mitigate supply chain entropy, while enhancing visibility and transparency.
1. Product Provenance Tracking
“Where did this item come from?” can be a difficult question to answer about many manufactured products. In both discrete and process manufacturing, tracking the true provenance of raw materials, components, assemblies, mixtures, and products is a cumbersome and challenging process. Furthermore, if a product recall becomes necessary, tracing the provenance in the quickest and most reliable manner will minimize customer safety risk, as well as mitigate the impact on company’s revenue and reputation.
Using IoT and other complementary technologies, the source and origin of materials and components, their serialization, and their compliance with regulation and social responsibility can be ascertained far more effectively than ever before. This fosters deeper transparency, deeper business trust, and stronger partnerships. End-customers can have greater transparency too. For example, by scanning a QR code on a baby food jar, parents of a newborn could gain a deeper understanding about the ingredients and their entire provenance, as well as allergen information and anything else they would like to know about the product. Forward-thinking companies are deploying such transparency features to build greater loyalty and trust with their customers.
2. Production quality visibility
As supply chains become more intertwined, and business cycles shrink, the need for transparency and visibility of production quality is increasing. Incidents of incorrect quality certifications affect many companies, and possibly customers as well. In addition, new-age manufacturing smart machines (such as 3D printers and robots) provide more granular data than machines of previous generations. Therefore, companies are looking to leverage IoT based production monitoring systems to capture a variety of production metrics. This data is used to track production quality and process accuracy, and to catch deviations and incidents during the production process that might impact the quality and safety of their parent products. Blockchain is used to share this data across pertinent parties that need verified, immutable access to the information, including trading partners, regulators, insurance companies, and others, based on the business case. This type of tracking and transparency also helps with what-if and root-cause analyses to optimize manufacturing processes, improve yields, and even preempt recalls. Blockchain facilitate and simplify such cross-organizational sharing and verification of information.
3. Product journey tracking
Theft, mishandling, and improper storage of products are common risks when products are in transit. In the new digital supply chain model, sensors embedded in products send alerts if there’s an issue with temperature-sensitive products, such as food or medicine; missing inventory; or even possible product tampering.
Precise track-and-trace capabilities, based on IoT and blockchain, show exactly what’s happening to the product as it moves through the shipping process. From logistics providers to distributors, every responsible party could be connected to the blockchain network and have access to an indisputable record of a product journey and its state. For high-value goods, companies could use GPS-enabled geofencing to receive alerts if a shipment moves outside its intended route.
4. Change of ownership and custody verification
Similar to journey tracking capabilities, IoT and blockchain could help which party or parties were responsible for any mishaps while a product was in transit. Custody and ownership tracking are important from a risk and insurance management standpoint, especially with high-value goods. If products are damaged or lost, companies must determine who is at fault in order to be compensated rather than write off the loss, as often happens today. IoT and blockchain together provide more fine-grained tracking than traditional methods, which often still rely on manual processes or IT systems.
5. Paperless logistics
Paperwork-related delays and mistakes put time-sensitive shipments at risk. Whether due to problems with bills of lading or customs-clearance documents, many shipments sit idle for extended periods as delivery providers have paperwork verified.
Data in a blockchain ledger, however, could provide immediate, electronic verification of a shipment. For example, as a shipment moves from one location to another, the blockchain could automatically generate a digital bill of lading and transmit it to supply chain members. This would provide a way to help ensure the authenticity of the document and to eliminate tampering or forgery. In addition, ‘smart contracts’ can help to validate and automate many aspects of regulatory verifications and clearances – thus expediting the end-to-end process, and minimizing human errors.
By leveraging IoT and blockchain technologies, the next wave of supply chain digitalization will meet today’s and tomorrow’s always-increasing competitive demands for transparency, speed, and precision—and help decrease time, cost, and risk across the supply chain continuum.