Delving into Blockchain and Supply Chain Solutions: Challenges and Innovators in the Arena

Blockchain represents the cutting-edge science of tracking assets. Initially designed to add value and security to cryptocurrencies without involving intermediaries, like a bank or government the blockchain concept is now making significant strides in industries ranging from property to factory production.

Among the various applications of blockchain, its usefulness in managing supply chains stands out as one of the quickest to gain traction. Typically, a mix of manpower and computer systems monitors goods as they transition along the supply chain from manufacturer to end-user, forming a clear chain of custody accessible at any stage, detailing who possesses what, where it is located, its timing, and purpose.

This meticulous process has its shortcomings, as every segment of the chain can potentially fail. A data entry error, a misplaced shipping tag, or a fraudulent check can disrupt the entire workflow.

By eliminating manual intervention and optimizing mechanical and computational processes, blockchain provides an infallible resolution.

Keeping Track

Consider a case featured prominently in the media - steel products being shipped to the U.S. In March, under President Trump's administration, a 232 tariff was introduced affecting all imports. Though the 232 tariffs are typically for national security, the real aim here was to curb unauthorized goods transshipment heavily tariffed China through intermediary nations into the U.S. market.

The challenge of transshipment underscores the weaknesses of conventional supply chain management systems.

A Chinese mill produces a steel beam. Ideally, the mill wants to sell this product at a premium. However, the U.S., which has been a prime market with the highest prices for beams, imposes tariffs on Chinese steel to deter previous dumping practices.

The image at Yangshan Port in Shanghai, captured from NYTimes

Nevertheless, Vietnam imposes no such tariffs on specific beams, allowing their export. Once in Vietnam, an ethical exporter might slightly process the beam, say by refining its rough ends, before labeling it “Made in Vietnam” and dispatching it stateside. In a less honest scenario, the label goes on the raw product, with the anomaly unnoticed.

The U.S. Customs and Border Protection encounters this beam—originating from China but fraudulently labeled as Vietnamese. The beam then navigates through to the final purchaser exempt from tariffs.

Local steel manufacturers protest, demanding governmental action. With no transparent tracking method for steel items globally, the U.S. government's only course has been implementing broad tariffs, targeting illicitly transshipped products.

This approach resembles performing delicate surgery with a blunt instrument.

This sequence would have been avoided if any part of the supply chain mandated blockchain use for tracking and authenticating the misplaced beam. Due to blockchain transactions' resistance to forgery, transshipment issues are rendered irrelevant.

The Human Element

Upon closer examination, the beam wasn't meant for resale; it was for internal use in a factory's extension project.

The issue began when an administrator miscategorized its barcode with those meant for export. The beam, which was supposed to be installed just yards away, ended up miles away, unintentional.

Once more, blockchain could have preempted this mistake. Without human error, the beam would've been routed correctly to its designated internal location. Even in the unlikely event of a barcode falling off, blockchain allows the beam to be tracked to its lapse and rectified. With a meticulous blockchain inventory system, missing assets don’t simply disappear into accounting oversights.

Flowspace, Warehouse Image from Techcrunch

It's evident that blockchain technology would simplify all necessary documents for marking goods for internal consumption, keeping order books and inventory tax calculations untarnished.

Freshness May Vary

While the example of steel is timely, blockchain might impact various sectors where promptness is crucial. Take food as a leading example.

A case of tomatoes is dispatched from the farm on a Tuesday. However, the newbie at the distribution center mistakenly places it at the dock used for non-perishables. The cooling truck arrives on Wednesday, loads other goods, and departs—leaving one case behind.

Days pass, and the tomatoes spoil rapidly.

A warehouse veteran, alerted by the odor, relocates the case to the correct dock and modifies the label to conceal that the tomatoes had been going bad for over 48 hours. The shipment proceeds Friday morning, destined to disappoint a grocery store.

When the blunder is identified, the deteriorated tomatoes are discarded. What's next? The management system installed appeared robust until the crate ended up on the incorrect side of logistics with faulty dates.

Unlike our beam narrative that focused on precise whereabouts, timing dictates our tomatoes' fate. Luckily, blockchain addresses this too. Immutable timestamps embedded in blockchain, allow grocery outlets to easily verify freshness, safeguarding their right to demand refunds if anomalies occur. Blockchain’s incorporation would also offer comprehensive records of inventory, enabling staff to monitor quality and deter any tampering.

Companies Tackling the Problem

Numerous blockchain initiatives are addressing existing supply chain challenges through innovative approaches.

Waltonchain

Waltonchain is an endeavor combining efforts from Chinese and Korean developers, focusing on blending blockchain tech with RFID to advance supply chain management while promoting the merger of blockchain with IoT advancements.

Wabi

WaBi seeks to leverage blockchain's security for authenticating physical products, defending consumers from counterfeit risks. The initiative includes placing anti-counterfeit tags on goods, offering proof of authenticity and integrity, allowing customers to employ the WaBi token for purchases. Initially concentrated in China, the parent company Walimai and WaBi are pursuing global expansion.

VeChain

VeChain applies blockchain solutions to various industries, tackling issues unique to specific sectors, such as enhancing food safety in liquor and other domains. This could involve mitigating counterfeit possibilities and improving traceability.

Honesty, Enforced

Implementing blockchain within the supply chain enforces a transparency standard among all stakeholders. Fraudulent behavior and manipulations become obsolete, driving not only effective business management but extending its influence beyond. Some groups plan to utilize blockchain to combat human exploitation in high-risk industries, where tracking origins of diamonds and valuable minerals become more transparent.

With the ongoing adoption of blockchain, normal practices in business are dwindling. Given its decentralized and integrative features, even a single blockchain-reliant segment in the supply chain can encourage the entire chain's alignment. If one link can undeniably affirm its authenticity, logical pressure mounts on the rest to match this standard or face obsolescence or dishonesty.

This notion perhaps highlights blockchain's most compelling advantage over traditional management approaches – its unwavering integrity.

References

1. http://www.supplychain247.com/article/why_blockchain_is_a_game_changer_for_the_supply_chain
2. https://www2.deloitte.com/us/en/pages/operations/articles/blockchain-supply-chain-innovation.html
3. https://hackernoon.com/blockchain-technology-for-supply-chain-management-3d12121df57b
4. https://www.commerce.gov/news/press-releases/2018/02/secretary-ross-releases-steel-and-aluminum-232-reports-coordination
5. https://www.nytimes.com/2018/04/22/business/china-trade-tariffs-transshipment.html
6. https://www.bloomberg.com/professional/blog/blockchain-coming-everywhere-ready-not/
7. https://www.newfoodmagazine.com/article/36978/blockchain-food/
8. https://slavefreetrade.org/blockchain-tackling-slavery-in-supply-chains/