Blockchain in Supply Chain Transparency

Supply chain transparency and management was one of the earliest cited examples of an industry that could benefit from the emerging technology known as blockchain.

In fact, the topic of blockchain in supply chain transparency is one of the most pursued and studied enterprise implementations of the technology, inspiring various reports as broad as “An Analysis of Blockchain Adoption in Supply Chains Between 2010 and 2020“, and as specific as investigating the value of blockchain for seafood logistics.

In short, blockchain is generally implemented in supply chains as a form of “track and trace” — although it is worth noting that this is certainly not the limit of the technology in this space.

How companies integrate blockchain into their supply chain can be largely categorised under two umbrellas:

1. B2B, business-to-business, to internally track the flow of materials and related data from Company A to Company B
2. B2C, business-to-consumer, for allowing consumers to trace certain information about the product they are buying

In the B2B model, the blockchain syncs with an internal database, or numerous internal databases, and can include any information relevant to the manufacturing process: source of the material, date of sourcing, which other companies the material passed through and under what circumstances (transport, preparation, modification, preliminary manufacturing), etc. Effectively, blockchain enhances the management of the supply chain.

Some examples of industries implementing blockchain in this way include healthcare, automotive, and oil & gas.

In the B2C model, blockchain has largely been used as a means to empower consumers to be able to trace the source of ingredients that generally either (1) carry a stigma of exploitation, whether that be exploitation of labour, resources, or a combination of both, or (2) are often counterfeited. B2C revolves around transparency, provenance, and authenticity.

Some examples of industries implementing blockchain in their B2C initiatives include gemstones, fashion, and food.

Blockchain can be a good fit for these industries due to the inherent advantages built into the technology. Furthermore, it can aid and speed up compliance with regulations such as the EU’s Corporate Sustainability Reporting Directive (CSRD).

Blockchain is secure, private, and effectively impossible to tamper with or change (immutable). Any alterations or corrections to entries need to be appended as a new entry. This means that it is always possible to see the full lifecycle of whatever activity is being logged.

However, there is one major, common misconception about blockchain’s implementation in supply chains that is holding it back from larger scale implementation.

We’ll address this misconception below, delve into specific use cases with real-world examples, and explain why we believe so strongly in our approach.

The Common Misconception about Blockchain in Supply Chain Transparency

The problem with misconceptions of blockchain is that they are held not just by the media, but often by well-respected organisations. Or goal here is not to point any fingers, but to give context as to why some technical misconceptions are so strongly held.

Below are two quotes from highly reputed organisations that are, frankly, incorrect. Or, at the very least, they present a firm position without necessarily having reviewed the full picture:

“Supply chains require private blockchains among known parties, not open blockchains among anonymous users. So that members of a supply chain can ascertain the source and quality of their inventory, each unit of it must be firmly coupled with the identity of its particular owner at every step along the way. Consequently, only known parties can be allowed to participate in such a blockchain, which means that companies must receive permission to join the system.”

Source: Harvard Business Review

Remember, we’re labelling these as misconceptions, despite the repute of their sources. Keep reading to understand why.

“In adopting blockchain technology for its supply chain, a company must first decide on the type of blockchain it would need to build. […] [T]he supply-chain world is unlikely to accept open access because its users don’t want to reveal proprietary details, such as demand, capacities, orders, prices, margins, at all points of the value chain to unknown participants. This means most supply-chain blockchains would need to be permissioned, with access governed centrally and restricted to known parties who may be limited to certain segments of data.”

Source: McKinsey & Company

We know these two quotes illustrate the general consensus in the business world because this is exactly what we have seen in the majority of blockchain decisions made by both businesses and governments.

The general consensus of the above can be summarised thus:

‘The only way blockchain can be implemented in a company’s supply chain is if a blockchain is purpose-built, private, permissioned, centralised, and likely by means of a consortium.’

The misconception seems to spawn from an assumption that “public = sensitive data in plaintext”. You can check out our previous article on Public vs. Private Blockchain for an in-depth explanation, but the truth is more nuanced.

The public blockchain is indeed public — meaning: anyone can write to it and read from it — but that doesn’t mean that the entries on the network are findable, identifiable, or legible by the public. If you go take a walk around your local city square, that doesn’t mean that every person you pass by suddenly knows what you look like naked — you’re wearing multiple layers of clothing, after all. (We hope anyway!)

Anonymisation/pseudonymisation, encryption, and further means of obfuscation are integrated right into the public blockchain. So sure, you may be walking around a public square, but you’re essentially wearing a hooded robe and a mask, as are the millions of other people around you.

Many companies have avoided blockchain implementations in their supply chain altogether due to the plethora of problems with private blockchains: they are expensive, slow, and intransparent. Building on the public blockchain is flexible, secure, private, customisably transparent, and best of all, affordable. It is the perfect way to instil supply chain confidence in both consumers and business partners.

Beyond track and trace initiatives, we envision all sorts of ways companies can use the public blockchain not only to better work together amongst themselves, but also with their governments. Let’s cover a few of our ideas.

Blockchain in Supply Chain Transparency: Beyond Track & Trace

Imagine a future where, instead of mountains of private databases, companies all over the world publish their supply chain records to the public blockchain.

Every step of the way, each company adds relevant or required information (product, source, cost, workers’ wages, taxes paid, etc.) and controls who has access to which pieces of that information.

Perhaps they want their business partners to know the source company in the event of a recall, their consumers to know that the end product is authentic and has been sustainably produced, and their governments to know they have paid their VAT. All of this, and more, is possible. Let’s dig in.

Unprecedented Interoperability

Our vision for a single-chain future means efficient, instantaneous interoperability between companies across borders. New partnerships and collaborations would be able to hit the ground running with no ERP tech issues in the way and no time-consuming consortium blockchain bureaucracy or expensive buy-in needed. Every company can work with the ERP platform they prefer, but with all of the source data stored permanently and immutably on the public blockchain, flexibility is guaranteed.

Granular CO₂ Tracking

With each company in the supply chain publishing the movement of goods through every step of the process, very granular CO₂ emissions data can be calculated and thereby appropriately attributed and offset. This could all be done automatically and without any need for manual intervention.

Enhancing Border Control & Security

When goods cross borders, all sorts of checks are done by the relevant authorities, both on export and import: document verification, customs declarations, compliance with customs regulations and international trade agreements, and many more. With international governmental standardisation and agreement, all of this data can be securely stored on the public blockchain, enhancing the workflow in a manner that can be trusted by all parties.

Streamlining Taxes

As we explored in more depth in our recent Blockchain in Accounting article, accounting figures can be stored on the public blockchain right alongside the supply chain data. Governments can continuously track invoice flows and do real-time, automatic tax payments and VAT processing.

The Solution for Supply Chain Transparency: Building on the Public Blockchain with mintBlue

As should now be clear, the cost, responsibility, slow speed, and intransparency of a private blockchain are simply not needed when building on the public blockchain is sufficiently secure and private. Building on the public blockchain also comes with the all of the additional benefits we outlined throughout the article. It’s a unique opportunity for incredible gains in efficiency.

What mintBlue brings to the table is a customisable SDK with an API that interfaces with the public blockchain. This allows you to fully leverage the public blockchain to fit your needs:

• Connect your current ERP/logistics platform right to the blockchain with minimal overhead.
• If you’re already on a blockchain platform, you can embed support for mintBlue or switch over entirely.

These solutions can either be built by your company in-house or custom built for you by our expert engineers. And since the data is on the public blockchain, there are no interoperability issues with other solutions, now or in the future.

In the case of supply chain management, let’s return to the two main implementations: B2B and B2C.

• For B2B, using mintBlue on the public blockchain means that every company involved in the process, from sourcing to manufacturing to logistics, can move away from all maintaining their own expensive private databases and simply collectively use the public blockchain. By controlling who has access to which information, this would be secure, unchangeable, quick, cheap (quite literally a fraction of the cost and none of the centralised infrastructural overhead), and allow governments access to the information relevant to them.
• For B2C, using mintBlue on the public blockchain increases consumer trust through its distributed and immutable nature. In contrast to a private blockchain where the company seeking consumer trust is fully in control of the records and could potentially alter them at will, the records on the public blockchain are simply there, in public, and are not able to be tampered with. It is the only trustworthy solution for proof of provenance and authenticity.

mintBlue on the public blockchain is the way forward for any company, small or large, looking to build blockchain solutions in their supply chain. We invite you to play around with our SDK & API or contact us today for a quote for your use case.