Supply chain security issues are far too complicated to tackle with passwords, access cards, and software suites alone.
The supply chain and logistics industry has undergone rapid transformation over the past two decades, a wave of digitization that’s looking at everything from live tracking, machine learning, and even artificial intelligence to tackle the growing challenges of supply chain security management, especially for larger, more complex supply chains.
While most of these new technologies are still in the ‘experimental’ stage, there’s one that the industry is betting on for betterment — and that’s supply chain blockchain.
What is Blockchain?
Developed originally as a type of distributed database, blockchain is a shared database system through which digital records can be stored, viewed, and updated by multiple users through a decentralized network on the Internet.
Unlike a conventional shared database system however, the record doesn’t just exist at one location. Rather, it’s shared among thousands of systems around the world, all of which reflect the same current state of something.
That something could be anything – a contract, an object, or the thing you’re trying to keep track of.
Each blockchain record (often referred to as a distributed ledger) is time-stamped, and every update to the something that’s tracked — a change in location, ownership, or current state for instance — can be logged and appended to the record as a new block in that record.
What you end up with is a shared record keeping system that can also be used to confirm or authenticate data through a verifiable unbroken chain of transaction blocks.
Hence the name — Blockchain.
It’s designed to be tamper-proof, hack-proof, and make data sharing secure and easy. There’s also its most important feature — guaranteeing the authenticity of the information stored in the system.
Blockchain technology has already proved itself through its most commonly recognized applications right now – cryptocurrencies like Bitcoin, and more recently, Ethereum smart contracts.
Based on the same technology that’s protecting and validating billions of bitcoin transactions across the globe, blockchain in supply chain is also being deployed as a revolutionary option to bridge the supply chain visibility gap.
Why is Blockchain Relevant to Supply Chain Security?
It’s difficult to balance the growing need for supply chain visibility with the dire need for supply chain cyber security.
With supply chain digitization playing an important role in making supply chains more efficient, there’s a growing emphasis on the value of gathering and sharing data that enables better decision-making.
The value of the data, however, also makes it a more lucrative target to threats.
Fake shipping manifests, altered invoices, tampered tracking data, and new age supply chain security issues like cargo theft by fictitious pickups (where goods are stolen by tech savvy thieves using falsified digital shipping records that let them make a legitimate pickup) – these are some growing concerns for digitized supply chains right now.
Securing modern supply chains against such vulnerabilities needs significant investment in terms of man hours and resources, which can add to the overall cost — and delays — in supply chain operations.
Blockchain applications in supply chain data management could change all that.
How Can Blockchain in Supply Chain Management Improve Data Security?
Complex logistics processes, a lack of uniform digital infrastructure, and several intermediate players between a shipment’s source and final destination make it difficult to guarantee transparency and accountability in a large supply chain network.
The accuracy and security of information logs in a modern supply chain is essential, especially when it comes to identifying who is liable.
The complications (and sometimes lack) of effective information sharing and trust in supply chains is what’s fueling interest in supply chain blockchain technology and its potential to improve data sharing and visibility in the logistics and supply chain industry.
1 — Easy Information Exchange and Complete Transparency — With Complete Data Security
Detailed records, everything from an itemized inventory to information about the source, the destination, and everything in between, all can be available to anyone who needs it without the need to log in to a centralized database or an online dashboard.
Blockchain records, by design, are meant to be distributed and fully available to all, giving each participant in the supply chain blockchain a complete copy of a record.
For customers, this could mean the ability to view information about what they’re purchasing at retailers – details about the quality, authenticity, and actual source of the products they’re purchasing, besides other insights like track record for the manufacturer, delays or damage caused during transport or storage, and anything (or everything!) that happened to the products they’re about to purchase.
For the authorities or auditors, this means the ability to view a shipment’s information and history in its entirety without the need to dig up paperwork from multiple verified sources, making it easier to audit and prevent fraud in the supply chain.
Blockchains do, however, allow you to limit the view and edit privileges afforded to participants as well, allowing participants to only access those sections of the shared records that are meant for them.
Every scrap of information about a shipment can travel with the shipment itself, without any risk of exposing sensitive information to unintended recipients.
This is a revolution in the level of data transparency for all participants in a supply chain, and it could spell the end of information silos as we know them.
2 — Tamper-proof Records and Smart Contracts — With Easy Verification and Audits for Every Supply Chain Transaction
The risk of shipment data being altered — accidentally or intentionally — is a growing challenge in securing digital supply chains today.
Blockchain records, by design, can help detect errors or tamper in supply chain records.
Although blockchain systems can allow many users to view or add data to a record, they cannot edit or delete existing sections in a record. Every change to a record persists, giving every participant a permanent log of supply chain transactions that’s accessible to all.
And therein lies blockchain’s greatest feature – data security through consensus.
A blockchain is decentralized, which means a single record exists simultaneously on several computers across the world. Unlike a conventional database, there’s no single record to edit. If anyone tries to tamper with a shipping record, they’d need to update it simultaneously across hundreds (or thousands!) of computers to completely forge a record.
Verifying the authenticity of a record is as simple as cross-checking it against all the copies in the network. The most prevalent version is the right one.
Supply chain data stored through a blockchain can be authenticated easily; any attempts at tamper would be detected just as easily — the forged records simply wouldn’t match any others in the supply chain blockchain.
Coupled with smart contracts to trigger automated shipment data handling and processing, blockchains could simplify and speed up supply chain transactions considerably.
Blockchain smart contracts in a supply chain can eliminate the need for centralized authorizations, audits, and lengthy verification processes through impartial intermediaries or external auditors.
Is Blockchain Security Enough for Data Security in a Digital Supply Chain?
Blockchain based information exchange systems will play a huge part in the transformation of supply chain management in the coming years.
Large scale supply chain blockchain implementations are already well underway.
The IBM blockchain, being developed in partnership with Maersk, is one such example of efforts to streamline global supply chain operations using blockchain. Maersk is working toward developing a digitized platform to monitor, manage, and secure shipments across geographies and trading zones.
While there are several features — especially better security and operational efficiency — that make blockchain for supply chain management an ideal record keeping tool, there are still some teething problems to contend with.
Perhaps the most important issue of all is data accuracy.
Blockchains can secure, validate, and guarantee the quality and accuracy of data just fine once it’s in the system. They cannot, however, give you the same guarantee for data that’s entered into the system to begin with.
Participants (i.e. every player in the supply chain) that log information into a supply chain blockchain register are responsible for ensuring the accuracy and reliability of their data before it becomes part of a shared record.
To ensure that every entry in a shared blockchain supply chain record is error-free and authentic, it’s vital to automate that first (and perhaps most vulnerable link) in the blockchain for supply chain – recording data.
While that may have been a daunting task earlier due to error-prone manual data logging processes, low-cost supply chain tracking IoT devices available today (that are also easy to deploy) can automate data gathering as well as guarantee its accuracy in a modern supply chain.