Disruptive Transparency – What impact will Blockchain have on supply chains?

Disruptive Transparency – What impact will Blockchain have on supply chains?

As the technology underpinning Bitcoin, Blockchain has led many to associate it purely with the world of cryptocurrencies.

Blockchain as a technology is actually so much more than this. A blockchain is a shared, trusted, public ‘ledger’ that everyone can inspect, but which no single user controls.   The participants in a blockchain system collectively keep the ledger up to date: it can be amended only according to strict rules and by general agreement.

The Economist calls it a ‘Trust Machine’ – it lets people who have no particular confidence in each other collaborate without having to go through a neutral authority.

The possibilities within the supply chain and procurement are enormous.   A trusted private ledger removes the need for reconciling each transaction with a counterparty – it’s fast and it minimises errors.   

Documents, physical items or processes can be notarised by embedding information about them into a public blockchain – meaning there will no longer be a need to audit them.  The information is immutable, available in real-time and in a verifiable format.

In a world of ever more distributed networks of partners in supply chains and sourcing, the ability to deliver transparency with complete confidence is revolutionary.

Imagine the possibilities where each step of the value chain – from extraction of raw materials, to component manufacture, to shipping, assembly, storage and delivery – can be logged, viewed and reported upon.  

This suddenly provides a means of cheap, verifiable proof that suppliers are doing the right thing for resource & environmental management, labour conditions, sustainability, etc.  Not to mention monetary costs and risk mitigation.   It also vastly reduces the costs of demonstrating sustainable procurement practices.

It can also protect Intellectual Property and reduce counterfeiting.   It’s an ideal solution for proving when a given piece of work was first created and used – making it easier for creators to enforce their rights and for buyers to be certain they are receiving the genuine item.

If there is a system of trust and transparency, and records of ownership, handling and location can be added to the ‘ledger’ – then transactions can be automated.  The buyer knows the ‘provenance’ of the goods / service they are receiving and the seller can prove delivery.  This has the opportunity to vastly reduce trade costs and payment delay.

Blockchain can shift the relationship between consumer and business, as the former can now hold the latter accountable by interacting with the blockchain.  Verified provenance at the point of delivery will encourage them to be be more conscious of their purchasing power and its impact on a global level.

Consumers were typically at the bottom of the supply chain – but this new technology can help them to play an active role in shaping how businesses operate.   As generational and attitudinal shifts see consumers demand more socially and environmentally responsible products, could this be the tool that forces business to act responsibly?