Why blockchain is the solution for supply chain management

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Nowadays there is a huge debate on blockchain technology among communities of business and technical experts. However, if you are new to it and need to know more, then I suggest attending this course. Most of the articles or videos address the application of blockchain to cryptocurrencies. Nevertheless, I believe that the killer application is the management of transactions among businesses. One example is the management of supply chains and logistics.
Blockchain

Traceability and compliance in electronic devices

Let's consider the problem of assuring compliance and traceability in the electronics industry. The manufacturers need to prove that they do not use material that comes from lands where there are conflicts like a civil war. Besides, they need to show that they use material environmentally friendly (e.g., no lead). However, this is only one side of the coin. There are many applications where traceability is crucial to a business, such as in medical devices industry. Another aspect to consider is the support that such capability gives to a company in assessing the financial impact from nonconformities. In fact, in case of a quality issue, a company need to restrict the problem only to the “affected population” in the field. It is easy to imagine that it is different if you need to recall thousands or millions of pieces, right?
Supply Chain in Electronics
The picture shows a simplified view of the supply chain in the electronics industry. Things can become complicated when we consider alternatives. For example, EMSs can purchase components from vendors instead of going directly to component manufacturers, or OEMs can partially outsource their production.

Solution with a centralized database

Today you need to rely on third party services ( e.g., IHS) and you need to build your own system to keep track of the information along the supply chain.  This approach consumes resources, time and money. In fact, to solve this problem you need to build your own centralized database.  From the process standpoint, you need a manual transfer of the information, or you need to arrange an integration path to other databases owned by third parties.

Solution with a distributed ledger

A distributed ledger is a perfect and cheap solution to this problem and is the single source of the truth. Every partner in the supply chain has a copy of the ledger where all players can register every transaction. There are multiple advantages of this approach: 
  • It removes the needs of integrating business processes and IT sources to create an in-house database. 
  • It removes the running costs to maintain the information up to date in a centralized database. 
  • It provides secure transactions certified by the distributed network. 
  • It assures traceability along the full supply chain.

The adoption of other technologies, like RFID and barcodes, can complete the automation in managing logistics and production processes. In conclusion, this solution is suitable for many scenarios, for example:
  • Medical Devices
  • Food
  • Drugs
  • Automotive
  • Aviation

I am sure that soon we will see such solution taking off, stay tuned!

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