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Blockchain in The Supply Chain Use Cases: Proof of Quality

The analysis of use cases proposed by Community NdT participants continues.

Proof of Quality (proposed by Guerra, an Italian SME food processor).

There are small-medium sized companies (SMEs) that operate in the business-to-business sector, supplying semi-finished products to larger-sized producers and consumer operators. Since long these SMEs have decided to stay away from price competition, focusing instead on quality products both in terms of taste (typically a subjective factor), and complying with a precise series of objective and measurable parameters that determine the quality of a product, of its raw material components, as well as the quality of the processing and transformation processes. The economic, organizational, and commercial efforts required to remain constantly within the parameters that affect all aspects of the product and process life cycle (e.g., procurement, transformation, storage, shipment) become significant for an SME that must further support the burden of demonstrating its continuous compliance in order to be credible in the market, and therefore competitive.

Demonstrating this with the tools currently in use becomes economically prohibitive. In fact, an SME that wishes to offer its customers- on behalf of the final consumer- a product label with the declared quality assertions, should bear the cost of demonstrability by activating a third part guarantor; all costs should then be multiplied by the number of links in the supply chain. There are also various certifications for which the SME has to bear additional costs, undergoing multiple audits before being finally registered. It goes without saying that, with the current tools, the quality assertions issued by the SME are accepted without the need for further guarantee only by long-standing business partners, based on trust. This certainly greatly restricts the field, putting the onus on the SME that has to carry out several quality and health analyses on all the lots of all raw materials, products and processing processes to demonstrate the difference -in an economically sustainable way- against those who do not do the same.

The characteristics of blockchain-based applications can come to rescue, enabling the issuance of a unique quality certificate for raw materials and finished products, lot by lot. The results of the quality and laboratory tests carried out according to the established specifications and protocols can be loaded onto the blockchain, together with the quality certificate and all the supporting laboratory documents. Blockchain then records the analyses carried out on all batches of products and raw materials, reporting both the digital values and the images related to bacterial grows. An important element of the control specifications for food products is that a quality assertion cannot be used more than once, so that test results must be applied exclusively to the lot examined. A new production lot requires the repetition of all the tests.

The application of quality assurance based on blockchain could therefore also control - by means of a smart contract - that laboratory tests are not reused for another batch. The clauses of the contract would require precisely that the tests are original. Should the manufacturer attempt to derogate from the rule, the blockchain block activated by the verifier system would bring him back to order. The rule is then established - and kept updated - by the regulatory body as a series of contract terms. The control does not require the "ex-post" intervention of a guarantee institution, as any unforeseen derogation would be blocked at the origin and the quality control transaction would not be recorded on blockchain, lacking the consent of the majority of the validators. These, on their side, would have no interest in favoring the "dishonest" producer, since the soundness of the system- and the consensus-control protocols- are defined in such a way as to avoid dangers of connivance or favoritism.

The list of use cases identified by the companies of Community NdT continues with examples that will be presented in subsequent articles.

 

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Enrico Camerinelli

Enrico Camerinelli

Supply Chain Blockchain Personal Coach

Aite Group

Member since

26 May

Location

Boston

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This post is from a series of posts in the group:

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.


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