Scrutiny over the strength of global supply chains has increased greatly over the course of the past year. The global pandemic, Brexit and a tanker blocking the Suez have illustrated how interconnected and fragile supply chains can be in the face of a crisis.
The ongoing global pandemic in particular has prompted the public sector to invest in building resilient supply chains through a mix of research, grants, policy changes and investment in digital trade infrastructure. U.S. President Biden signed an Executive
Order in February, with a focus on making America’s supply chains resilient, greater domestic production, built-in redundancies and safe and secure digital networks. Last month, the G7, together with Australia and the Republic of Korea, issued a Ministerial
Declaration to develop a framework for collaboration on digital technical standards, which include a focus on electronic transferable records to remove the legal and regulatory barriers that impede digital trade.
Multinational corporations (MNCs) are also redefining their supply chain footprint. While most supply chains traditionally focused on cost-efficiency, today’s chief supply chain officers (CSCOs) must build supply chains that optimize for cost, agility and customer
service. National interests to invest in domestic production, customer expectations to keep costs low, avoiding shortages in critical goods and ensuring the safety of employees and customers are all factors that must go into rethinking global supply chains.
In order to build more resilient and agile trade networks that can weather the storm of a crisis and prove fit for the modern age, CSCOs are using the crisis as an opportunity to advance their digitalization agendas. This is much needed given the current
state of supply chains across the world, that are largely characterised by paper-based processes and challenges in reconciling information. Technology, coupled with the right vision, people, culture and processes, is a key enabler to build more resilient and
agile supply chains.
A problem looking for a solution
At present, supply chains face the double conundrum of increased regulation and pressure to adapt to sustainable practice, alongside outdated and archaic processes which hamper their improvement.
Poor supply chain processes create several challenges for large corporates and manufacturers, and their respective supply chain networks. For instance, ‘spill’ or dealing with a bad part at source may cost up to $500,000 to rectify. At the same time, manufacturers
do not know enough about the journey their products take, making it difficult to prove safety and ensure conformity.
Data reconciliation is plagued by errors and disputes impacting cash-flow optimization and the ability to support the-long tail of suppliers, leading to difficulty identifying and stopping counterfeit parts or goods from entering the system.
Many of these issues arise because supply chain management and ERP systems provide siloed solutions. Every participant must manage their own records. There is no common network or shared application for information to be exchanged seamlessly across participants.
Added to this is the prevalence of paper across many supply chain management systems. Paper-based documents do not provide the consistent or accurate data needed for producers or manufacturers to track production, provide visibility into the location of
parts or easily reconcile purchase orders and invoices. This results in high costs, errors and an inability to dynamically adapt with supply and demand, meet provenance requirements or to improve inventory forecasts. This often leads to delayed payments to
suppliers and an inability to provide provenance information that is critical to proving product safety and meeting compliance requirements.
Supply chains, reimagined
Blockchain technology is the ideal candidate to deliver the traceability and trust that supply chains sorely need. A distributed, immutable ledger can address the issues of provenance; verification; and regulatory conformity that global trade requires.
Enterprise blockchain can bring transparency and trusted information to corporates, supply chain partners, regulators and consumers by ensuring supplier updates are shared and verified on a distributed ledger to provide visibility into the movement of goods.
Granular tracking of components for provenance reporting can be achieved to support product safety and conformity.
Blockchain can enhance supply chains from a cash flow perspective, too. Accessing real-time supply chain data can improve inventory forecasting accuracy and enable automated PO and invoice matching to enhance cash flow.
The result of this is that buyers, suppliers, and other supply chain actors can rely on trusted data and a platform that keeps everyone in sync. Increased visibility for supply chain agility, reduced costs and errors, and the ability to react to sustainability
and safety requirements with ease are all among the benefits that blockchain can bring.
Beyond the efficiency and cost saving benefits a transparent supply chain can bring, ensuring traceability over trade networks can help businesses meet sustainability goals, too. ESG commitments are quickly establishing themselves as key criteria for investors
when determining the attractiveness of an investment proposition. Many astute businesses are responding in turn by embedding ESG principles to achieve resilient supply chains. Ethical supply chains are becoming an increasing focal point in many companies’
quest to demonstrate tangible action to meet ESG goals. Recent crises such as the Suez accident have only highlighted the fragility of stretched, global supply chains and the need to take supply chains into account when looking at sustainability.
Choosing a technology fit for purpose
Not all blockchains are created equal, and the complex, regulated world of supply chains requires a platform fit for purpose. This means choosing a blockchain solution that was built from the ground up with privacy features front of mind. Permissioned blockchain
platforms provide the assurance that all parties within the ledger are trusted and verified, so that the ‘what you see is what I see’ promise is one that can be relied upon. Looking to blockchain providers that work in step with regulators can also be helpful
to ensuring that regulators get a copy of appropriate data.
The promise of blockchain technology in transforming supply chains is ever growing and evident: by 2025, the global blockchain supply chain market is expected to reach $9.85 billion. Distributed ledgers can reimagine and restructure supply chains. While
we can never remove the threat of a pandemic or other crisis entirely, ensuring that the information that underpins global trade is transparent and accessible to all stakeholders is more important than ever.