Today’s supply chain process is very complex, non-transparent, costly and inefficient due to many intermediaries involved in a process to take a product from its source to a merchant.
The lack of collaborative systems between all the intermediary parties involved makes this process even less transparent and difficult to trace. By the time an item reaches the end user, its traceability is almost lost. The end user has no idea of the origin of the item and can only go back to its last source.
Without knowing if an item is original or counterfeit, healthy or contaminated, and from the source that it claims, there's no simple and trusted way to verify the authenticity of the item. The lack of a system to verify the health and transparency of a supply chain prevents consumers from having confidence in the goods they are buying.
According to a study by OECD and EUIPO, "Imports of counterfeit and pirated goods are worth nearly half a trillion dollars a year, or around 2.5% of global imports."
To restore customer confidence that has been lost due to cases of foodborne diseases, such as the infamous horsemeat scandal of 2013 where food advertised as beef was found to contain undeclared meat, there should be a level of transparency to trace items’ source through a quick and trusted method. Although there are already ways to track sources, these are very complicated, time-consuming and costly.
Blockchain is a distributed ledger technology that promises a decentralized, peer-to-peer system, bypassing all the intermediaries (or keeping them honest), resulting in not only reducing time and cost, but also offering a better customer experience.
Provenance through blockchain has introduced a way to offer a solution where lost confidence can be restored by a consensus method. A simple entry into a blockchain with a costless verification process helps ensure the safety and authenticity of a transaction. Any mala fide activity can be detected, traced and blocked by the community. Removing multiple intermediaries also reduces the time it takes and the cost it incurs to resolve any last-mile issues.
There are many applications of blockchain technology that are being used to resolve similar problems. One market is restaurants, which can offer their customers full transparency to trace the source of ingredients in a food that customers are ordering. Blockchain technology can address a problem by offering full traceability of items to build consumers' confidence in ordering and enjoying food. Zest Labs is a post-harvest freshness management solution for today’s restaurant industry that uses blockchain for food traceability.
The CDC "estimates 48 million people get sick, 128,000 are hospitalized, and 3,000 die from foodborne diseases each year in the United States." A process to detect and stop a supply of defective items had been very slow to develop before the introduction of blockchain. Big retailers are experimenting with the technology in order to identify and track foodborne disease. Walmart, for example, uses IBM's blockchain-based technology to bring transparency to the food supply chain in order to improve food safety and track foodborne diseases.
There are solutions to trace the source of items, but they could take days, and because items transition through multiple intermediaries, knowing and trusting all may not be possible. Blockchain provenance solution will not only build confidence in customers, but also help in tracing the sources of items that may cause health issues. This way, those items could be quarantined while consumers could still continue to use items from other providers, rather than halting the supply from all providers and issuing indiscriminate recalls. This could save local businesses and the overall economy millions of dollars.
As blockchain is gaining popularity in different industries and verticals, more and more players are expected to join the bandwagon. UPS is supporting a blockchain consortium along with SAP to “increase transparency and efficiency among shippers, carriers, brokers, consumers, vendors and other supply chain stakeholders.”
CB Insights, through its emerging technology insights platform, has identified 58 big industries that blockchain could transform. Being an early mover has the advantage of strengthening its solution and align it more with the market needs. It gives the opportunity to work with other partners early on to develop a more interconnected solution that could make it more interoperable and widely acceptable.
If the market realizes the full potential of blockchain, provenance could solve the long-standing issues that plague the supply chain.