Supply Chain Management (SCM) is becoming a chaotic mess as each day passes because the present technology used under the hood is obsolete now.
There still is a lot of manual work involved which costs a lot of time and money. For instance, presently it takes days for payments to get through end-to-end. And this manual work, in a way, is futile in nature because there is barely any trust among different stakeholders.
Each stakeholder manages their own ledger in a centralised fashion which makes things hazier than they should be. The contractual information involved has to be managed by involving a third party like a lawyer or banker. So, it’s clearly a lot of headaches to manage a supply chain. Especially when the world is advancing towards more and more globalisation.
The duo of ‘Blockchain’ with ‘IoT’ is disrupting a lot of industries at the moment. This combination has become so powerful. Blockchain makes the transactional records tamperproof, and IoT establishes a connection between the physical world and the digital world through the means of devices, sensors etc.
This combination will effectively reduce friction in SCM by majorly eliminating central third-party entities and enforcing direct P2P connection. Simple transactions are presently done with lengthy procedures, these can be automated with smart contracts. For example, if a condition is met then only the payment is released. The concept of smart contracts can be extended not only to money but also other aspects like temperature control or location traceability. This smart contract is executed automatically and facilitates more efficient SCM. The contract is publicly recorded and can’t be tampered with which accounts for blockchain’s reliability.
Consider this simple story where a shipment of ice-cream is recorded on a blockchain. This container in the shipment is IoT enabled. This shipment has to reach the ice-cream parlor from the dock. The IoT enabled container locally records and continuously transmits messages regarding container’s present location and temperature to the cloud where Blockchain as a service is running. Suppose the smart contract reads only one following rule: “If the temperature of container rises above -2 degree Celsius, then the ice-cream parlor won’t accept the container”. If this is violated then the supplier is held accountable. Let’s say, the temperature of the container is recorded every 30 seconds. This data is stored on a blockchain which is visible to all. On this ledger, chronological history of ice-cream can be tracked which guarantees the provenance of the item.
Blockchain with IoT has the power to combat with the problem of food fraud as well. In such cases, the health safety of the customer is at stake. So companies are all the more cautious with SCM. Even a slight mistake can cause a dent on the company’s reputation along with millions of dollars. If the end customer is able to check traceability of the asset and everything is transparent and crystal clear on the blockchain, one will see a happy and a satisfied customer. All thanks to the blockchain, its platforms like these which instate trust in the system by eliminating centralised infrastructure with middlemen.
Applications of IoT and Blockchain in Supply Chain
- Food Traceability: What if I tell you that you can check where your meat is exactly coming from? If a customer gets an insight into the provenance of the product he/she is consuming, it’d certainly enhance the customer experience manifold. One can simply scan the barcode and get the entire chronological history of the product. This is a great way to combat food fraud.
In late February, 14-year-olds Nahima and Yayaya died after eating tainted biscuits at a classmate's birthday…qz.com
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2. RFID-driven contract: This is great to make logistics more efficient. RFID tags for containers store information like location, date, time etc. This data is sent over to the cloud for further analytics. A smart contact may also act upon this data.
These applications can be extended to cold supply chain monitoring, or automobile parts supply chain monitoring. Likewise, there can be hundreds of places where this idea can be used.
Blockchain along with IoT can transform supply chains. This transformation won’t occur over the night. It’s going to be a long show. Companies may experiment with blockchain and IoT on a little segment of their supply chain in the induction phase and later extend it as per their experience. Smart contracts can help eliminate costly delays and waste currently due to manual handling of paperwork. This opens the door for a smarter supply chain.