The Need for Supply Chain Blockchains

Last week, Reuters broke the story that Johnson & Johnson’s Baby Powder product has previously shown traces of asbestos.

Although J&J strongly denied knowing it, stocks went into freefall, losing around 10% overnight. Finance journals are warning investors against buying the dip, given the risks of long-term reputational damage.

It’s a fair assessment given that Baby Powder is one of J&J’s flagship products, trusted by parents worldwide. Asbestos is a fibrous carcinogenic mineral and a known public health hazard. Industrial exposure to asbestos has resulted in millions developing deadly cancers, and in turn, millions of lawsuits.

The Supply Chain Transparency Problem

Another example is where food manufacturers tried to dilute the global supply of honey with other, cheaper sugary syrups in an attempt to boost profit margins.

One of the problems in achieving supply chain transparency, even in more ethical companies, is the sheer complexity of the process. We live in a world where products and ingredients can criss-cross the globe several times over before they make it to the end consumer.

One 2016 study of 1,700 companies indicated that a shocking 54% of companies have no supply chain visibility, with only 19% reporting that they have full visibility.

This might indicate that greater supply transparency is needed. Not just by companies, to protect their risk exposure and share price, but by consumers.

Blockchain in Supply Chains

Now, companies are starting to recognize the value that distributed ledgers can bring to the global supply chain problem.

IBM is blazing a trail in permissioned ledgers, working with global companies like Walmart and shipping giant Maersk to implement supply chain management solutions.

Some sectors are investigating industry-wide solutions, as in the case of pharmaceutical manufacturers. Many of the big players in the pharma sector have been working together in the Mediledger project, to develop a blockchain supply platform and governance model that can be used to combat counterfeit drugs.

Many in the blockchain community remain skeptical about permissioned ledgers because they miss the benefits of true decentralization.

After all, if a distributed ledger is distributed only to those with permission to change it, how is that any better than a centralized database?

For big businesses though, there are still some reasonable concerns over using public blockchains like Ethereum, such as data security and scalability.

Achieving Decentralization

In addition to the big guys, some tech startups are now developing innovative platforms that achieve both supply chain transparency and decentralization.

Temco is launching a supply chain solution developed on RSK, the smart contract layer operating on top of the Bitcoin blockchain. They aim to provide a cost-effective and accessible supply chain platform for companies of all sizes.

On their system, a product can be traced from the raw ingredients all the way through the manufacturing process to the end consumer. Each party in the chain (except end consumer) will undergo a verification process to ensure this traceability.

Although RSK operates on the Bitcoin blockchain, its developers have improved on Bitcoin’s scalability and resilience, meaning RSK can manage a speed of 100 transactions per second. Cryptographic hashing can ensure full data confidentiality.

RFID Tracking

Waltonchain is another project targeting blockchain supply chain solutions. In contrast to Temco, Waltonchain uses its own blockchain, together with RFID tracking technology tags to track items throughout the supply chain.

Scanning the RFID tag will show the nature of the product, where it’s been, who has handled it, and any other relevant information.

This creates an element of customizability that may be attractive to companies in different sectors with varying concerns about their supply chain. For example, some industries like luxury goods have counterfeiting issues, whereas food manufacturers may care more about safety and hygiene.

The Future of Supply Chain is Transparent

As first movers in blockchain start to demonstrate supply chain visibility, consumers will see the potential and begin to demand better information about the products they’re buying.

This will put the burden on companies to ensure they keep up with new technologies if they want to keep their customers.