Blockchain-Based Supply Chain Solutions: Technologies & Industry Benefits

Here’s a question regulators are now asking: can you produce a product’s tracking records within 24 hours?

Under the FDA's FSMA 204 rule, businesses handling high-risk foods must hand over tracking records within 24 hours of a request.

Pharma faces a similar standard: since November 2023, the Drug Supply Chain Security Act has called for electronic tracing of prescription drugs at the package level. Regulators have stopped treating traceability as optional.

That's why suppliers, carriers, and retailers are looking for a blockchain-based supply chain tracking system to each keep their own records. It's also why more companies are looking at blockchain-based supply chain solutions, which give every partner one shared, time-stamped record to work from.

What are Blockchain-Based Supply Chain Solutions?

Blockchain-based supply chain solutions are digital systems that track the progress of a good through the supply chain from its sourcing through to delivery of the end product. Usually, in conventional methods, organisations store information in various databases, separate records, spreadsheets, paper documents, and so on. These pieces of information contradict each other or cannot be verified at all.

But blockchain in supply chain becomes the solution to this; it's a single document to which all authorized persons have access: a shared ledger with identical information that is impossible to manipulate quietly, which builds trust among all, including suppliers, manufacturers, logisticians, and buyers. That is the reason why blockchain-based supply chain platforms have become popular in fashion, food, pharma, and the automotive industry.

Key Components of a Blockchain-Based Supply Chain Management System

1. Distributed Ledger

Each participant on the network keeps a copy of the entire ledger in sync with everyone else's, making it the most reliable source of truth. You can't just go in and change history either because all entries are stored in order, meaning changes to past transactions are pretty much impossible.

2. Smart Contracts

These are little computer programs that sit on the blockchain and kick in when certain conditions are met - like a rule book that gets applied every single time, no exceptions.

3. Digital Identities & Tokens

Every participant on the network gets a verified identity, and every product, batch, or asset gets a unique token that lets us track it individually. This makes it really easy to keep track of where things are, what's in stock, and so on.

4. IoT & Data Capture Devices

This is where the magic happens - sensors, scanners, and GPS trackers send real-world data in to get verified by the blockchain. Now it can be a real pain to get physical information onto the network (like proof that a shipment actually arrived), but that's where these devices come in.

5. Consensus Mechanism

The rules of the network decide how a new record gets verified and accepted. This is the bit that makes sure everyone is on the same page and that the whole network stays in sync.

6. Cryptography & Access Controls

Digital signatures help us know who actually submitted a particular entry, while permissions decide who gets to read or add to what. It's all about keeping the data secure and making sure only the right people have access to it.

7. Integration Layer & User Interface

This is the part of the system that links up with your existing software and gives you a way to interact with the ledger either by viewing what's already there or adding new records.

Types of Blockchain in Supply Chain Management

Importance of Blockchain-Based Supply Chain Solutions

• There is an increased demand for blockchain in supply chain management because businesses want to have more visibility, reliable documentation, and trust within supply chains.

• According to a McKinsey survey, over 45% of supply chain leaders did not have visibility beyond their first-tier suppliers. Blockchain-based supply chain solutions will allow businesses to track product movement through documentation, making it easy to detect delays and possible disruptions in the supply chain.

• A more widespread use of blockchain in logistics, manufacturing, retail, and food industries opens up new possibilities for adopting the technology.

• The growth of online shopping and international business is leading to the increased need for blockchain-based supply chain tracking systems that track the flow of products across multiple locations in real time.

• Blockchain-based supply chain solutions use smart contracts that are integrated with IoT devices to automate the load of supply chain tasks, help businesses verify product history, prevent fraud, and identify discrepancies in shipment documentation.

• The need to keep costs down, cut delays, and handle supply chain disruptions is making a lot of businesses think about whether blockchain-based solutions are for them.

How Blockchain Technology Works in Supply Chain Management

Step 1: Register Products and Supply Chain Partners

This process starts by registering all the organizations and goods used in the supply chain. The farmers, manufacturers, logistics firms, warehousing companies, and retailers are granted digital identities and access.

The goods or batches are uniquely identified through their serial numbers, batch codes, or QR codes. These identifiers help track the goods through all the records associated with them along the supply chain.

For instance, in a diamond tracking system like Tracr, participant verification plays an important role in ensuring trust between various firms on the network. However, it does not ensure the accuracy of information provided about the good.

Step 2: Record Production and Quality Information

Whenever a good is manufactured, picked, or inspected, organisations create a new record in the blockchain database that includes the ID number of the product, the data of the product produced, picked, or inspected, and its current status.

The business gets access to all that information using barcodes, RFID, or IoT sensors. After validation by the network algorithm, transactions are added to the database.

Blockchains connect data via cryptographic hashing; therefore, previously written data becomes evident. Inspection sheets can be stored outside the blockchain, but their hashes can be recorded in the database to confirm that the files were not tampered with.

Step 3: Track Shipments and Product Transfers

Moving products from one supplier to another, from one manufacturer to another, from carriers to warehouses, and so forth, every time a transfer occurs, a new transaction takes place.

For instance, in transferring a shipment from a manufacturer to a logistics firm, the transfer transaction will contain information about the people involved and the timing of the transfer. This goes on even after the transfer to warehouses or retailers takes place.

Since all participants in a blockchain-based supply chain management have access to the same record, it eliminates the company's manual history tracking method.

Step 4: Verify Delivery and Update Inventory

Once the goods reach their destination, the company that received them can scan the ID or shipment details and compare them to the previously recorded details to know where it's from and process it. Any discrepancies in the data can be noted for further investigation.

Also, smart contracts are capable of initiating certain predefined tasks when the conditions are met. For example, payment can be processed once the information about delivery is confirmed and the agreed conditions are met.

A good example of the use of shared transaction records in the process of freight payment is Walmart Canada's blockchain-based freight payment program.

Step 5: Allow Customers to Verify Product Origin

Blockchain-based supply chain management systems may also offer consumers the possibility of accessing information about specific products. When scanning a QR code, a consumer will have the possibility of obtaining information about the origin of the product, production process, and its journey throughout the entire supply chain.

For instance, a pilot project on pork traceability conducted by Walmart in China was aimed at exploring the role that information plays in the process of improving food traceability.

Consumers do not always have access to the full blockchain record. In permissioned blockchain networks, companies have the opportunity to restrict access to information such as suppliers' contracts and transaction prices.

What Technologies are Used in Blockchain Supply Chain Solutions?

Benefits of Blockchain in Supply Chain Management

• End-to-end live tracking
• Transparency and data integrity
• Product authentication
• Faster recalls and audits
• Smart contract automation
• Partner collaboration

Best Practices to Implement Blockchain in Supply Chain Management

1. Identify the problem

Don’t start with the blockchain. Start with the pain: endless reconciliation, products that you can’t trace, or recalls that take days. Write down the figures (in hours) now and the rates of mismatches so you can measure the results later. Now pick one use case when multiple suppliers give you dirty data.

2. Get all partners in the Same Room

Make all the decisions about who controls the data, access rights, fees, and dispute resolution in advance, before even thinking about building anything. Decide also how a new supplier will join the network, and how an old one will leave it. This is more challenging than the technical work.

3. Type of blockchain network

Choose between public, private, or consortium. Your choice depends on which value is more important for you – speed, privacy, or governance. Keep necessary information in the blockchain and store the rest in your databases.

4. Formalize the rules in smart contracts

Smart contracts are your best friends in this case, as they allow you to specify in advance the rules of how transactions will be recorded and approved and how each party will have access to the blockchain. Keep sensitive information off the blockchain and make sure you're following the rules and regulations.

5. Plug it into what you already have

Connect your ERP, warehouse systems, scanners, and sensors. Test in a sandbox first so you catch bad data, wrong permissions, and error handling issues before real shipments are involved.

6. Run a small pilot

Don't try to roll out a massive new system all at once. Start with a small pilot where you track just one product as it moves across two supplier tiers. Get all your teams IT, supply chain, quality, legal involved, and see how your results compare to where you started.

Blockchain in the Supply Chain: Industry Use Cases

1. Food, Agriculture, and Retail

Walmart used blockchain technology in collaboration with IBM on a pack of sliced mangoes, which traced the pack from the farm to the point of origin in 7 days using the conventional process and in 2.2 seconds via blockchain.

Carrefour started with its own range of free-range chickens in 2018 and even went ahead to introduce eggs, tomatoes, and pomelos. Carrefour even made profits out of this technology since the chickens being traced sold more than those that were not traced via the technology.

2. Pharmaceuticals and Healthcare

MediLedger is a network of pharmaceutical manufacturers and distributors that was created to comply with the US drug tracking legislation. Its FDA pilot program involved seven of the ten largest pharma companies and all three major US wholesalers. The first task performed was inspecting returned medicines, approximately 60 million drug units annually.

The company Zuellig Pharma in Asia developed eZTracker. This technology enables a person to scan a code on a package and get information about the expiry date, temperature history, and origin of medicine. It was advertised after a Hong Kong clinic had inoculated 36 people with expired vaccines against Covid.

3. Automotive

The first automaker to track cobalt in the batteries of its electric cars with blockchain is Volvo. This project was carried out in cooperation with the startup Circulor. Polestar, the sister brand of Volvo, did even better. It used Circulor to track such substances as nickel, mica, and lithium, as well as CO2 emissions in the process of producing batteries.

4. Aerospace and Defense

GoDirect Trade is an online market for spare aircraft parts, operated by Honeywell. The annual size of the spare parts market is estimated to be $4 billion, and these parts usually lack any history. On average, a part changes hands four times in its lifetime, so Honeywell logs every transaction on the blockchain. Honeywell's very manager admitted that blockchain in itself cannot prevent counterfeiting, so Honeywell uses physical tags in addition to it.

5. Shipping and Logistics

TradeLens was created jointly by Maersk and IBM in order to digitise paperwork in shipping. The number of users grew to over 300, but then the project was terminated in early 2023. Maersk stated that the platform functioned well, but global cooperation across the industry could not be achieved. Thus, we understand that rivals need to be able to use the same platform.

6. Trade Finance and Government

The TradeTrust initiative launched by the government of Singapore turns bills of lading into electronic records. Netherlands-Singapore joint pilot reduced the bill of lading delivery time from 6 to 10 days to less than 24 hours.

7. Construction

Construction is still largely in the research phase. For instance, in a Stanford project, a smart contract was used to pay seven subcontractors in two commercial construction projects following verification of the completion of the work.

Why Choose Clarisco for Supply-Chain Solutions?

Clarisco has been developing blockchain solutions since 2016. Our blockchain development company is headquartered in India. We have delivered 600+ blockchain projects for customers in 30 countries.

We build scalable blockchain products, integrate with smart contracts for automating payments, approvals, and delivery confirmation which helps companies to get rid of fragmented data and establish a single, tamper-proof ledger. We also help you build

• A blockchain-based supply chain traceability software that accurately tracks products and batches from sourcing to delivery
• IoT and ERP integration to bring sensor, scanner, and system data on the network
• Network establishment (public, private, or consortium) with role-based access for all partners
• From pilot to rollout, starting with one product and expanding to other partners and sites

From smart contracts to IoT integration, we assist companies in launching blockchain-based supply chain solutions and maintaining them after go-live. Contact us to plan your pilot.