On Oct 25th, 2019, Chinese President Xi Jinping pointed out during the 18th collective study session of the political bureau of the CPC central committee that blockchain technology and industrial innovation should be accelerated, and integrating blockchain into economic and social development should be actively promoted. This indicates that blockchain has been recognized by the Chinese government as a national strategic core technology. And one of the most important applications for blockchain technology in China has been the modernization of the supply chain.
In the 2018 and 2019 Global Blockchain Survey Report, Deloitte presented the most popular field of application for blockchain technology in the world (Figure 1). The supply chain was on the top of the list, accounting for 53% of the surveyed enterprises.
Figure 1 Application of Blockchain Technology
Source: Deloitte’s 2018 Global Blockchain Survey
A supply chain is a network of individuals and businesses that produce and sell specific products and services – from the initial supplier to the end-user. A basic supply chain system usually involves suppliers of food or raw materials, manufacturers, logistics companies, and end retailers.
Up until this point, the industry has been plagued with inefficiencies and opacity of supply chain management systems. The more participants in a supply chain, the more prominent these problems become. Ideally, in supply chains, products and raw materials, as well as money and data, should all be seamlessly integrated.
However, the conventional way makes it extremely difficult to maintain a continuous and efficient supply chain. This can have a negative impact not only on corporate profits but also on retail prices in the end market.
These pressing issues facing supply chains can be addressed using blockchain technology, which provides a whole new way to record, transmit and share data.
Blockchain has attracted more and more attention from people from all walks of life. The fascinating part of this technology lies in that it can be quickly deployed to provide a reliable point-to-point trust, effectively removing interference of none-related information during data transmission. It is essentially designed to protect privacy, make public information transparent and easily accessible, and improve the efficiency of information exchange. Furthermore, blockchain could save money and resources through simplifying work procedures, reducing unnecessary transaction costs and institutional costs. The application of this technology in supply chain management can effectively improve many pain points the industry currently has, bringing long-desired transformation, upgrades and development.
The decentralization nature of blockchain can effectively prevent information from being tampered, thus this technology can be well applied in the supply chain network. The distributed accounting method of blockchain can be used to record the whole life cycle of products such as origin, processing, quality inspection, transportation and logistics, achieving a high degree of transparency and traceability within each procedure (Figure 2).
Figure 2 Basic Workflow of Blockchain-backed Supply Chain
Source: China Federation of Logistics and Purchasing
There are several advantages of applying blockchain technology in supply chain management. Here are some of the most significant ones with examples:
- Improve transparency and reduce risks of the entire supply chain.
Companies across the supply chain can have access to accurate and transparent end-to-end data without a third party to provide credibility. Blockchain technology can effectively process all transactions made by companies digitally and can build an unchangeable transaction history. All the data could be shared in real-time, effectively reducing the time cost of data access for the companies.
Jingdong 7FRESH (a new-concept brick-and-mortar retail grocery chain established by JD.com) has been implementing blockchain in its “Magic Mirror” produce tracing system. With an easy scan of the QR codes on the packages of each type of fresh meat and produce, the overhead screens will clearly display the origin farm information, distributor information and the exact dates the product was produced, transported to each point, and finally place on the shelf. All details are stored on Ethereum. In this way, the end customers can have a full grasp of the quality of products when they make purchasing decisions.
Figure 3 The Jingdong “Magic Mirror” System
Source: 7FRESH
Walmart is another pioneer in the implementation of blockchain technology for the supply chain management. As a giant in the retail industry, Walmart is highly concerned about food safety. For this reason, Walmart has not only established its own food safety center in Beijing but also cooperated with Tsinghua University and IBM to track all links in the food supply chain using blockchain technology. It tracks US-imported products and pork products in China, as well as tens of thousands of packages shipped to its stores.
Walmart also collaborates with hatcheries, farms, meat processing plants, partners in logistics and other links in the supply chain, putting them together on the alliance blockchain. It provides the retail giant with the ability of comprehensive real-time tracking of food production, processing, circulation, storage and distribution, and proactive control of food safety, meeting increasingly critical individuation and diversification of consumer demands.
The supply chain management under the blockchain can effectively cope with emergencies and respond quickly. For instance, whenever food safety issues occur, Walmart can quickly scan its entire food supply chain, track down the problematic link, deploy solutions swiftly, and effectively reduce corporate losses.
- Break through the isolation of information and build a smart supply chain through smart contracts
Blockchain can effectively eradicate information isolation, and provide high-quality data through more information sources based on supply chain big data analysis. It can reduce the risk of data leakage, and ensure security, effectiveness and credibility of all data on the supply chain. It can get through the information isolation of different departments and different stakeholders – raw material purchase, production, logistics, sales and supervision in the supply chain – and establish a supply chain information trading platform.
With the popularization of blockchain technology, supply chains will be smarter, faster, more efficient and more credible. I believe that give it a few years for the in-depth application and development of blockchain in the supply chain, the future digital economy will become more just and transparent while ensuring the quality and safety of products will become cheaper and more reliable.
Strategy in the Age of Decentralization 