Blockchain - Usecases in supply chains

Supply Chains, are the lifeline of businesses globally. Most likely, your business will find itself between upstream suppliers and downstream sales channels/distributors/customers. The figure below indicates this topology succinctly.

Generic Supply Chain connected via a Blockchain

Your organizations ability to fulfillment of its sales orders, totally depends on how efficient, agile your supply chain is. Some of the areas where blockchain technology can add great business value are:

Optimizing Inventory Costs
Though organizations have fairly automated internal processes, most still rely on antiquated ways of interacting with their suppliers and business partners, Orders can be placed over voice calls, email, logging into each other's portals, etc. Tracking of these orders status is never, in real time, mostly left to voice calls, email reminders, etc. In fact, it would not be uncommon for your organization to get notified of a supplier's delay in order fulfillment, close to your own, downstream, fulfillment commitments. By having, deep, blockchain-based integrations, with your supplier's ERP, you can ensure almost real-time notifications of any potential delays, in your order fulfillment. You can automate balancing of orders across your other suppliers as well.

If your distributors/sales partners are also on the blockchain, any weakness in demand, can also be notified to your organization in real-time, so as to re-balance supplier-side orders. This will lead to highly optimized inventories and substantial reduction in inventory costs. De-risking from supply side outages due to a specific supplier is another collateral benefit.

By having most of your suppliers on the chain, you will get unprecedented clarity about the big picture on the supply side, across all your suppliers. This can help you in coordinating receipt of goods from different suppliers, with a consolidated scheduling system based on blockchain data. This can further optimize the timing and logistics aspects of the inventory.

Minimizing Quality Costs using the blockchain
With the blockchain in place, your organization can have selective access to your supplier's ERP Data, including their quality control data. Having this level of accurate data, you can choose to minimize redundant quality checks, at your end. This is the good example of using a blockchain to enable trust and optimize costs.

Suppliers of a Supplier can also be brought onto the blockchain, to enable deeper and far reaching integration via the blockchain.

A blockchain can be used very effectively to "track the state" of a logical unit of delivery across supplier's parts. For example, if your organization was making refrigerators, every part, being supplied, tracked with the various suppliers, can be co-related with the logical entity "refrigerator 123" on the blockchain, hence, at any given point in time, you could not only know that 30 compressors, 26 coolant tubes are being supplied to me, but also that, I will be able to get out 26 complete refrigerators to my customers.

Bidding based supplier order management
The same trust based blockchain technology can be used to operate a bidding platform, to manage orders being issued out to the suppliers

Why traditional integration technologies like API, will just not work?
Point to point integrations with multiple suppliers not are just not scalable, in the supply chain ecosystem. imagine a supplychain with 5 nodes, each talking to other via point to API calls. Blockchains, along with providing a decentralized datastore, to track "shared state", also provide a standard stack for integration, at all peers, not to mention "consistent versions" of same distributed smart contracts for processing the data.

The suppliers that you bring onto the blockchain, may be direct competitors, inherently having a lack of trust about using processes, business logic, databases and codebases, belonging to each other, but the decentralized blockchain, will make it possible, to bring all such parties onto a common platform, sharing data/state, business processes and code.

Countering, Counterfeiting

While researching into the practical applications of blockchain tech, in provenance, tracking and traceability, I came across claims that blockchain can help to tackle counterfeiting, which is a serious issue in the fashion, luxury and branded products industry.

The general opinion seemed to be that its tough to fight counterfeiting because establishing authenticity of an original product item, over a cleverly counterfeited one, was a tough nut to crack (at affordable technologies).

Lets get into the mind of counterfeiter then...Typically counterfeiters will reproduce a near-duplicate of the original, at a fraction of the cost, then package it exactly like an original and send it out to be sold. It would be next to impossible to catch a cleverly made and packaged counterfeit item.

The barcodes and qrcodes on the item package can be copied to the T, as well and then pasted onto the duplicates package. Standard barcodes (EAN-13) contain only the manufacturer code and product category information, which is popularly recognized as a GS1 standard GTIN, like is typically used to scan retail products as POS terminals. But the real problem like I said is that, the entire barcode can be copied and put onto a duplicate item, making it indistinguishable from the original. Authenticity is sadly not guaranteed even if additional attributes about the product item were embedded into extended barcode versions like the GS1 Databar or GS1-128.

For authenticity checking, the trick is to use 2 factor authentication. Imagine a qr code encoding a random number, printed on the outside packaging of a luxury product. Now another QR code with yet another encoded number present inside the product itself (say on the product lining or inside of the cap of the bottle). Now we have 2 numbers, one on the outside and one on the inside(can be accessed, only after breaking the seal of the product).

A simple web page/mobile app can be developed to validate the compatibility of the inside number and the outside number. As long as the compatibility checking algorithm is secret (maybe using a magic number/s), the end user can just scan the outside and inside QR codes/numbers, to let the website/mobile app, determine if the product is authentic or counterfeit.

Even if the counterfeiter manages to exactly copy, the outer packaging, he can never "quess" what the inside number should be, since he does not know the exact algorithm, that is used to derive/correlate to the inside number.

The last problem to solve, is the possibility that the counterfeiter may get hold of a few good samples of "valid" number pairs and use them with all the counterfeits repeatedly ! This can be easily tracked, since the website/app is centralized and can keep track how many times the query for checking authenticity is being received and from what sources, mobiles, geo-locations etc

Let know in the comments, any loopholes, I may have missed or any improvements you can think of.