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Increasing transparency and traceability in supply chains through AFRY’s new blockchain application

AFRY’s blockchain-based application provides a new level of data flow security across supply chains while helping clients cut costs and make supply chain operations more time efficient and flexible.

Most companies can no longer ignore the benefits that blockchain technology can bring, most especially within the supply chain realm. Blockchain has shifted from being the driving technology behind Bitcoin to becoming the underlying structure for solution development across a plethora of different industries and applications. In 2019, €3.8bn were spent on blockchain solutions worldwide and this amount is expected to increase to €12.8bn by 2023. The value added to businesses is estimated to reach €157bn by 2025 and exceed €2.8tn by 2030 [1], especially when combined with other advanced technologies such as Internet of Things, Artificial Intelligence and Smart Contracts.

Currently, manufacturing sectors are facing the toil of inefficient, slow and costly supply chains. In parallel, global service expectations are setting the bar higher and higher in terms of quality standards and time demands due to vying competition and exponential technological advancements. Not surprisingly, the manufacturing sector has experienced one of the largest at-scale blockchain implementations, threefold that of retail and consumer products [2]. In 2018, 6% of manufacturing companies effectively implemented pilot projects using blockchain. By 2023, this figure is expected to rise to 30%, anticipating massive furtherance in product safety and traceability, maintenance lead times, shorter time-to-market, amongst others. Blockchain arises as an effective response to these transformational changes in consumerism, endowing the supply chain with a greater opportunity to reduce cost, time, waste and emissions.

Figure 1. A visualization of how blocks are cryptographically linked through digital fingerprints.
Blockchain Article Figure 1

 

Four out of five organisations indicate that traceability is one of the top three drivers for blockchain investments. The low level of transparency in supply chains is one of the main challenges when it comes to supply chain management (SCM). The reason is manifold, but it mainly boils down to the fact that processes are currently interconnected physically, but not digitally, and that plants are becoming more and more dependent on external upstream, midstream and downstream processes. Typically, companies are unable to provide information beyond tier-1 suppliers. Manufacturing plants depend on multiple control and management systems, lacking a common native structure, thus hindering the automatic transfer of data between processes and plants. This disintegration creates problems and errors across data consistency, real-time accessibility, work order planning and ability to extract traceable data securely and quickly. This lack of transparency in SCM implies having limited insight into the what’s, where’s, when’s and how’s of a product thus tightly restricting the possibilities for further improvement. Additionally, this is becoming an increasingly niggling issue as end-consumers demand more information about their purchased goods and expect companies to have such information readily available.

From a sustainability and a corporate image perspective, transparent SCM is becoming an imperative to truly trace production’s impact on society, on the environment and on the economy; and thus, blockchain has become a focal point in offering this deeper level of company understanding and operational guarantee. Historically, many companies have had their corporate image ruined amid the discovery of a corrupted supply chain that included forced labour, armed conflict or toxic emissions. Blockchain for one would be a blockage to this type of activity, as the technology design would have to include data points that should be specifically outlined to identify these malicious pursuits.

Blockchain offers exiting possibilities for new and innovative business models and processes. Traceability and transparency are key in shaping the efficient Supply Chain networks of tomorrow.

says Pär Ström, AFRY’s Business Unit Manager for Supply Chain Management

Figure 2. An example of a generic supply chain to explain the process of tracking goods by using blockchain technology.
Blockchain Article Figure 2

 

Additionally, the immutable distributed ledger technology allows companies to safely store, verify and trace supply chain information along an ever more complex and global supply chain. By storing data on blocks that are cryptographically linked to one another, blockchain provides a tamper proof way of sharing data within a network of non-trusted parties. Suppliers, distributors, logistics, manufacturers, retailers and end-consumers can all get access to the information they need about a product or service, and transact with one another. Blockchain design would outline the extent of data sharing content, permissions and relationships across the different stakeholders.

In the food industry, the benefits of blockchain have been identified to be many. Particularly, contamination control and ensuring the integrity of the food element is a main driver for using blockchain within the food industry. An effective blockchain implementation can increase traceability and transparency by 81% and 79%, respectively2. The high concern with regards to risk of disease spreading and the intense demands for strictly controlled food systems nicely align with the operational benefits that blockchain can offer with regards to transparency and traceability. The security aspects inherent to the blockchain as well as the transactional approach of the technology, help companies streamline the supply chain in a way that their products are safely treated according to restrictive quality standards of the sector, cut out unnecessary parts of the supply chain to reduce costs and further integrate the stakeholder ecosystem.

Internet brought up Data Revolution, which now fuels AI. The same way Blockchain will bring trust in the transactions. It will also bring equality which Internet missed out. Rights will be distributed evenly. 

Prajit Datta, Future Technologies Team, AFRY

A further example is automotive manufacturing, one of the sectors with the highest perceived disruption by blockchain. Within this sector, blockchain has become a more than interesting collaborative platform that can provide transparency of material flow across different stages of the supply chain, from base material production, through component manufacturing and forming, to vehicle assembly and across all the intermediary quality tests in vehicle operation. Ownership is also a key issue within the automotive industry. For instance, Original Equipment Manufacturers (OEMs) must, on the one hand, certify the quality of their production, but also handover ownership and data to the purchasing company. This multi-plant transfer can be traced through a blockchain that can easily track back a deficient part or trace a product for audit purposes. Having a flexible supply chain with accurate data shared between stakeholders has been identified as highly beneficial to manufacturers. Especially those who are looking to reduce costs whilst increasing revenues and creating new business opportunities. Ostensibly, blockchain application within the industry could potentially lead to cost savings of 89%, increase revenue by 57% and increase the opportunities for new business models by 44%. In addition, counterfeit products account for 3.3% of worldwide trade. From a safety perspective, these automotive groups want to ensure the quality of their products while reducing risks of buying fraudulent components. Blockchain provides a time-stamped guarantee of production and quality.

Seeing the high potential of blockchain within the supply chain industry, AFRY has not remained a stranger to blockchain design. We have developed our own blockchain-based platform which will be publicly announced soon. Our product is designed to fit a wide spectrum of supply chains and, so far, the product has successfully been applied to different industries and for different applications including food safety, power plant optimisation and land ownership registration. Through our customised and flexible design, AFRY’s blockchain platform can track any type of product and process across any supply chain. Access to platform data can be tailored to each stakeholder according to their operational needs and to the required inputs at every supply chain stage. The flexibility that our blockchain platform provides allows us to effectively respond to the specific requirements of each client, industry and process.

At AFRY, we believe that blockchain technology is a high-standard solution development platform for companies that want to invest in a transparent, flexible, streamlined supply chain where data is secure, accessible and true. Within our client and project portfolio, we have identified that blockchain technology is applicable to most of our clients and can lead to great efficiencies across their processes. If you would like to study blockchain suitability for a particular use case, do get in touch with us. We would love to have a chat on the potential benefits that could be envisioned through the blockchain technology.

Sources:

Does blockchain hold the key to a new age of supply chain transparency and trust?, Capgemini Research Institute

How Blockchain Can Improve Manufacturing In 2019, Luis Columbus for Forbes

Forecast: Blockchain Business Value, Worldwide, 2017-2030, Gartner Research

Trade in fake goods is now 3.3% of world trade and rising, OECD

[1] Forbes, 2018 and Gartner, 2017

[2] Capgemini Research Institute, 2018

Authors

Joana Barragan

Joana Barragan is an energy engineer with an MSc in Engineering with Finance from UCL and an MSc in Sustainable Energy Futures from Imperial College London. She works at AFRY Management Consulting Madrid as an energy analyst, currently covering the Iberian gas and power markets.

Sara Westlund

Sara Westlund has a MSc in Industrial Management Engineering and is currently working with supply risk management in the pharmaceutical industry. She wrote her master’s thesis in South Africa about how to increase traceability and transparency in the supply chain of wine by using blockchain technology.

For more information

Fredrik Hofflander

Section Manager, Future Technologies

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