Supply Chain Transparency and Traceability
The supply chain is used to sell particular items to customers. The essential phases of supply chain management are dealt with by almost all firms involved in the procurement and selling of goods. The two most sustainable components for conducting an efficient operation are trust and transparency in the supply chain. What does the future hold for supply chain management with blockchain? Continue reading to learn about the primary advantages of this new robust ledger technology.
Principles of Supply Chain Management
Let's start with a definition of the supply chain concept, its management, and the supply chain process's fundamental principles. From the initial manufacturer to the ultimate client, the supply chain is the network of different companies, personnel, information, and resources involved in the manufacturing, transportation, and sale of a product. It combines the following parts of the process:
supply of basic materials
transforming ingredients into finished goods
storage in a warehouse
retailer distribution and delivery
providing the final product to the customer
The terms supply chain segment and logistics are frequently used interchangeably. Logistics merely relates to the movement of commodities, whereas supply chain encompasses a wide range of topics. As a result, logistics is only one component of the supply chain. The distribution of raw materials from the supplier to the producer to the end user is coordinated throughout the chain. The supply chain has an impact on the quality and timeliness of product production.
The materials must be delivered from the supplier to the manufacturer, from the manufacturer to the retailer, and from the retailer to the final client.
What is Supply Chain Management (SCM) and how does it work?
Supply chain management is a critical optimization process that leads to lower costs and more profitable outcomes for businesses. It establishes a long-term competitive edge while increasing customer value. Product development, production, logistics, and the information systems that manage these activities are all covered under SCM. The goal of SCM is to keep track of shipments, deliveries, and distribution while lowering costs and improving time management.
SCM is critical to every company's success. As a result, it is necessary to keep a tight eye on all expenses and operations. Supply Chain Management has a positive impact on the efficient development of supply chains. CSM is built on the concept that every product is the result of the efforts of numerous supply chain organisations.
According to the Investopedia definition of SCM, it aims to coordinate these operations while reducing costs and fat. Conglomo, for example, manufactures its widgets at a domestic plant. Conglomo buys the raw materials it needs from suppliers and staffs the plant with hired people to make the widgets.
The corporation also provides the manufacturing with operational supplies, such as equipment and light bulbs. The manufacturer needs packaging supplies and equipment, trucks, drivers, fuel, and insurance to package and ship the final widgets to retailers for sale. Production, shipment, and distribution are all managed centrally through SCM.
Traceability and Transparency are two problems in SCM.
Due to the increasing difficulties in supply chain management, this industry is frequently confronted with difficult-to-solve problems. Traceability is the most important factor in ensuring the long-term viability of the global corporate supply chain.
Why is it so important for small and large firms to keep all procedures in supply chain management traceable and transparent? Traceability refers to the entire system that connects all of the stages in a chain. It's the ability to track down the origins, distribution, location, and use of products, parts, and materials. As a result, from the supplier to the final consumer, a traceability system monitors, documents, and controls the process.
One of the most important things to track and monitor is food and medicine safety. Traceability assures information on the origin of food and goods, as well as the conditions under which they are produced, maintained, and transported, in response to growing demands from governments, suppliers, purchasers, and consumers.
Information about the components, quality, and safety of products is included in traceability. The partnership of supply chain firms should give in-depth, real-time insights, as well as procedures for analysing the data collected by the factory management system. Collaboration is the ideal approach for supply chain traceability, according to the United Nations Global Compact's (UNGC) practical guide:
Supply chain players are in charge of following products from source to consumer, tracing their origins, and documenting their delivery history. One of the consequences of poor supply-chain management is mislabeling. With traceability solutions, audits can be more effective and data can be shared more easily.
Supply chain complexity is influenced by a number of things. It is extremely challenging to construct an efficient supply chain due to customers' needs for a product on time and at a reasonable price. Finally, we'll look at several supply chain management and traceability issues that jeopardise its long-term viability:
Customers' Demands and Globalization
Because of the complexity of supply chains, fraudsters have a significant potential in the globalisation scenario. In most cases, a buyer wants his product as soon as possible and at a reasonable price. As a result, businesses are forced to relocate their manufacturing to lower-cost countries. As a result, the installation process will take longer. Supply chain management necessitates stringent supervision and verification at all stages of the process.
Food fraud is always caused by a lack of transparency. The supply chain is frequently harmed as a result of the rise of highly organised criminal activity.
Food safety systems, on the other hand, find it difficult to detect and combat fraud. As a result, food fraud has a negative impact on the overall health of the people, as well as the brands and reputations of businesses. Fish, olive oil, milk, and honey are the most regularly reported food forgeries, according to the Rey Global Food Safety Initiative (GFSI), which delivers cutting-edge information on food fraud.
Customers are losing faith in businesses, and businesses are losing money. Every year, food fraud is expected to cost the global food business $30 billion to $40 billion dollars in the United States. But that is only the monetary cost.
Blockchain, as a transformational technology, has the potential to solve this type of issue. This solution will keep all supply chain management participants in the loop and track their every move in a transparent and decentralised manner. In the next section, we'll go over this enormous opportunity.
The Information Deficit
Lack of automation has an impact not just on supply chain operations, but also on finance operations. As illustrated in Figure 3, a staggering 90% of businesses claim that their global supply chain technology is insufficient to provide timely information to their corporate finance departments. For budgeting, cash flow planning, and management, this information provides correct costs and delivery dates. As a result, businesses' financial productivity is being harmed by a lack of global supply chain visibility and automation, which are critical weapons against uncertainty.
To guarantee that data collection is managed successfully and the correct data is obtained, a well-designed traceability system is essential. Companies must share traceability data with other supply chain participants. Successful supply-chain traceability necessitates the sharing of information and effective communication among the various parties in the supply chain.
Non-compliance with the Standards is a serious offence.
Standards give information on the social and environmental performance of goods and services, as well as supply chain information. When consumers buy things that are branded or certified, they are confident that they are purchasing products that are sustainable, environmentally friendly, safe, and of high quality. They put their faith in the standards rather than the product or the company who manufacture it. The issue is that standards-implementation systems are never perfect.
Transparency is lacking.
We deal with a variety of material products in our daily lives and don't hesitate to use them. We have a basic understanding of the products we buy in the market or in stores. It takes a long time for a supplier to deliver a product to a customer. The way a broad network comprising so many entities and persons is collaborated and compiled remains a mystery. The implementation of production, delivery, supply, storage, and distribution takes a long period. Food fraud, illnesses, unsafe working conditions, harmful substances, inappropriate food storage conditions, low-quality products, and other issues are all caused by a lack of openness in supply-chain management.
In this scenario, it's worth remembering the horsemeat scandal, in which horse DNA was discovered in beef products sold and supplied in the United Kingdom. This was announced in the media in April 2013 on BBC news. Since 2011, 50,000 tonnes of horse meat have been distributed around Europe. According to the World Health Organization, 600 million people (almost one out of every ten people on the planet) become unwell each year as a result of consuming contaminated food. 420,000 people die as a result of this.
Blockchain Supply Chain Management Solutions: A Crucial Tool in Digitized Supply Chains
Blockchain, or distributed ledger technology, is enthralling the world at breakneck speed. This fact was confirmed by Quartz, which stated that blockchain has captivated corporate executives who can no longer afford to ignore it. This earnings season, the number of mentions of blockchain in quarterly reports and conference calls has more than tripled compared to previous year. According to the data, blockchain was mentioned 665 times by corporate executives over the course of four weeks in October and November. Ledger technology is used by strong companies from a variety of industries. IBM, Walmart, Estée Lauder, NVIDIA, Oracle, Maersk, Citigroup, Webjet, UPS, Western Union, and others are among them.
Has the rise in the price of Bitcoin have an impact on blockchain chat? Yes, that is true; it is one of the reasons. According to Quartz, it's more likely that business executives are discussing blockchain because the sky-high price of Bitcoin has made the technology unavoidable.
Centralization vs. Decentralization: What's the Difference?
To begin, let's define what this massive beast known as blockchain is, as well as the differences between centralization and decentralisation. All transactions are conducted through third parties, each of whom has its own internal systems, as well as its own visions and business models.
There are many frictions and a lot of paper paperwork as a result of these variables, which leads to non-compliance with the validity, inefficiency, and obscurity of the situation. Every participant in such networks has the capacity to change the data history, posing a risk when making high-cost payments.
Decentralization is a completely new and diametrically opposed concept. The immutable ledger in which all transactions are fixed and saved is spread among all network nodes. Everyone on the network has access to the transaction history and all of the data they've been granted access to. As a result, blockchain technology is built on decentralisation, which ensures trust, transparency, and traceability in corporate processes.
Why Are Decentralized Technologies Appropriate for Modern Supply Chains?
This question necessitates a sophisticated response. The aforementioned supply-chain management difficulties clearly demonstrate the necessity for efficiency solutions. There has always been a broad set of concerns affecting the supply chain's long-term development. The supply chain has been plagued by three major issues for decades: data visibility, customer demand management, and process optimization. While blockchain technology will not be able to solve all problems, it can aid in the improvement of traceability, trust, and transparency. Because it promotes credibility and accountability within and between firms, ledger-digitized technology is trusted.
With its potential to guarantee anonymity and security in corporate development, blockchain has been used by a variety of industries. Our goal is to assist organisations in selecting and deploying the best blockchain technology for their needs, as well as developing blockchain-based applications. Blockchain allows smart contracts between corporations for company insurance. This adds an extra layer of security while also lowering expenses by eliminating the need for third-party accounting services.
Why Is This Powerful Digitized Tool Required for Supply-Chain Management? What Does It Say About the Future?
Blockchain is a decentralised, distributed digital ledger that enables all supply chain players to perform business-to-business transactions. No one can edit or delete the transactions, hence it's a single immutable database. As a result, a priori application of probable fraud schemes is difficult. To begin with, blockchain delivers supply-chain management with transparency, trust, and traceability. The following benefits of ledger technology could revolutionise supply-chain management in the future.
The following are some of the benefits of blockchain technology for supply chains:
A decentralised supply chain is a peer-to-peer network in which all participants in the process can fix and validate transactions in real time. Each participant has access to the status of commodities along the whole supply-chain ecosystem.
It is permissible to have a transparent and shared network. This means that there are limitations on who can participate and in what capacity, as well as who has access to the network, due to the availability of confidential data. Participants must first be invited and then validated before they may contribute.
No one else can join the network; however, validated users can examine all previous transactions without being able to change them. All players in the supply chain have end-to-end visibility of the network because of this specific degree of permission.
The decentralised peer-to-peer approach allows users to collaborate openly and transparently with one another, with no ability to cheat or deceive.
The Traceability of Provenance
Without the approval of other participants, no one can change or delete the records. Blockchain allows for detailed asset tracking while ensuring that the responsible party/owner(s) remains unassailably identified.
Digital technology, which may significantly simplify all corporate activities, are currently the present trends in numerous industries. However, with these cutting-edge solutions comes an increasing risk of cyber-attacks. Blockchain technology can assist in keeping sensitive data secret and safeguarding supply chain activities.
He noted that this notion has the potential to become a component of the supply-chain cyber and cyber-physical systems security measures that are of considerable interest to countries all over the world, with the United States, China, Russia, India, and others leading the charge in recent years.
To summarise, smart contracts established on blockchain are written as code in the blockchain, ensuring that the parties may trust each other. Although the participants are anonymous, the contract is a public ledger. Hackers and illegal modifications are less likely to affect the system as a whole. No one outside the network has the ability to modify or validate blockchain apps. Only members of the network have access. As a result, cybersecurity is substantially stronger, preventing hackers from collecting personal information. The Ethereum ecosystem is the way to go if you need help implementing your token distribution logics, business behaviour, and storage in a decentralised method—and we can help.
Operating Costs of Automobiles and Time Savings
Payments and financial transfers from payer to payee do not require the use of banking systems or auditing services. These procedures are made simple by blockchain. When compared to traditional audit clearing houses, which take several days to complete payment, the secure, quick operation saves time and money.
For corporate branding and reputation, the rise in regulatory and customer demand for provenance information is critical. Fraudsters erase or manipulate information in accounting systems, replacing papers with their own phoney files, in order to carry out illegal schemes. There is no centralization on a blockchain network; all transactions are made amongst all participants across the network. These transactions are fixed and preserved in a shared decentralised ledger, where their visibility and transparency prevent fraudsters from changing or deleting information. Manufacturers' goods will have provenance thanks to this immutable transaction history.
Let's have a look at how transaction history is built. On the IBM Blog, there is an understandable explanation. The validation of a new transaction block must be agreed upon by network participants before it can be added to the network. This is referred to as consensus. Each block has a timestamp, is encrypted with a private key, and is linked to the previous block in the chain. Although you can add a new transaction to the network, all previous records will remain accessible and traceable. In this situation, blockchain acts as a network that allows everyone in the chain to see the asset's origin, owner, and progress.
Delays caused by paperwork are being reduced.
Even so, some businesses still use manual documentation, which causes transportation and payment delays. All of these actions will be carried out promptly, safely, and openly without the involvement of third parties on a decentralised platform. Over the next few years, blockchain implementation promises to be an ideal, high-level solution. For starters, it foresees the provision of a secure means of conducting financial transactions and communicating data. Due to human nature, manual paperwork contains inaccuracies in orders, invoices, and other associated papers. Electronic documents on the blockchain have the potential to be a good substitute.
Blockchain strengthens the supply-chain area, piqueing the interest of major global players that want to adopt it due to its lack of transparency, particularly in the food industry. It has already prompted IT companies and startups to establish new pilot projects that have effectively integrated supply chain management.
The Food Safety Alliance is a collaboration between Walmart and IBM.
IBM, Walmart, and Tsinghua University recently announced their collaboration in the Food Safety Alliance to improve food monitoring, traceability, and safety in China, as well as achieve better openness across the food supply chain, according to an IBM press release dated December 14, 2017.
IBM and Walmart have already piloted a single blockchain initiative for tracking food goods, including pork in China and mangoes in the United States.
He claims that all of the open data will reveal insights that will enable people to have a safer, more economical, and long-term food system. It will slash the time it takes to track down things from days to weeks to minutes.
The partnership helps brand owners protect their data while also assisting them in integrating their online and offline traceability for food safety and quality-control channels. Companies who join the alliance will be able to share data using blockchain technology, and they will be able to choose the best standards-based traceability solution for their needs and legacy systems. As a result, the supply chain will be more transparent, and new technology will be introduced into the retail sector to provide a safer food environment and improve the consumer experience.
Supply Chain Blockchain Implementation on a Technical Level
How might blockchain be used to manage supply chains? The technical methods of blockchain implementation, business process models, blockchain architecture, and client application specifications are all covered in this section. Our understanding is that you require a solution that will demonstrate provenance to your customers while also allowing you to further optimise resources as a result of the benefits of data availability and new business and technology approaches.
Modeling of business processes. BPMN 2.0 (Business Process Modeling Notation)
How can you forecast your company's future status and assess its current state? Business Process Modeling is one of the most useful tools available. It is a high-priority mechanism for businesses to optimise processes by implementing functional tools and navigation to ensure that they run smoothly. BPM is a tool for mapping out a pipeline of business processes for analysis and progression. To enhance their efficiency and improve corporate performance, this method is used to depict various activities, steps, logical judgments, events, and resources. To make better decisions, diagrams, charts, and maps are utilised to visualise the processes.
We are convinced that streamlined management and a well-organized work process are critical to the smooth and flexible operation of a team. Process Mapping, Process Discovery, Process Simulation, Process Analysis, and Process Improvement are all part of BPM.
What Are the Benefits of Business Process Modeling?
We'll go through the advantages of BPM and why we use it in business cases in this part. Business Process Modeling tools enable digital transformation and automated events to be represented as business processes. Work procedures were once completed by a single person from beginning to end. It was an inefficient and time-consuming method of production and operation. When BPM was introduced, it took two decades to replace earlier organisational techniques. Analysts and producers of business process tools have learned to characterise, reengineer, and standardise business processes as process techniques have evolved. As a result, BPMN (Business Process Modeling Notation) has become a de facto standard. It was further developed by the Object Management Group (OMG).
BPM has numerous advantages in terms of business performance. We've highlighted a few of them here.
PROCESS MODELING FEATURES:
BPMN is a model that incorporates both IT and human processes.
Improvements in Process Communication
Communication and decision-making are easier to implement because to a shared uniform language. New employees can learn quickly with well-designed process modelling. It also reduces the risk of losing employees. For company managers who wish to communicate their ideas quickly and effectively, mapping and flowcharts are ideal for creating a good knowledge of the situation.
Control and Consistency
Rather than relying on humans, the process is carried out in a consistent manner using a written process. Modeling rules improves decision-making. In terms of regulatory policy, BPMN follows company rules to ensure compliance with legal regulations.
The Processes' Visual Appearance
Visual representations make it easier to comprehend the big picture and make it more comprehensive.
Enhancing Operational Efficiency
Process simulation aids in optimization by enabling for the investigation and comprehension of process flows. It shortens cycle times, boosts existing resource productivity, and improves resource use.
Aligning the Operations
Business Process Modeling is a technology that allows team members to carry out business tasks and operations in accordance with the plan.
Notation for Business Process Modeling (BPMN 2.0)
Now we'll take a quick look at the BPMN 2.0 approach, which is widely used in businesses and organisations.
BPMN 2.0 is a new industry standard that our organisation uses to help businesses run more efficiently. The last time it was updated was in 2011. The fundamental goal of BPMN 2.0, according to its requirements, is to provide a notation that is easily understood by all business users, from the business analysts who generated the initial draughts of the processes to the businesspeople who would manage and monitor them. As a result, BPMN serves as a standardised link between business process design and implementation.
This international standard defines the notation and semantics of collaboration diagrams, process diagrams, and choreography diagrams by combining best practises from the business modelling community. A BPMN core structural schema is shown below:
Flow objects (events, activities, gateways), connecting objects (sequence flow, message flow, association), swimlanes (pools and lanes), and artefacts are some of the building components (data objects, text annotation, groups). BPMN is a key component of Business Process Management (BPM), an enterprise design endeavour.
Business procedures outline how a company achieves its goals. BPMN is versatile enough to support all BP variants, according to the OMG BPMN Tutorial. Process maps (basic flowcharts of high-level activities), process descriptions (flowcharts with more detail), and process models are examples of this type of flowchart (flowcharts with enough information for analysis, simulation, and execution).
Permissioned Blockchain Implementation
We believe that permissioned blockchains should be of great priority for businesses to run. The reason for this is the fact that businesses have a significant amount of confidential information which must be secured and inaccessible to outsiders of the network. The aforementioned blockchain feature of permissions for fraud prevention in supply chains controls access and identity management. We implement permissioned blockchain solutions to make records in the network private. There are restrictions for participation. New members must have an invitation, and then be validated to the permissioned network. This ensures intensified security.
All the transactions in the network are encrypted by the private key, but there is no way to view and alter previous transactions without execution of consensus protocol between the nodes. Each member of the network must solve a complex, resource-intensive cryptographic problem. Hereby, Applicature supports Proof-of-Authority (PoA) consensus algorithms, allowing private setups in the network. It has a number of pre-approved authority nodes that can approve and validate transactions and blocks. Therefore, a new node can be added through approval by the “validator,” who runs software allowing him or her to put transactions in blocks. The process is automated and does not require validators to be constantly monitoring their computers.
So, why use Proof-of-Authority? It is the most suitable engine for private blockchains, being more secured and incentivized. The concept behind PoA is that individuals earn the right to become validators, so there is an incentive to retain the position they have gained. By attaching the reputation to identity, validators are incentivized to uphold the transaction process, as they do not wish to have their identities attached to a negative reputation. This is considered more robust than PoS.
So, let’s go deeper into blockchain nodes. They are anonymous individuals in the network. To add a transaction to the blockchain ledger by a node, consensus protocol must be adopted. The consensus determines whether the transaction should be validated in the ledger. This is called a block. Each node in the blockchain keeps a copy of the ledger, downloaded automatically upon joining the blockchain network. They propagate transactions and blogs everywhere.
There are different types of actors in a supply chain who can be the nodes in the blockchain network, with the ability to make transactions and record information:
Blockchain Architecture and Client Application Specifications
We understand that you need the solution that will provide provenance to your customers, as well as further optimize resources via the benefits of data availability and new approaches to business and technology. We would like to share with you our experience and knowledge on traceability implementation to your supply-chain business processes.
This first phase is to review your business processes together and decide which of them to include in a blockchain-based traceability project. Once the roadmap of the project has been generated, including goals, it’s time to get the definition of the architecture and the research of top candidates for blockchain deployment. Technical architecture includes the following steps:
generating an overall architecture schema
considerations for blockchain implementation
research and list of blockchain platforms for deployment
Visual Wireframes for the minimal version user-facing applications
The next phase covers the proof of technical assumptions and the validation of the risks standing between us and successful final proof of concept. Within a technical feasibility project, we deploy the selected blockchain candidates and run all necessary tests to confirm the match with our criteria. We intend to deliver the most appropriate configuration in its early stages of development, usable f