As our society has grown more digitized, there’s been an exponential increase in the complexity of our supply chains that makes security an even more pressing issue. Many believe that blockchain — the distributed ledger technology — holds substantial promise as a solution.
Cyber breaches cost the international community $2.1 trillion annually – and many subject matter experts believe those losses will only mount as hackers grow increasingly sophisticated in their capabilities.
Every link in the supply chain is susceptible to security issues. Cargo theft, for example, causes $30 billion in losses each year. But it’s in the growing importance of IT systems and interconnectedness where some of the most prominent dangers lie: With manufacturing systems linked to those for sales and operations that are in turn linked to transport management systems, if one is hacked, a lot of doors are likely to be opened.
Blockchain’s structure makes it an ideal platform for supply chains in a global digital economy where networks must be expanded to include more trusted partners – if success is to be scored. But the more players, the greater the security risks.
As a distributed ledger technology, blockchain mitigates much of that risk. It creates a shared and virtually unalterable record of events and transactions and gives real-time and trusted data to verified parties in the supply chain. This, in turn, enables more secure transactions that are less vulnerable to fraud and theft. And since data is distributed, residing on multiple PCs versus a centralized server, cyber attacks are virtually impossible to carry out.
Other security issues also stand to be mitigated with the blockchain solution.
Manufacturers, for example, expect reassurance that items used on their production lines have solid and traceable provenance and the products they ship out aren’t tampered with. Blockchain’s structure allows for precise and transparent product tracking, so that risk of fraudulent goods slipping into the system is reduced. Goods are registered on the ledger, providing a solid audit trail that also includes information like cost, location, date and production and transportation partners.
A variety of projects have been launched that show the various areas where blockchain could be beneficial in fixing some of the more persistent security issues on any number of fronts in the supply chain. IBM, for example, has a service where customers can track high-value items through complex supply chains via a cloud-based blockchain. The company had initially tested it for increased transparency in the diamond market – one that’s rife with criminal activity and violence.
These are exciting times — and challenging ones, too — for an increasingly vast and complex supply chain. Evolving technologies like blockchain promise a system that achieves higher levels of efficiency, transparency and security in the process.