Blockchain and Its Impact on Supply Chain Security

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.

The Connected Supply Chain: Get Positioned Now to Play

Game changing.

That’s the impact the Internet of Things (IoT) technology may have on Supply Chain Management generally, and inventory management and demand forecasting specifically. And it’s happening now.

Through 2025, according to projections by DHL and Cisco Consulting Services, the IoT can be expected to generate some $1.9 trillion in value driven by supply chain and logistics applications. By 2020, the firms also estimate that the number of devices connected to the Internet will explode to 50 billion from 2015’s 15 billion.

Supply Chain Management at its simplest involves managing the flow of goods and services from the point of origin to the point of consumption and all the stops in between. A supply chain that’s “connected” stands to yield any number of operational efficiencies. But, at the same time, there will be challenges – not the least of which is bringing businesses current with IoT technology, given the number of outdated legacy systems being used alongside new technologies and assets that are both connected and unconnected.

Among the efficiencies a connected supply chain can create:

· Far better tracking of assets and at incredibly granular levels. The IoT poses substantive advantages by expanding the existing application of RFID and GPS sensors that will track products from floor to store or more. In addition, deeper data dives will be possible on things like storage temperature or length of time on retailers’ shelves. All of this improved data will combine to improve quality control, delivery performance and forecasting.

· Having better data on assets can lead to improved production schedules and also give companies a better perspective on vendor performance. That’s important when up to 65 percent of the value of an organization’s products or services stems from its suppliers. Having a better understanding of how they’re handling supplies and product is a bonus.

· IoT monitoring programs for forecasting and inventory planning purposes are a lot more accurate than what humans can do. Still, data collection can be haphazard, not necessarily providing a good baseline for analyzing product performance and predicting failures. MIT’s Center for Transportation and Logistics, though, has developed an algorithm that builds IoT failure data directly into the equation. It not only helps predict future inventory needs, but has been shown to help reduce stock by 6 percent to 10, a considerable bottom-line impact

The drive to create a connected supply chain is not going to be easy, however. And it’s not just the question of investing in the technology and in the skills that people will need to develop to make it work.

The IoT-connected supply chain is going to result in exponentially larger amounts of data. Simply collecting it won’t be enough. It’s knowing what to do with all the disparate data that will be produced, when much of it will be incomplete, insufficient and inaccurate. This data will need to be accounted for and properly managed in order to lead to the sophisticated analytics that provide insights for smarter decisions. Sound analytics processes, along with the right people and technology need to be put in place.

Without question the IoT is changing the supply chain game. But as this game is a work in progress, your best bet is to start positioning yourself now to be a player.