The weak links
The XXI century is a very peculiar time. In order to stay afloat and maximise their profits, big international companies need to implement new technologies, as well as satisfy the needs of their customers. These days, delivering goods to a point of sale and offering them at an acceptable price is not enough for customers in most developed countries — more and more people want to know the exact origins of their purchases as well as how sustainable, ethical and environmentally friendly they are.
In has long been known that most global corporations exploit cheap labor in their factories in developing countries, where people are often subjected to inhumane and unsafe working conditions. Apple simply installed suicide nets around their factories in China after several workers jumped to their deaths. In 2013, an unsafe factory building in Bangladesh, which housed the productions of Benetton, Mango, Primark, Walmart and several other brands, collapsed, which resulted in 1,127 casualties. Just a few months before that, 112 people died in a fire at another clothing factory in Bangladesh.
This year in China, hundreds of thousands of children received substandard rabies vaccines manufactured with technology violations. In 2013, researchers tested cheap beef burgers from several supermarkets and found that a third of samples contained horse DNA, with a staggering 85% of samples containing pig DNA. It’s worth noting that in addition to general public rightfully being furious about shops selling horse meat under beef labels, the situation angered the Jewish and Muslim communities all across the country, as they normally avoid eating pork for religious reasons.
According to Paul Brody, a Global Innovation Leader and Ernst & Young, the systems and databases that currently form the global supply chains were relevant 30 years ago, but not so much today. At best, they’re different systems that don’t ‘speak’ with each other, at worst — everything is done on paper.
As a result, the supply chains are not transparent, which means that a company’s management might not even be aware of the conditions their product is produced in, there can be significant delays in deliveries and any fraudulent activity or errors are almost untraceable. Because of this, it’s basically impossible to identify defective shipments, recall them quickly and efficiently or to trace exactly what caused the defects and eliminate the cause.
Clearly, the industry needs to transition to a more transparent model, which will allow companies to operate more efficiently, and, therefore, increase their profits. Moreover, the global demand for ethically sourced goods is constantly growing. According to a survey conducted by Nielsen among respondents in 60 countries, 66% of consumers are willing to pay more for sustainable products. Among the millennials, this number is even bigger — 73%. Intractability of the products’ origins still remains a problem.
Blockchain as the strongest link
The supply chain system significantly differs from most other industries that are considering implementation of the blockchain technology in a sense that blockchain actually present a very real opportunity to not just maximise profits very quickly, but also significantly improve the industry’s reputation in the eyes of consumers. So, we don’t really have to speculate about the industry’s future, we can simply evaluate it based on real‐life use cases that actually exist.
For instance, IBM are already actively promoting their solutions for the freight industry based on the blockchain technology. Among the benefits described are transparency, dynamic optimisation of shipments and easy access to live feedback from customers.
The blockchain is described as a distributed ledger, which includes all the relevant product information, with each record being time‐stamped and inextricably linked with the previous one. Blockchain will enable businesses to track the exact location on any shipment, the ownership rights to it, the organisation currently handling it as well as its present condition. The implementation of blockchain will significantly improve the overall planning of shipments, the inventory process, dispute resolution and quality control.
This is especially useful for transporting goods with limited shelf life. All the documents confirming that the food being transported is up to the hygiene standards and is insect‐free need to be stamped and signed by dozens of agencies and then individually transported by air mail to the destination port, as customs often don’t trust the electronic versions of documents. A single error can lead to serious delays, which can result in the product simply going bad. Moving such documentation to the blockchain where all the organisations can access it will significantly reduce the delays and costs of transportation.
All the data recorded on the blockchain is immutable, meaning that all the parties can be sure that they’re viewing the same document. It’s worth noting that immutability doesn’t guarantee truthfulness, but this issue can be easily resolved with digital IDs for all parties as well as digital signatures. These technologies have been available for a while now and are not even unique to the blockchain technology. Moreover, all the data on the blockchain can only be viewed by those who are authorised to do so. Essentially, it’s a way sharing sensible information with partners around the world, while protecting it with an additional level of security.
One of IBM’s solutions is called the IBM Food Trust and it is already being used by Walmart to track the origins of the food they sell. Through this system, any food item can be traced back all the way to the farm where it was produced. According to Frank Yiannas, Walmart’s Vice President of Food Safety, each segment of the food supply chain approaches the traceability issue in their own way and, more often than not, they only make records on paper. With the implementation of blockchain technology, Walmart hopes to unite all the intermediaries — farmers, processors, distributors — in a single, transparent system.
While big international companies are mainly focusing on optimisation of their supply chains, small startups are utilising the blockchain technology to track ethically sourced goods. For example, a British startup called Provenance recently tested their product in Indonesia: upon catching fish, local fishermen sent a text message to a provided number, creating a new ‘asset’ on the Provenance blockchain. This ID then accompanied the caught fish through processing factories and into shops and restaurants. It also included the audit results confirming that by purchasing this particular product a customer won’t be supporting illegal fishing or slave labor.
Another British startup, Everledger, created a blockchain protocol designed to track the origins of diamonds. In fact, they created a global database of diamonds, with a ‘digital passport’, which includes all its properties and the place of its origin, created for each precious stone. Essentially, this initiative blocks ‘blood diamonds’ found in mines around areas of combat from entering the market. Selling those diamonds enables the warmongers in such areas to purchase more weapons and essentially finances the bloodshed.
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Clearly, the widespread implementation of the blockchain technology into the global supply chains can make the world a better place. Demand for the ethically sourced, sustainable goods is soaring. More and more people want to know exactly where their stuff and their food comes from and are unwilling to blindly support slave labour, poaching and the destruction of natural resources. Bringing as much transparency into this industry as possible can really change the current state of affairs.
Of course, the demand for the cheapest possible products, often produced in the atmosphere of total disregard for moral and ethical standards, will still be there, at least for a while. Still, it is very important to provide an alternative. The obvious fact is that the global industry in undoubtedly interested in this, simply because the implementation of the blockchain technology will help streamline the entire supply chain, and, by extension, maximise their profits.
The work is underway, and in this case we can actually say that this without being overly pompous and blindly optimistic: blockchain will make this world a better place.
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