Real-World Blockchain Implementations in Supply Chain Management
How Thales & Accenture have used blockchain to secure and simplify the aerospace & defense supply chain.
From the Silk Road to modern-day automated supply chains, goods have been transported, and buyers have been checking their products on receipt. As technology advanced, the manufacturing of products developed, and trade accelerated, but complexity increased and the origins of goods globalised. The multiplication of intermediaries and transports made it more crucial but also more challenging to check that the products received were those that were ordered.
What can blockchain technology bring to the table?
Thomas Hulse, current technical Blockchain Lead for Fifth9, is convinced that blockchain can add real value to the supply chain process. Buyers need to know that the products they received are the products they ordered and are meeting the original specifications. Buyers also want reassurance that no counterfeited components have been built into assembled parts.
In the current model of supply chain management, buyers can only monitor the goods they receive. They can only see the goods leaving the supplier warehouse to reach their own warehouse, like tracking an Amazon delivery online.
When a buyer gets an assembled part which has a defect, not only does the original supplier need to be identified & notified, a complex and time-consuming process but as the components can’t be used, the whole production process is delayed, and in some cases a finished product needs to be put out of service and returned to the manufacturer.
Buyers need a quick solution to identify where the faulty element is coming from, who has sold a counterfeited piece and to potentially ensure that the seller’s name is shared amongst their partners. This way the buyer can make sure they get authentic components, and none of their partners keep buying counterfeited elements putting their own end product at risk. This traceability creates a virtuous circle amongst suppliers improving the integrity of the entire supply chain.
The challenge is to find a way to ensure the buyer has a real-time view of all his components’ origins reflecting the reality of what is coming into his warehouse without having to check each element physically.
A private ledger enables the buyers and the sellers to share as much or as little information they want about a single transaction and track all of the goods as they move across the supply chain in real time. It also allows access to hundreds of participants while restricting open public access to sensitive information.
The solution needs to meet two essential requirements:
A neutrally owned repository of information trusted by all the users that offer different access levels
Any participant can track a part of the blockchain by using their app to query the ledger and retrieve the information granted by their access rights. The screen shows all the transactions of goods at each step of the transportation journey. A transaction, in this case, is a point in the supply chain where the products change hands, such as a transporter picking up the goods from a supplier to transport them to the buyer. This solution provides a secure real-time view of the full supply chain, which is not currently available on existing systems.
A real-time and 100% accurate view of what is physically happening in the supply chain
The next crucial requirement is to ensure the view tracks the reality of the physical world. The purchaser needs to verify the goods received are meeting the specifications of the products purchased, and no physical substitution has occurred.
In a typical supply chain model barcodes or QR codes are used to identify goods at various checking points of the journey such as being loaded on a truck or entering a warehouse. But barcodes and QR codes do not have the same characteristics as a blockchain, namely – immutability and being tamper proof. Thus, in each industry, a solution needs to be developed to recognise the goods being transported uniquely. The specificities of each tracking mechanism need to be customised to the type of products carried and the key characteristics to be recognised to ensure identification.
For instance, DeBeers has sponsored the development of a technology based on light pattern recognition to assign each diamond a unique ID recording characteristics such as carat, clarity, and color. The reliability of the physical integrity of the goods needs to match the strength of the blockchain, or it will undermine its value.
Thales & Accenture
Together, Accenture and Thales are actively demonstrating how blockchain technology can secure and simplify aerospace & defense supply chains.
Thales approached Accenture with the following problem: the Ministry of Defense had aircraft carriers that needed to be returned to the supplier because of faulty electrical systems. The issue was due to counterfeit components. It meant that the originality of the fake components had to be tracked back up a twenty tier supply chain.
Aircraft are built using thousands of different suppliers, and any of these suppliers could have inserted counterfeited elements. It can cost millions of pounds to identify the origins of a counterfeit piece. Additionally, a grounded aircraft generates high revenue losses and the need to set up alternative solutions.
The solution developed by Thales and Accenture uses Fabric Hyperledger. A pilot product for this would cost around $800,000. Hyperledger Fabric is a private blockchain allowing for easy allocation of permissions to different participants in the network.
Tamperproof Cryptoseals have been created to secure the physical elements of the supply chain. These are a blockchain version of a barcode and are produced by Chronicled. If a QR code is removed, it destroys the NFC tag inside it. This means that at the next supply chain check, the blockchain application can flag that the Cryptoseal, and potentially the goods inside have been tampered with. Cryptoseals are also cryptographically unique, so they are impossible to replicate, and the information on it is immutable.
Accenture and Thales are currently testing the solution which has the potential to find uses across the aerospace and defense industry. While blockchain might not be the answer to solving every supply chain management issue, the technology brings a unique capability to provide a single, shared view of the supply chain and an immutable audit trail – for partnering suppliers, manufacturers, and operators.
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Helene has spent years developing innovative solutions in Financial Services with a particular focus on business models and markets to increase revenue.
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