Four Reasons to Think Blockchain for the Electronics Supply Chain

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Carolyn Mathas for Mouser Electronics | Estimated reading time: 4 minutes, 25 seconds

A myriad of supply-chain disruptions underscores the need for digitization based on strong data integrity and quality. For supply chains, blockchain attributes include transparency, trust, management benefits, and most of all, a compelling future. Here’s a look at all four.

Supply chains face many issues, including low traceability, complex compliance requirements, low flexibility, and problematic management. Supply chains are incredibly complex. Enabling transparency of information is a major advantage of blockchain, which provides a fully auditable and valid ledger of transactions. Using encryption and control mechanisms, blockchain safeguards transparency by storing information so that it cannot be altered without recording the alteration.

Blockchain enables greater transparency and accurate end-to-end supply-chain tracking whereby organizations digitize physical assets and create a decentralized immutable record of all transactions, enabling tracking from production to delivery. Through distributed ledger technology, blockchain supply-chain solutions provide permissioned participants greater visibility across all supply-chain activities.

Many top corporations have started implementing blockchain for real-time data access, privacy, traceability, and auditability for their supply-chain management, including:

• Blockchain helps Walmart employees track the origin of food in seconds vs. days, accelerating supply chain transparency.
• Ford Motor Company uses blockchain to trace supplies and authenticity of cobalt, an essential ingredient for electric car batteries.
• De Beers uses a blockchain-based network to track diamonds across the supply chain
• UPS joined the Blockchain in Trucking Alliance for increased transparency in the supply chain. UPS and Inxeption introduced a blockchain-powered platform to enhance merchant supply chains. The company filed a patent for a blockchain system capable of storing package destination, movement, and transportation method, ensuring efficiency and transparency. 
• FedEx uses blockchain to guard chain of custody in tracking its shipments. It also launched a blockchain pilot program to determine what data should be stored on blockchain to rectify customer disputes.

Until blockchain, supply chains had to trust the network, participants, computers, cryptography, and protocols—all potential points of failure. The sharing of data on a blockchain platform is based on an immutable, distributed, and shared ledger to transact with supply-chain partners in a trusted way. Blockchain is, therefore, a trust-building technology, as its distributed-ledger system securely records, stores, manages, and transmits transactions. The technology removes the need for trust between all members of the supply chain—and requires only that the technology be trusted.

Blockchain enables access to the same information, reducing communication and transfer data errors. Less time is spent validating data and, instead, the focus is on the accurate, efficient, and safe delivery of goods and services—improving quality and reducing cost.

The World Economic Forum has recently produced a blockchain-deployment toolkit, created over a year of global collaboration by 100+ leaders. “Redesigning Trust” focuses on supply chain and trade use cases, and it was developed through lessons from an analysis of real projects. Its goal is to help organizations embed best practices and avoid possible obstacles in deployment of distributed ledger technology.

If a supply chain is small and all parties within the supply chain are known and trusted, blockchain is likely unnecessary. That hardly describes most complex and global supply chains today, however, that are multi-tiered, and demand high levels of traceability because of industry regulations. Supply chains are often moving billions of transactions in real time, and the information is often siloed, disparately formatted, difficult to access, and hard to analyze.

Blockchain addresses such management issues as data authenticity, confidentiality, and it can be used for financial transactions or commodity transportation, providing trust and integrity throughout an electronics supply chain. Here are a few important benefits of blockchain for supply-chain management:

• No one can tamper with an entry in the distributed ledger. With blockchain, it is impossible to falsify a supply-chain payment, inventory records, warehousing conditions, delivery times, and dates.
• All the entities in the chain are onboard—and agree that each transaction is valid.
• The entities in the chain know where each asset, whether components, end-product, or natural resources originated.

Blockchain can also offer the supply chain end-to-end protection. A blockchain-based monitoring framework, for example, can be used to mitigate vulnerabilities across the entire electronics supply chain.

Blockchain AI and IoT are converging, capitalizing on the best features of all three. While blockchain provides supply-chain transparency, trust, privacy, secure storage, and sharing of data, AI provides real-time intelligence, pattern detection, and greater analytics. IoT will drive automation, increase transaction speed, and lower costs.

Having access to the benefits of all three will address several of today’s supply-chain challenges, including:

• Legacy systems that make data difficult to extract and interpret data cross-platform.
• Unencrypted IoT data sent directly from the machine to the cloud.
• Inability to associate a transaction with a particular party, opening the door for money laundering or terrorist financing.
• The storage and management of a large amount of data.

As blockchain, AI, and IoT converge; the combination will pave the way to a new era of digitization in supply chains.