Breaking down Blockchain and Supply Chain Tech (How They Work Together)

blockchain supply chain tech

Supply chains have become increasingly complicated over the past few decades. The typical iPhone, for example, includes components manufactured or assembled in Germany, the United States, South Korea, Japan, Taiwan, France, Italy, the Netherlands, and Singapore. When manufacturing and packaging are complete, products must be delivered to stores and fulfillment warehouses around the world.

Supply chain complexity isn’t necessarily a bad thing – it’s allowed the creation of increasingly sophisticated and efficient products – but it has increased the burden of supply chain management. Supply chains are only as strong as their weakest link, so shoddy work or timeline issues at any point in the production can delay the entire process. In this sense, supply chain members rely upon each other, forming economic networks in which all parties depend on clear communication to get products made and sold.

As supply chains grow more complicated, there’s been increasing demand for technology solutions that can handle complex transactions efficiently. Data analytics, Internet of Things technology such as RFID tags, and shipment management software are all tools that have been embraced by supply chain participants looking for tech solutions. Now many supply chain members are embracing blockchain, a technological platform with the incredible potential to make manufacturing and logistics more efficient.

Blockchain Technology

The blockchain is uniquely well-suited for supply chain management due to its immutable transaction ledger. A record is made on the blockchain whenever a new event occurs in the supply chain; such as a new batch of components getting manufactured, or a shipping container of products getting transferred from a warehouse to a freight truck. Smart contracts can also be built into the blockchain and automatically add new blocks for every performed contract. 

Blockchain can be used to record chain of custody for components and products, to create automatized transaction agreements between supply chain members, and to track elements against contamination or mislabeling. Many healthcare companies, for example, are experimenting with blockchain solutions to fight counterfeit or contaminated pharmaceuticals, using blockchain’s transparency to drive out bad actors.

Of course, any blockchain technology used by supply chain managers needs to be scalable and fast enough to handle the complex torrent of data that an average supply chain generates. They’ll require significant flexibility to accommodate the needs of diverse supply chain members while continuing to incorporate the strict immutability and transparency that makes blockchain such an appealing technology in the first place.

Solutions for blockchain obstacles include new protocols for more scalable blockchain formats and DAO (Decentralized Autonomous Organization) structures, in which blockchain tokens are used to vote on the direction of a functional organization that’s governed by blockchain code rather than human hierarchies (CEOs, managers, etc.). DAOstack is a DAO platform that provides a decentralized, secure environment for companies and individuals to build dApps (decentralized applications) that run on DAO principles. Supply chains are inherently decentralized even though they’re economically enmeshed; Apple, for example, usually contracts with other companies to buy parts and components, rather than owning or managing them directly. dApps built on DAOstack can provide customized and decentralized tools for facilitating cooperation and agreements between networks.

Freight Logistics and Blockchain

fr8 network logoFr8 Network is using blockchain to manage freight logistics, a complicated and inefficiency-ridden industry still relying on old technology. The trucking industry is highly fragmented, with 90% of carriers owning fewer than six trucks and 50% acting as owner/operators. The current situation is also challenging for a driver shortage. Industry analysis by DAT Solutions found that just one truck was available for every twelve loads that needed to be shipped at the beginning of 2018, the lowest ratio since Great Recession in 2005.

Between outdated technology, fragmentation, and talent shortage, the freight industry is suffering supply chain management issues. Fr8 Network is making trucking more efficient and reliable by launching the Fr8 board, an online platform that shippers and carriers can use to find matching shipping and capacity needs. The Fr8 board includes a bi-directional matching engine, which helps truckers get rid of wasteful and expensive “empty miles” in which trucks must be driven empty from a drop-off point to a pick-up location.

Fr8 Network ensures that this platform will be trustworthy, despite involving few brokers and little face-to-face contact, through blockchain. Users buy into the system by investing in Fr8 tokens, an Ethereum-based dedicated cryptocurrency. When users make shipping agreements, smart contracts automatically place Fr8 tokens in escrow until the job is completed. Settlement after the shipping finishes can also be automated through smart contracts, and finalized in either Fr8 tokens or fiat currency. This platform efficiently combines the match-making capabilities of a massive digital network with the security and trust that can be created with blockchain. The result is a powerful, and reliable supply chain.