Blockchain

Bringing transparency through Blockchain and utilizing AI(Artificial Intelligence) to estimate supplier risk in future and make predictions. Grefun promises to help the environment in keeping supply chain clean. Block chain are the back bone in sorting out issues with supply chain emission. Measurements would reward those who put forth remedies and measures to stop climate change.

According to a study by World Bank; materials provenance by blockchain will stop $4.2 trillion forgery industry. Blockchain-controlled arrangements can work flawlessly with the data entirety, conveying huge incentive for modern organizations.

Inventory,

The Inventory and store network would come to know of any shortages in the Inventory making sure stocks are replenished on time.

Quality

Quality that can look across a creation life cycle to measure capabilities, quality, examples of deformities, and so forth.

A blockchain-empowered arrangement would assist manufacturers with following each step until the final inventory and update on the Final disposal of the product.

Sensors and other Web of Things (IoT) innovation, a blockchain-controlled would record the circumstances a shipment of parts looked or the difference in temperature the product endured in the transportation..

According to Harvard Business Review

“Blockchain, the digital record-keeping technology behind Bitcoin and other cryptocurrency networks, is a potential game changer in the financial world. But another area where it holds great promise is supply chain management. Blockchain can greatly improve supply chains by enabling faster and more cost-efficient delivery of products, enhancing products’ traceability, improving coordination between partners, and aiding access to financing.

To better understand this opportunity, we studied seven major U.S. corporations that are leaders in supply chain management and are trying to figure out how blockchain can help solve the challenges they face. These companies—Corning, Emerson, Hayward, IBM, Mastercard, and two others that wish to remain anonymous—operate in varied industries: manufacturing, retailing, technology, and financial services. Some of them are just beginning to explore blockchain, a few are conducting pilots, and others have moved even further and are working with supply chain partners to develop applications. This article describes what we’ve learned about the state of play, the advantages that blockchain can provide, and how the use of blockchain in supply chains will differ from its use in cryptocurrencies.

A blockchain is a distributed, or decentralized, ledger—a digital system for recording transactions among multiple parties in a verifiable, tamperproof way. The ledger itself can also be programmed to trigger transactions automatically. For cryptocurrency networks that are designed to replace fiat currencies, the main function of blockchain is to enable an unlimited number of anonymous parties to transact privately and securely with one another without a central intermediary. For supply chains, it is to allow a limited number of known parties to protect their business operations against malicious actors while supporting better performance. Successful blockchain applications for supply chains will require new permissioned blockchains, new standards for representing transactions on a block, and new rules to govern the system—which are all in various stages of being developed.

The Advantages of Blockchain

Led by companies such as Walmart and Procter & Gamble, considerable advancement in supply chain information sharing has taken place since the 1990s, thanks to the use of enterprise resource planning (ERP) systems. However, visibility remains a challenge in large supply chains involving complex transactions.

To illustrate the limitations of the current world of financial-ledger entries and ERP systems, along with the potential benefits of a world of blockchain, let us describe a hypothetical scenario: a simple transaction involving a retailer that sources a product from a supplier, and a bank that provides the working capital the supplier needs to fill the order. The transaction involves information flows, inventory flows, and financial flows. Note that a given flow does not result in financial-ledger entries at all three parties involved. And state-of-the-art ERP systems, manual audits, and inspections can’t reliably connect the three flows, which makes it hard to eliminate execution errors, improve decision-making, and resolve supply chain conflicts.

Capturing the Details of a Simple Transaction: Conventional vs. Blockchain Systems

The financial ledgers and enterprise resource planning systems now used don’t reliably allow the three parties involved in a simple supply-chain transaction to see all the relevant flows of information, inventory, and money. A blockchain system eliminates the blind spots.

Click the image below to download the PDF of this exhibit.

Execution errors—such as mistakes in inventory data, missing shipments, and duplicate payments—are often impossible to detect in real time. Even when a problem is discovered after the fact, it is difficult and expensive to pinpoint its source or fix it by tracing the sequence of activities recorded in available ledger entries and documents. Although ERP systems capture all types of flows, it can be tough to assess which journal entries (accounts receivable, payments, credits for returns, and so on) correspond to which inventory transaction. This is especially true for companies engaged in thousands of transactions each day across a large network of supply chain partners and products.

Making matters worse, supply chain activities are often extremely complicated—far more so than the exhibit depicts. For example, orders, shipments, and payments may not sync up neatly, because an order may be split into several shipments and corresponding invoices, or multiple orders may be combined into a single shipment.

One common approach to improving supply chain execution is to verify transactions through audits. Auditing is necessary for ensuring compliance with contracts, but it’s of limited help in improving decision-making to address operational deficiencies. Consider the problem a food company faces when its products reach the end of their shelf life in a retail store. A study that one of us worked on with a major manufacturer of packaged foods found that an audit or an inspection of inventory in a store can reveal the number of expired items, but it won’t explain the causes. Those can include glitches in any part of the supply chain, such as inefficient inventory management upstream, suboptimal allocation of products to stores, weak or sporadic demand, and inadequate shelf rotation (failure to put older products in front of newer ones). A record of all those activities can help reduce expirations.

Another way to strengthen supply chain operations would be to mark inventory with either RFID tags or electronic product codes that adhere to GS1 standards (globally accepted rules for handling supply chain data) and to then integrate a company’s ERP systems with those of its suppliers to construct a complete record of transactions. This would eliminate execution errors and improve traceability. However, the experiences of the companies we studied showed that integrating ERP systems is expensive and time-consuming. Large organizations may have more than 100 legacy ERP systems—a result of organizational changes, mergers, and acquisitions over time. Those systems often do not easily communicate with one another and may even differ in how they define data fields. One large company told us it had 17 ledgers in separate ERP systems associated with a single activity—trucking—and its suppliers and distributors had their own ledgers and ERP systems.

When blockchain record keeping is used, assets such as units of inventory, orders, loans, and bills of lading are given unique identifiers, which serve as digital tokens (similar to bitcoins). Additionally, participants in the blockchain are given unique identifiers, or digital signatures, which they use to sign the blocks they add to the blockchain. Every step of the transaction is then recorded on the blockchain as a transfer of the corresponding token from one participant to another.

Consider how the transaction in our example looks when represented on a shared blockchain (refer again to the exhibit). First, the retailer generates an order and sends it to the supplier. At this point, since no exchange of goods or services has taken place, there would be no entries in a financial ledger. However, with blockchain, the retailer records the digital token for the order. The supplier then logs in the order and confirms to the retailer that the order has been received—an action that again gets recorded on the blockchain but would not generate an entry in a financial ledger. Next the supplier requests a working-capital loan from the bank to finance the production of the goods. The bank verifies the order on the shared blockchain, approves the loan, and records the loan’s digital token on the same blockchain. And so on.

A blockchain is valuable partly because it comprises a chronological string of blocks integrating all three types of flows in the transaction and captures details that aren’t recorded in a financial-ledger system. Moreover, each block is encrypted and distributed to all participants, who maintain their own copies of the blockchain. Thanks to these features, the blockchain provides a complete, trustworthy, and tamperproof audit trail of the three categories of activities in the supply chain.

Blockchain thus greatly reduces, if not eliminates, the kind of execution, traceability, and coordination problems that we’ve discussed. Since participants have their own individual copies of the blockchain, each party can review the status of a transaction, identify errors, and hold counterparties responsible for their actions. No participant can overwrite past data because doing so would entail having to rewrite all subsequent blocks on all shared copies of the blockchain.

Jeffrey Milstein

The bank in our example can also use the blockchain to improve supply chain financing. It can make better lending decisions because by viewing the blockchain, it can verify the transactions between the supplier and the retailer without having to conduct physical audits and financial reviews, which are tedious and error-prone processes. And including lending records in the blockchain, along with data about invoicing, payments, and the physical movement of goods, can make transactions more cost-effective, easier to audit, and less risky for all participants.

Furthermore, many of these functions can be automated through smart contracts, in which lines of computer code use data from the blockchain to verify when contractual obligations have been met and payments can be issued. Smart contracts can be programmed to assess the status of a transaction and automatically take actions such as releasing a payment, recording ledger entries, and flagging exceptions in need of manual intervention.

It’s important to note that a blockchain would not replace the broad range of transaction-processing, accounting, and management-control functions performed by ERP systems, such as invoicing, payment, and reporting. Indeed, the encrypted linked list or chainlike data structure of a blockchain is not suited for fast storage and retrieval—or even efficient storage. Instead, the blockchain would interface with legacy systems across participating firms. Each firm would generate blocks of transactions from its internal ERP system and add them to the blockchain. This would make it easy to integrate various flows of transactions across firms.”