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The Benefits of IoT and Blockchain for the Supply Chain

Two important new technologies are combining to increase efficiency, reliability, and speed for manufacturers, suppliers, and logistics service providers.

By Sandeep Basu, Oracle Insight

January 2018

Intelligent things and blockchain are among the top 10 strategic technology trends that will impact most organizations in 2018, according to Gartner. By 2019, with increasing adoption of the Internet of Things (IoT) across industries, IDC estimates that 20 percent of all IoT deployments will have basic levels of blockchain services enabled.

Sandeep Basu

Sandeep Basu, Oracle Insight

Blockchain is a system for maintaining distributed ledgers where the characteristics of traceability, auditability, and collaboration in a secure fashion are required. IoT is a network of intelligent physical objects and things that have the capability to connect to a network to be able to send and receive data. Predictive asset maintenance, plant operations monitoring, and fleet monitoring are some of the key use cases for IoT in the enterprise.

Within the supply chain universe, IoT and blockchain together can provide major benefits for manufacturers, suppliers, and logistics service providers. Below are a few key value drivers that the combination of these two technologies can deliver across modern supply chains.

End-to-End Real-Time Supply Chain Visibility

End-to-end visibility across supply chains is complicated by the number of parties involved in global supply chains. While companies collect their own data to respond to supply chain disruptions, they need to be able to analyze data across various companies and validate it for reliability before they can respond. IoT devices that can track the status of goods as they move through the supply chain and share this information to a blockchain-based framework can ensure that all of the participants in the chain can access the data in real time.

For example, a manufacturer in the US could raise a purchase order on a supplier in Vietnam while simultaneously tasking a logistics service provider (LSP) in Singapore to pick up and deliver the goods to the US upon completion. In this case, the supplier could publish the production status of the products tracked via their production monitoring IoT platform to a secure blockchain, allowing both the LSP and manufacturer to track the same information. The LSP would arrange for containers to pick up the goods when they were nearing completion and would provide the status of the container movement based on embedded IoT devices in the containers. This would allow all the other parties in the chain, including the supplier and customs agent, to track the status, prepare for transshipment, and execute cross-border transactions.

All of this would be done via a combination of IoT-based statuses published to a secure distributed blockchain. These could also be combined with third-party datasources, such as weather data streams, to anticipate any delays. A supply chain with real-time access to shared, reliable data in a secure blockchain allows companies to be responsive to unexpected supply chain events such as supply disruption or a sudden dip in customer demand.

Enhancing Global Supply Chain Financing

Global supply chains typically involve cross-border transactions, which require voluminous paperwork and bureaucracy. All of this has a significant impact on the time it takes for international payments, because these involve multiple parties and are subject to local banking regulations. Any discrepancies, such as duplicate invoices, can lead to significant delays in clearing the payments. Blockchain and IoT working together could significantly speed up the movement of goods across borders, resulting in secure, efficient, and cheaper transactions that prevent fraud through a distributed register that cannot be manipulated.

This is facilitated in blockchain using smart contracts, which are computer programs where the terms of an agreement between two parties can be preprogrammed, automatically executed, and enforced based on the occurrence of defined events. For example, a manufacturer of goods could enter into a smart contract with a retailer with the payment terms being defined in code and conditional on delivery of goods at the retailer’s dock. Both the manufacturer’s and retailer’s banks would have access to the status of the contract.

Smart contracts eliminate the need to reconcile documents across multiple parties. With IoT devices that can monitor the actual status of the shipments and trigger the execution of the payment terms of the contract upon delivery, the banks have visibility into the original contract, the sales order, and the actual delivery status. This allows them to validate the origin and authenticity at the same time and speed up the payment cycle.

Regulated Supply Chain Reliability

In highly regulated industries such as food and pharmaceuticals, goods need to be transported across locations under strictly controlled temperature ranges and within specific time windows. It is important for manufacturers and distributors in these industries to be able to provide evidence of adherence to specified ranges. Failure to do so can result in high-value shipments being delayed or impounded for investigation.

A blockchain framework complements an IoT-based data feed to guarantee the reliability and security of information received and captured.”

It’s currently possible to capture temperature feeds from onboard sensors and transmit them online to an IoT platform. What has been missing is the ability to ensure that the captured, transmitted data is secure and tamperproof. A blockchain framework complements an IoT-based data feed to guarantee the reliability and security of information received and captured. Such a combination also would enable suppliers to capture compliance conditions in a smart contract. In this case, the actual temperature feeds during the journey could be compared against the defined conditions in the contract to demonstrate compliance as well as any exceptions.

Ensuring a tamperproof, reliable data chain for medicinal products and perishable goods can allow manufacturers and suppliers to ensure they are compliant with regulations and avoid losses due to delays for investigations, while at the same time addressing the safety of humans consuming these products.

Data-Driven Insights

Blockchain and IoT allow for all the partners and things in a supply chain ecosystem to share data securely. Stakeholders can use the latest machine-learning techniques on this holistic dataset, often in combination with third-party datasources, to derive new insights across their supply chains.

For example, manufacturers can gain the ability to share and access real-time data from all partners such as suppliers, logistics providers, and contractors on a single secure platform, and combine it with economic and climate trend data across the network. This could enable them to make better decisions on realigning their sourcing and distribution networks. At the same time, the partners are able to utilize data to visualize their role and impact on the overall supply chain and make improvements designed to improve their competitiveness.

Blockchain and IoT can come together to address some of the key issues faced by supply chains today and unlock real value for enterprises. Both IoT and blockchain are gaining traction in their own right, and this trend will likely accelerate into production as the technologies mature.

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