Using blockchain to drive supply chain transparency

Current supply chain landscape

Until COVID struck in 2020, consumer expectations revolved around a two-hour delivery model. But when the pandemic disrupted that model, consumers soon discovered the implications of the term “supply chain” as they confronted delays in the delivery of household goods—everything from toilet paper, mobile phones, and entertainment equipment to gaming consoles and home office furniture. With knowledge comes new expectations. And now both consumers and organizations alike are looking to technology to enhance supply chains and alleviate, or at least mitigate, any bottlenecks in the system. Nevertheless, technology is no silver bullet. Supply chains are often hostage to a host of factors including geopolitical tensions, cyberattacks, inflation, droughts that disrupt shipping by lowering water levels, and critical product stockouts, as well as the many unforeseen effects of global warming.

Given all these disruptions, many companies, and those responsible for supply chain effectiveness, are rethinking their lean and just-in-time planning as well as issues related to source, make, deliver, and return processes and systems. Moreover, supply chain executives are increasingly required to predict, and proactively mitigate, vulnerabilities in the supply chain. For that reason, these executives are focusing their strategic investments on three key effectiveness drivers:¹

1. Predicting supply chain risk
2. Enabling environmental, social, and governance (ESG) tracking through supply chain traceability
3. Enhancing trust in a complex, multi-stakeholder environment

Enhancing these three drivers can help executives and their enterprises achieve transparency, track provenance and compliance, and enhance brand loyalty. For many organizations seeking to master their supply chains, this is where blockchain enters the picture. Blockchain is a record of transaction data that relies on a shared ledger. This ledger is inherently tamper-evident and provides a trusted shared and reliable way to record, validate, and view transactions across a complex system with many participants, some of whom may not inherently trust each other.

In the past, supply chain leaders had to rely on redundancy to mitigate supply chain disruptions. While some redundancy may always be necessary—especially for critical materials—solutions like blockchain can help companies proactively detect and mitigate supply chain risks before any severe impact occurs. For example, to increase transparency and traceability, companies in resource-intensive industries have turned to blockchain solutions to help control Scope 3 emissions.² Finally, because global supply chains involve many discrete entities that are frequently separated by several degrees in terms of their interests, the quality and opacity of information invariably degrades trust among parties. Technologies like blockchain can help offset such detrimental effects by ensuring the authenticity of information and transparency during upstream transactions.

How can blockchain help?

When thinking about how best to apply blockchain technology in the supply chain, it is important to remember that supply chains are, at their core, a network of interlinked companies. In that network, each business adds value to a product or service before it reaches the end user. This exchange and accumulation of value is recorded through a series of transactions, or flows, of information, goods, services, and finances.³ A “permissioned blockchain” offers the potential of recording these transactions (both physical and virtual) on a shared and immutable ledger, which enables the capture, validation, and sharing of data across these interlinked companies. Ultimately, all parties have access to a seamless exchange of value and a single source of truth that was previously impossible. For more and more use cases (e.g., predicting risk; enhancing visibility and traceability for critical product components; increasing data accuracy, immutability, and trust among value partners), blockchain strengthens global supply chains. Moreover, blockchain technology is mature enough to interface with, and take advantage of, other emerging technologies such as Internet of Things (IoT), smart contracts (pieces of code stored on a blockchain), and artificial intelligence (AI) to provide an enhanced and secured supply chain.

The next section discusses the potential benefits of blockchain in each of these areas. 

Conclusion: Future outlook for blockchain in supply chains

Imagine a world where you can replace the currently fragmented tracking of your supply chain with an interoperable solution, one that can significantly reduce the risk of unethical sourcing, shipping delays, inadequate storage, or ineffective distribution of your goods. Imagine a world where you can provide visibility into your supply chain to your customers and regulators and furnish irrefutable proof that you are meeting supply chain standards and expectations. And imagine a world, where, by addressing these considerations, you foster deeper trust and efficiency among all the stakeholders within your supply chain.

Blockchain can help address some of the key challenges that the supply chain industry faces today. While some technological and operational challenges remain in implementing blockchain solutions, Deloitte continues to work with enterprises to overcome these roadblocks and deliver the robust and effective solutions they need to forge superior supply chains. Given the current economic headwinds, and as corporations and consumers alike entertain high expectations of supply chains with fewer risks, greater visibility and transparency, and enhanced trust, Deloitte encourages enterprises to consider blockchain solutions as a possible antidote to their supply chain challenges.

This publication contains general information only and Deloitte is not, by means of this [publication or presentation], rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional adviser.

Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

About Blockchain & Digital Assets at Deloitte

At Deloitte, our people work globally with clients, regulators, and policymakers to understand how blockchain and digital assets are changing the face of business and government today. New ecosystems are developing blockchain-based infrastructure and solutions to create innovative business models and disrupt traditional ones. This is occurring in virtually every industry and in most jurisdictions globally. Our deep business acumen and global industry-leading Audit & Assurance, Consulting, Tax, and Risk and Financial Advisory services help organizations across industries achieve their various blockchain aspirations. Learn more at deloitte.com/us/blockchainanddigitalassets.

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