Distributed ledger technologies can dramatically improve operational efficiency in the management of supply chains. Further, the creation of “supply networks” that offer the potential for a universal view, enable advanced supply chain financing, streamlined adherence to regulation, and vastly improved emergency response capabilities in the event of recalls or shortages. Finally, attaching digital identities to physical objects in supply chains provides huge potential for new value-added products and services.

Modern supply chains are vulnerable to fraud, suffer from lack of resiliency, and are subject to various inefficiencies that slow down the movement of goods and increase their costs.

Supply chain vs “supply network”

Status quo supply chains are very much chains in the sense that products and information move linearly from one link to the next. This basic structure, however, makes it impossible for links at opposite ends of the chain to communicate directly. It is precisely the lack of communication amongst nodes in supply chains that holds back innovation in supply chain management. The lack of communication makes it difficult or impossible for nodes to coordinate. This results in a low level of supply-chain resiliency, an inability to rapidly and efficiently track and trace items in the supply chain, lack of access to financing for upstream suppliers who remain cutoff from downstream financiers, and a host of other missed opportunities.

A far more efficient way to manage supply chains is through the creation of a network, whereby nodes are connected through multiple routes, rather than through the linear “one-up, one-down” model that is the norm in the status quo of supply chain management.

Factors holding back the creation of a “supply network”

Decentralized supply chain management systems that are built on permissioned blockchains overcome the challenges related to security, privacy, and adherence to regulations.

Supply networks

Participants in a supply chain can come together to form supply networks. In such a network, upstream suppliers can audit their data-sharing permissions directly on their own node. For example, universal permissions can be granted for data that supports sustainability measures while permission can be restricted for sensitive data such as the cost paid by a distributor to its direct supplier. Regulators can be granted a universal view of all available data, enabling fast and efficient track and trace in the event of an emergency recall.

Digital identities

Items in a supply chain can be linked to digital identities that are stored in a decentralized network. Public/private key pairs ensure access to associated data for permissioned participants only.