Today’s global market is full of limitless opportunities: companies have the possibility to grow and expand into new geographies reaching customers almost anywhere in the world. Yet, these opportunities are also the cause of extremely complex and vulnerable modern-day supply chains, which, in turn, result in lack of traceability and obstructed visibility.
Challenges with Traceability and Visibility
As manufacturers miss the tools to trace their products throughout the entire supply chain, counterfeiting has become a serious issue. Alone in 2017, the US Department of Homeland Security seized over $1.2B worth of falsified goods. Other unlawful issues related to the lack of traceability include unauthorized cross-border sales and falsified goods used in return frauds, to name a few.
In a similar manner, upstream and downstream visibility is affected by insufficient exchange of information about stock levels between participating parties. Consequently, companies are often faced with misforecast inventories and missed sales due to stockouts.
It’s clear that parts manufacturers are in need of traceability and visibility within their supply chains to achieve synergies and benefits, and in the case of supply chains controlled by a single entity — those challenges are addressed by connected supply chain management solutions.
These solutions minimize the challenges of lack of traceability and obstructed visibility, and by equipping the after-sales industry with intelligent inventory management systems, like Syncron Inventory-Retail™, companies can improve cooperation between suppliers and dealers. This optimizes the complete supply chain from suppliers and distribution centers to dealers – to achieve best-in-class service levels, and its application is possible, providing there’s trust between all parties involved.
Some retailers, however, do not operate in a cooperative environment. Competitive markets and demanding customers push dealers to offer multiple brands in their portfolio. In such cases, when a multi-franchise dealer shares their stock level data with suppliers, the question arises, “who should be the data custodian?” The obvious answer: respective suppliers. However, for the dealers, complexity of integration with multiple systems owned by different suppliers is enormous and impractical.
On the other hand, a centralized solution would require employing a single third party to administer the data. Such an entity would wield enormous business and financial power over all involved parties. Additionally, a centralized solution creates a single point of failure in case of hacker attacks, bankruptcy, or technical problems.
Landscape of Blockchain Technology in Supply Chain
New solutions based on blockchain technology come into the picture by eliminating the need for central arbiters of trust who, especially in case of transactional supply chains, are difficult to establish. Blockchain technology allows for the creation of digital, tamper-proof ledgers, and is based on a distributed architecture, guaranteeing that no single user or even a group of users can take control over it.
As such, it has an alluring potential to completely disrupt the way global supply chains operate today. It’s no wonder that in recent years, a multitude of initiatives emerged with a goal of optimizing supply chains by using blockchain technology. They almost entirely focus on either supply chains of heavily regulated markets (usually pharmaceutical, medical equipment or food) or those of luxury consumer goods (typically jewelry or apparel & footwear). An important market of after-sales service is, however, completely missed by the blockchain industry.
After-sales service logistics are more challenging than that of finished goods. Volatile demands and the huge number of spare part types — a modern car and a jet airliner consist of 15,000+ and 300,000+ parts, respectively — make visibility a pre-requisite for an effective supply chain offering high service levels. Yet, the visibility aspect seems to be completely neglected by blockchain initiatives for after-sales.
In addition, typical blockchain solutions are based on ledgers that are by design public to all participants and therefore not suitable for businesses that need to stay in control of their data.
Another problem is that the current blockchain-based solutions to achieve traceability rely on the existence of unique identifiers for items. Unfortunately, despite large investments and promises made in the last two decades, the world is still in infancy when it comes to addressing the spare parts uniqueness problem. This was made very evident by the recent incident of a major US airline airplane whose engine exploded mid-air due to a fan blade disintegration. The ensuing investigation quickly revealed that it is virtually impossible to track back maintenance history of the broken fan blade. If critical parts as fan blades in a highly regulated industry of aerospace cannot be traced, one can only imagine how far we are from resolving the spare parts uniqueness problem.
Although the world continues efforts to address the “uniqueness” issue, it’s clear that satisfactory, practical solutions lie years away. One notable initiative is “Item Unique Identification” mandated in 2005 by the US Department of Defense which requires all federal contractors to mark certain types of delivered machines and parts with unique identifiers. More recently, an attempt was made to introduce identity to 3D printed parts which is straightforward in case of the additive manufacturing process.
Still, in the manufacturing industry, save a few exceptions, parts do not have unique identifiers. The excessive costs of introducing them to the manufacturing processes makes it unlikely that traceability solutions offered by current blockchain companies will be successful.
A New Approach to Blockchain Technology
Despite the aforementioned challenges, our belief that it’s conceivable to create a blockchain-based solution with all its inherent advantages but in addition offering both visibility and traceability, which could expedite adoption of the blockchain technology for after-sales.
By using a distributed ledger based on blockchain technology, companies can provide a system which stimulates cooperation between selected participants of the supply chain. Suppliers, distribution centers, dealers and other parties could use it to publish current stock levels and movements. By sharing this information, they would improve the coordination of their supply chains and achieve unprecedented synergies. Another piece of the puzzle is to ensure traceability in the absence of unique parts identification, which could be realized by creating a link between physical products and their digital identities — a link that is not based on unique identifiers but enforced by financial incentives.
Such a blockchain-based solution would be cryptographically secure with parties in full control of the access to their data. Separate authentication entities would confirm real-world identity of companies that join the system. This way, other participants could be sure that they cooperate with authentic partners. And, by exploring blockchain-based solutions, we’re furthering our commitment to empower manufacturers to maximize product uptime and deliver exceptional after-sales experiences, creating exciting opportunities for establishment of transparent and efficient supply chains of the future.