The Critical Role of Blockchain Technology in Post-COVID-19 Supply Chains

Nish Kotecha and Shawn Muma

In the COVID-19 world, with the exception of a few well-positioned companies demand has fallen off a cliff and is unlikely to return to pre-pandemic levels, even when a vaccine arrives. And for those reaping a windfall it is hard to tell how long it will last. Sales channels will be forever transformed with far greater buying and fulfillment through digital channels. That will place significant pressure on supply chains to create and deliver products in new ways. With its cross-enterprise workflow strengths, Blockchain is likely to play a critical role bringing transparency and visibility to supply chains.

Globalization has bought dramatic changes to supply chains many of which have been focused on lowering costs that resulted in increased lead times and restricted flexibility. The recent debate between onshore and offshoring is more than just price versus speed (and quality) as the trade-off. The debate has proven to be about nationalism. In the post-COVID world, there will be a strong desire to bring the supply chain onshore or nearshore in the name of resiliency,reduced risk and to speed delivery and for many governments, national security.

We are in new territory. The supply chain, a vital, yet rarely publicly discussed business function, is now in the news on a daily basis. Source locally is a common refrain from business and government leaders. Overnight, digitalization has become a survival imperative as organizations rethink their supply chain design criteria to respond to both the pandemic shock and focus on manufacturing locally. The debate over offshore vs onshore/nearshore will be reframed as resilience and adaptability become paramount. This will drive a rearchitecting of supply chains in new ways that result in the widespread acceptance of blockchain as an technology that enables cross-enterprise transformation and digitalization.

Since the 1980’s, global supply chains have been designed as sequential links in a chain that passes data and goods as they move from supplier to supplier. We rely on each constituent in the supply chain to do their part and pass on information quickly and accurately. But the truth is, that data is rarely passed from the beginning to end accurately in the best of times, much less so when supply chains are in disarray as they are today. And as countries, and for that matter, states open at different times, the links in a supply chains are being stress tested as never before.

Blockchain technology will play a critical role in the digital transformation of supply chains emerging in a post-COVID-19 world. The simple fact is blockchain technology can effectively manage workflow across the entire supply chain and through its distributed ledger approach guarantee that data is accurate, transparent and immutable Critical capabilities in supply chain redesign.

This digitalization challenge is further compounded by the shift in globalization we are witnessing particularly away from goods sourced from China. Global supply chains work well in an open, global marketplace. Changing priorities and architecture overnight will likely lead to bottlenecks and breakages, disrupting economic recovery. But rapid digitalisation will enable the transition while minimizing breakage. This will require investment, which given the cash flow constraints due to the pandemic, will need to be funded through operating savings or government programs.  

We cannot wait for a vaccine to return to normal. Supply chains need to adapt to the new normal. This means rethinking your supply chain architecture to build-in resilience and digitize workflow so that you can react to dynamic changes in demand or breakages in your supply chain at speed. As companies require resiliency while remaing cost competitive, Blockchain has a clear--and critical--role to play.

Blockchain technology can provide transparency and create the supply chain agility required in the new normal. In the enterprise, blockchain can be used as a private permissioned framework for a group of stakeholders, such as suppliers, customers and regulators to manage sourcing, production and movement of goods dynamically throughout the supply chain.

We are already seeing examples. Bumble Bee Foods has united several fishing industry stakeholders, leading an effort to track-and trace yellowfin tuna from the Indonesian ocean to the dinner table. The QR code provided by Bumble Bee does not just enable provenance but also allows the retailers to access real-time trusted information on the flow of their physical goods. Repsol, the global oil & gas group are using Blocklabs powered by Finboots’ MARCO to integrate different parties, IoT devices and existing ERP systems to register, manage and track petrochemical products, providing a transparent and immutable trace of physical assets throughout the oils and chemical supply chain.

Building a dynamic supply chain with inherit resiliency requires visibility and data that includes evidence-based delivery. Every component and process should be visible to ensure that the final product can be verified and tracked, identifying where workflow can be optimized and whether organisations are operating in the most efficient way possible while complying with labor standards and regulatory requirements. This will enable rapid reaction to future supply chain shocks and provide resiliency during these unforeseen events.

Finding the optimal balance between onshore, nearshore and offshore will be a challenge.. Workflow digitalization using Blockchain technology will have a starring role. Start with a Proof of Value. DSCI’s five key questions and BFI can help you get started.