April 7, 2020
Nowadays, information is the true lifeblood of businesses. Global supply chains have been extremely disrupted by the COVID-19 pandemic, which has highlighted the importance of real-time and accurate information flow.
Various buyers just found out that part of their supplies is manufactured in China. The need for supply chain visibility and transparency is greater than ever before. Before COVID-19 hit us hard, the emphasis on better information was already gaining more traction. When is my package going to be at my doorstep? Where do these strawberries come from? Is the cotton in this shirt organic and sustainable? Can I trust this company with my private information? We, as consumers, ask one or more of these questions, and expect clear answers: we’ll be at your door tomorrow at 9 PM, no children worked in manufacturing your clothes, we care about your privacy, and so on.
However, like a stone in a pond, these questions ripple through supply chains, propagating from one company to its suppliers. The retailer demands more information from its suppliers, the local insurance company asks secure privacy systems from its IT provider, the trader in Latin America demands additional information from the cooperatives it works with. The result is that our consumer demand for better and more precise information becomes a quest to revolutionise how information is managed and transferred throughout global supply chains.
This process generates challenges, obstacles on the path to digitalisation and sharing of information. While these challenges are often an annoying road blockage for a global multinational, they easily become insurmountable mountains for Small and Medium Enterprises (SMEs). SMEs face the clear risk of being left behind in this journey towards generating and sharing supply chain information. It is for this reason that we have decided to identify and tackle major challenges in safely collecting and sharing information, affecting specifically SMEs in the logistics/supply chain, agri-food and healthcare industries.
The idea, encompassed within the Blockstart project, is to select 4 “transnational challenges” that are recognised by many companies and, concurrently, form a transnational team of experts and SMEs around it to co-develop solutions that can be brought to Technology Readiness Level (TRL) 6. The Blockstart consortium has been working on identifying and selecting these challenges in the three sectors. In this post, we’d like to share our findings.
Supply Chain
Track and trace
What is it? Despite significant developments in last-mile delivery, reliable track and trace information across supply chains is still the ‘holy grail’ for the logistics industry. Track and trace is difficult to achieve within specific contexts due to a lack of information sharing and supply chain transparency, as well as overreliance on unreliable information. Blockchain can be used to connect different ‘oracles’ to provide reliable and timely information, which allows companies to improve their logistics processes, thanks to accurate forecasting and timely interventions. The lack of a global data standard could be a big hurdle to overcome and various initiatives experiment with track and trace solutions.
What could we do if this happens?
Digital provenance, certification and consumer verification of product origin could be the next steps.
Material passports
What is it?
To transition towards a fully circular economy, reliable information regarding the materials being used in a product and their composition must be available to all parties in the network. Currently, a standard for such material passports describing characteristics of materials in products doesn’t exist. Blockchain could ensure a secure, immutable trace of each material passport and act as a digital twin.
What are the main concerns?
It is still unclear how legislation will impact the development and use of these material passports. Some SMEs lead in this innovation, but applications seem to require large consortia to work.
What could we do if this happens?
We could enable circular economy business models, in which companies, including SMEs, could reuse, recycle and, ultimately, reduce the use of specific material (e.g. cement), based on the additional information collected in these ‘passports’ throughout the years.
Logistics-finance process integration
What is it?
It’s difficult for SMEs to properly integrate their procure-to-pay and order-to-cash processes. While large companies have scale enough to allocate the proper resources to reduce errors and exceptions, SMEs have to manage on a smaller scale and, as a consequence, they face more and costlier errors when they have to integrate logistics information with financial ones (for example, reconciliation of delivery documents with invoices).
What are the main concerns?
Despite the buzz around this topic, no developments have yet to concretise.
What could we do?
Having a single source of truth for logistics documents greatly reduces the need for manual reconciliation and could unlock smart contract-based collection and additionally supply chain finance solutions.
Access to credit for logistics companies
What is it?
Picture this: a guy owns a small logistics company, just some trucks. He has to front a lot of costs to complete a delivery: gas, salaries, tolls, administration. However, he only gets paid in 60 days, and that is only if the customers pay on time. There an easy way for him to get better cash flow: invoice discounting, or even factoring. However, who is going to buy or finance his invoices? As it is, banks and other financial institutions don’t know him, trust him or are interested in his very small volume of invoices. However, if logistics companies could safely share critical information on their successful deliveries (e.g. e-CMR), the level of information needed by a financier to buy or finance their invoices would significantly reduce. Moreover, through a platform, SMEs could collectively connect to financiers, generating interesting volumes.
What could we do if this happens?
This could be a prelude to more advanced supply chain finance solutions.
AGRI-FOOD
Most of the identified challenges in logistics apply to agri-food as well.
Tracing food
What is it?
Mass production of food increases the risk of contamination. In our globalised economy, unsafe food sources can have catastrophic consequences as we have seen last decade. Currently, food commodities are difficult to trace back to their origins. The introduction of a trusted data layer among players can assure traceability throughout the supply chain. Tokenising specific assets (e.g. food batches) can make product movements visible. Fully transparent (traceable) food supply chains will soon become operational.
What could we do?
This could unlock formal certification services and make provenance solutions available to consumers.
Paper-based processes
What is it?
It’s cumbersome in agri-food to manage the paper-based process (especially in logistics), which tends to disproportionally affect SMEs (due to the overhead and lack of scale). Reliance on a paper-based document is prone to errors, mismatches and leads to longer lead times. Having a single source of truth for digitalised documents greatly reduces the need for manual handling and facilitate sharing, reducing lead times which might strongly reduce SMEs’ cost structures. There remains an issue of how to deal with non-standardised documents.
What could we do?
This could unlock faster customs procedures and additionally smart contract-based transactions.
Conditioned goods
What is it?
Cold chains are typically managed by silos and are still not updated in real-time, despite the obvious advantages this might bring. Buyers and customers lack full insights into the conditions of the goods throughout the complete supply chain. Combined blockchain and IoT introduction at different stages of the supply chain could bring real-time sensor information into an immutable data storage linked to the digital twin of the product. Smart contracts can be employed to act on pre-aligned conditions. Some SMEs might lead, but widespread applications seem to require large consortia and more standardised data formats.
What could we do?
This could unlock more sustainable transportation modes, improved insurance products and additionally agri-food specific supply chain finance solutions.
Consumer trust in the food system
What is it?
Consumers are demanding more information than ever and have less faith in the food system in the wake of various scandals. There is likely a price premium for certain-origin food, especially if related to sustainability. Similar to the previous challenge, the introduction of a trusted data layer among players can assure traceability throughout the supply chain.
What are the main concerns?
Although additional information might change consumer behaviour, it won’t revolutionise the industry. Large retailers will likely run the show by demanding it to their suppliers, while SMEs might simply have to jump on the wagon(s). Centralised solutions based on certifications already exists, but provenance information isn’t accessible by the customers.
HEALTH
Almost all identified challenges in agri-food apply to health as well. A typical constraint for health is that this sector is highly regulated which makes it more risk-averse and conservative. Challenges with track and trace, paper-based processes and conditioned goods are applicable and one specific challenge is identified concerning medical data sharing. Exchanging health information
What are the main concerns?
Sharing (classified) medical data across different healthcare stakeholders is challenging and highly regulated. At the same time data is getting extremely important to create and improve healthcare solutions that analyse patient behaviour and medical history. For SMEs, data is difficult to collect due to the limited scale they operate on.
What could we do?
Blockchain creates a single source of truth for medical data proofs to verify the provenance, source and quality of shared data while preserving privacy and consent confirmations of the patient. This single source of truth creates data freedom and a level playing field amongst all parties and enables more powerful data analysis and insights from population health analytics. Moving away from providing care towards working on prevention. The technology is still immature and needs to be more proven to get embraced by the sector.
IDENTIFICATION APPROACH
These challenges were identified using different methods: analysis of scientific and non-scientific existing sources, interaction with SMEs and with experts. Identifying a ‘challenge’ is a relatively complex activity, requiring proper considerations of the different perspectives involved. In fact, the definition of a challenge is not limited to the identification of a generalised problem or issue that an SME faces, but is the contextualisation of such problem within the landscape of blockchain adoption. This requires taking into account the perspective of various stakeholders and experts, to reduce the risk of focusing on ‘challenges’ that are either uninteresting or unlikely to be the subject of blockchain adoption.
With these challenges, the Blockstart consortium was able to build a training programme that delivers a much greater impact. The free SME training programme, set to launch soon, will be offered to European SMEs in the health, agri-food, and logistics sector. The course will be tailored to each participating organisation, who can determine which workshops, webinars, and training sessions best suit their needs.
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