Emerging blockchain technology enables members of a consortium to share data in a secure and trusted environment to enable improvements in operational performance. The key benefits of current pilot programs involve limiting the cost of a recall or identifying counterfeit products. To maximize the effectiveness of a blockchain-enabled supply chain track and trace solution and help ensure that the goals of the consortium members are met, the processing nodes of the supply chain must be included. This requires data from the manufacturing execution system (MES) as well as the warehouse management system (WMS), transportation management system (TMS), and associated cold chain applications.
Supply Chain Track and Trace Includes Both Transportation and Processing
A supply chain includes both transportation of materials between nodes and nodes where the product is processed. Often, this occurs in multiple steps, like grain becoming flour and then flour becoming bread. Thus, to provide effective visibility, track and trace must go beyond just transportation and include the activities in the processing steps.
Growing Risk of Recalls
Access to data and analytics have empowered governments and non-governmental organizations alike to identify issues in the supply chain. For example, the US Centers for Disease Control and Prevention (CDC) has vastly improved its ability to use technology to identify foodborne illnesses. This enables greater regulatory oversight and stronger enforcement. Data collection and analytics applied to detecting health risks have vastly increased the CDCs ability to identify issues, even those that might affect a relatively small number of people.
Incident Affecting One in a Million People Triggers a Recall
In just one recent example, with electronic access to health trends and improved analytics, the CDC found just 100 illnesses among over 100 million people – that is, one in a million. This triggered a recall in 2018. Those 100 people were spread across 33 states with 30 people hospitalized and (luckily) no reported deaths.
$10 Million Cost per Recall
With weak tracking and slow tracing, the typical recall dramatically in-creases in scope as the product is traced back through the supply chain. The average cost of a recall in the food and beverage industry is $10 mil-lion. Also, outbreaks that harm people can be devastating for brand dam-age and lost sales. According to a Harris Interactive Poll, consumers indicated the following after a food product recall:
- 55 percent would switch brands temporarily
- 21 percent would avoid purchasing any brand made by the manufacturer
- 15 percent would never purchase the recalled product again
A recall leads to a significant reduction in a firm’s revenue with a negative and long-lasting impact on shareholder value.
Blockchain Helps Assure Transparency and Security
Blockchain is a decentralized database that stores a ledger of ownership and transactions across a peer-to-peer network. With blockchain, each step in the supply chain adds to the accumulated data in a “block” that all participants can view. Transactions are accumulated in an encrypted block, and the new blocks are added to make a “chain.” Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. Copies of the blockchain file are stored in multiple locations. The multiple blockchain files are compared to determine if one has been tampered with and only the consistent blocks continue to be used.
Each block provides a “single version of the truth” about transactions and activities occurring across complex supply chain ecosystems. While participants in a blockchain may access, inspect, and add to the data; multiple layers of encryption prevent them from altering or deleting existing data. The original information “stays put,” leaving a permanent and public in-formation trail of transactions.
Blockchain technology enables secure peer-to-peer communications among members of a consortium to achieve operational improvements in the supply chain. The fast visibility to trusted data benefits the consortium members.
Supply Chain Includes Processing Nodes with MES
The transportation portion of the supply chain is relatively straightforward from the viewpoint of logging the transaction into a blockchain via WMS and TMS applications. In the nodes where processing occurs, this tracking gets more complex and requires integration of the MES application.
Processing Nodes of the Supply Chain
The processing nodes of a supply chain transform the materials. For trace-ability, tracking must occur through the associated manufacturing steps. In the discrete industries, this will involve metal cutting, stamping, assembly, testing, or other manufacturing steps. In the process industries, there are a wide variety of mixing, separation and transformation steps that occur – like the grain-to-flour-to bread example mentioned previously.
Among the many functions of a MES application, the parts that most apply here are materials tracking and managing work in process (WIP). The MES application knows what materials went into which product and when. This information needs to be logged with the blockchain (and the finer the resolution the better) for traceability to be able to effectively reduce recall-related losses.
ARC Advisory Group clients can view the complete report at ARC Client Portal
If you would like to buy this report or obtain information about how to become a client, please Contact Us
Keywords: Blockchain, Track and Trace, Supply Chain, Manufacturing Execution System (MES), Warehouse Management System (WMS), Transportation Management System (TMS), Cold Chain, ARC Advisory Group.