Today the World Economic Forum (WEF) published a report highlighting how digitization and blockchain can help with supply chain disruption. While blockchain may not be able to address the impact of COVID-19 directly, it can help with supply chain visibility. A manufacturer may be aware of problems with its Tier-1 suppliers, but it’s less likely to know what’s happening with the supplier’s partners.
Early on in the COVID-19 outbreak, multiple supply chain disruptions were announced as a result of China’s lockdowns.
Although the argument for digitization is usually related to efficiency, the transparency issue is now to the fore. If you know a supplier’s partner is having problems, you can anticipate that there may be a disruption with your tier-1 supplier. And the company has a chance to make alternative arrangements.
Understandably, suppliers may be wary about sharing details of their partners, with concerns about losing competitive advantage or their customers side-stepping them. However, with permissioned blockchains its conceivable to share data without necessarily sharing the identity of the supplier. Or if they choose to share the supplier’s identity, they can do so only with customers they want to.
The WEF paper also suggested incentivizing participation. One possibility is to pay suppliers for the data. But more often, access to funding through supply chain finance is just as good. Many supply chain finance solutions only focus on enabling invoice financing for first tier suppliers, but more modern ones tend to offer finance for multiple tiers within a supply chain.
Finally, the WEF concludes that similar disruptions could happen in the future, so it’s worth implementing transparency solutions sooner rather than later. If the Covid-19 crisis has highlighted one thing, it’s a general lack of preparedness for this sort of disaster.
The World Economic Forum has a team focused on blockchain and set up a blockchain initiative targeting supply chain as well as a traceability platform for sustainability. Combining both supply chain transparency and sustainability, the WEF initiated a group to explore blockchain for the metals and mining sector, which includes Glencore, Anglo American/De Beers and Tata Steel.