It’s your day off, so you want to take it easy and relax. You get dressed and head out to your favourite coffee shop just around the corner. On your way there, you are hit by the familiar citrusy fragrance coming from the fruit stand. The owner, busy as always, is talking with the lorry driver while his son is unloading a batch of ripe watermelons that are already being eyed by the regulars, eager to take the first pick. While this scene is unfolding, the barista hands you his latest work of art. You nod kindly, take a sip of that speciality coffee you enjoy so much, and start browsing your phone, ready to finally order that pair of designer jeans that caught your eye a few days ago.
Although this may seem like an ideal afternoon for most of us, the goal here was to set the stage for the following question which may sound like the beginning of a stale joke – what does the coffee, watermelon, phone and pair of jeans have in common? At first glance, seemingly nothing. But when we change our perspective and analyze these objects from a different angle we can observe a faint connection.
All of the above mentioned are goods that, in some way or other have made their way from their point of origin, a faraway plantation from an exotic country for the speciality coffee for example, to your cup. This interconnected and highly convoluted web of operations that takes place over multiple continents, involving a myriad of unnamed actors that deliver the product to the end consumer is known as the supply chain.
As a matter of fact, the supply chain can be seen as the circulatory system of our modern world, where goods are transferred from one place to another, to be transformed from raw resources to end products that are delivered to shops all throughout the world and even to our doorstep. The issue is that the current supply chain system functions on an outdated model that is already showing a number of stress fractures accumulated over the years as a result of its increasing complexity.
Modex manages to bring quantifiable trust to the supply chain industry with its innovative Blockchain Database (BCDB) solution that fuses traditional database engines, a core element of supply chain management systems that is also utilized by manufacturers, retailers, transportation firms and other actors involved in the supply chain flow with blockchain, a technology that acts as an invisible framework that guarantees data integrity, traceability visibility and trust.
The features unlocked by Modex BCDB have a transformative impact on the supply chain flow because they unlock a number of benefits that mend a series of chronic pain points:
- fast document verification: through Modex BCDB, supply chain actors have access to a distributed ledger of data that holds all the necessary documentation in an easily accessible medium that is available 24/7. As such, transportation firms no longer need to wait at queues at customs as document verification is performed almost instantly with the hit of a button
- no more conflicting documentation: the supply chain is composed of multiple segments that need to collaborate seamlessly especially on documentation. Often than not information gets disjointed and disparate when so many actors are involved. Modex BCDB removes the need for costly and time-consuming documentation reconciliation because it ensures that every party involved has the same version of the data
- cost-effective and fast audit: the Modex BCDB technological layer makes audit processes simple and less time consuming by offering complete data traceability
Over a hundred year ago, supply chains were relatively easy to manage because commerce and goods were sourced locally, often involving a reduced number of actors. Globalization has forever changed the supply chain landscape, transforming it into a highly complex network of processes involving multiple actors that range from manufacturers, suppliers, logistics companies, and retailers that need to coordinate and synchronize to function like a well-oiled machine that is in a constant state of motion.
But as society continues to expand, additional pressures are placed on the supply chain system that needs to keep up with the increasing demands and added levels of complexity. As a predominantly paper-based sector, supply chain systems rely on disjointed data systems that lead to information silos which make product tracking a difficult and time-consuming task. This state of information disarray generates a set of industry-wide challenges like lack of traceability, visibility and transparency that propagate down the chain of operations, producing delays, errors and increased costs.
In a bid to address some of the pain points mentioned above and to prepare the supply chain sectors for the new influx of challenges and demands, modern supply chains have already embarked on a digitalization processes, embracing a number of innovative technologies such as cloud computing, artificial intelligence and the Internet of Things (IoT). With its ability to provide unparalleled levels of trust concerning data, transparency and visibility, blockchain seems to be the last piece of the puzzle that can help bring forth trust, by unlocking new levels of visibility and near-real-time collaboration between supply chain actors.
A brief overview of supply chain
The term “supply chain” is said to have been coined by the newspaper the Independent in 1905, but the concept itself is much older. In one form or another supply chain has played an essential role throughout human history. From a very high-level overview, the supply chain is a network that connects companies with suppliers with the goal of distributing a product or a service to the end customer. Typically, a supply chain flow involves a wide range of actors ranging from suppliers, manufacturers, regulators, transportation and logistics firms, warehouses, wholesalers, retailers and the last link in the chain, the consumer who is usually unaware of all the work, planning and coordination that is required to deliver his favourite cup of coffee. The supply chain also encompasses all the steps that a raw, unrefined resource goes through to become an end product that is then distributed to retailers and customers.
Appearing much later, in the early 1980s, the term supply chain management (SCM) refers to the management and optimization of all the systems, processes and workflows required to transform raw material into a finished product. SCM covers the flows of materials, finances and information, including operations such as product design, planning, execution, monitoring and control. The goal of SCM is to ensure a smooth flow of operations during every segment of the supply chain, a difficult task because each segment of the supply chain requires a particular set of skills and expertise. When effective, SCM increases efficiency, lowering a company’s costs, boosting profits. The difficult part to SCM is that it needs to work like a finely tuned clock, if one component of the apparatus encounters a delay, it produces a series of bottlenecks that spread throughout the rest of the chain of operations.
Is blockchain right for the supply chain?
Blockchain is a distributed incorruptible ledger of economic transactions that can be programmed to record not only financial transactions but virtually any type of data that has value. A type of distributed ledger technology (DLT), blockchain is a digitized, distributed database that records all the information introduced in a decentralized peer to peer network. The created database is then replicated and shared among the network participants. Due to this design choice, every member of the network has access to the information.
When talking about blockchain, one should envision an ordered list of blocks, where each block is identified by its cryptographic hash. Every block is arranged in such a way that it references the block that came before it, which leads to the creation of a chain of blocks (hence its name). When a new block is created and appended to the blockchain, all the information contained by the new block will be available to every member of the network. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks.
Blockchain is a technology that presents itself as a viable instrument that can help connect all the actors involved in the intricate web of operations involved in SCM. This is because blockchain offers the opportunity to transform the highly fragmented and siloed data landscape present in current SCM systems into a decentralized and distributed ecosystem where every party involved has near-real-time access to the data that is appended to the network.
Also, through its unique set of characteristics, blockchain can address a series of supply chain challenges such as the lack of transparency generated by inconsistent and disparate data systems present all throughout different segments of the supply chain. Blockchain also holds the promise to help the supply chain sector forego its reliance on a pen and paper approach and transition to a shared model powered by interoperable data systems where each member of the flow of the operations, including the end consumer, can track a product’s journey in the chain.
What type of blockchain is best suited for the supply chain sector?
The first type of blockchain that emerged is the public blockchain, which acts as the main infrastructure for the most popular cryptocurrencies Bitcoin and Ethereum. A public blockchain stores a single type of data – financial transactions, in the case of cryptocurrencies. Typically, this type of blockchain network has an inbuilt reward mechanism that encourages more participants to join and maintain the network.
From a permission standpoint, public blockchains are categorized as permissionless. A blockchain network can be considered public when virtually anybody can download a node that contains all the blockchain, namely the whole transaction database and openly see and analyze all the information. All the data stored on the blockchain network is public, transparent, every member of the network can see and interact with it. This is the best example of a truly decentralized network. In a public blockchain, anybody can take a node, become a member of the network and interact with the data, but the system as a whole isn’t governed by a single entity. This is the case for Bitcoin and Ethereum. Although this type of network can be used in other ways, it is mainly used on the market as a backbone for cryptocurrencies, as it enables every member to see the data, there is no central point of authority and it manages to achieve consensus between untrusted parties.
Although praised for its ability to ensure trust in an ecosystem where the parties involved do not trust each other, public blockchains aren’t suited for the supply chain mainly due to their public nature. As with any business, too much data sharing can be a liability especially when trade secrets are involved. Furthermore, public blockchain isn’t owned by a single entity, so this lack of control can work against an organized SCM system.
From a technical perspective, private blockchains are almost identical to public blockchains. The main difference stems from the logic behind it and its applicability in business. Although it’s similar from a technical perspective to public blockchains, individuals and companies outside the network require permission from the owner of the protocol to join. As such, private blockchains are primarily permissioned networks, in which network participants require special access to view the data, append and commit new information to the chain.
The moment when the owner of the network decides to restrict access to outside parties, then the blockchain essentially becomes private. From a functional standpoint, it is similar to a public blockchain as it stores transaction-related data. To join a private blockchain, you require an invitation and must be validated by either the creator of the network or by a set of rules put in place by him. This access control mechanism can vary, depending on the network: existing participants can decide future entrants, a regulatory authority can issue licenses for participation or only an elite group of the network decides who is able to enter.
Typically used in the business environment, the private blockchain infrastructure has a clearly defined purpose, and can act as the foundation for enterprise-grade software specially designed to operate on the blockchain. When a company decides to have a blockchain infrastructure, it means it wants to tap into what blockchain has to offer, data immutability and integrity, workload distribution, information traceability, and so on, but in order to protect its interests, a company won’t expose the nodes to the public. Information can be shared with business partners or clients to clarify a misunderstanding, but in general, it is limited only to the members of that company. The higher degree of control and the more centralized nature of private blockchains make it an ideal framework that can support a large network of SCM players. Because all the parties involved are already known entities, a private blockchain is ideal because the main focus isn’t to ensure trust between the members, instead, the focus is placed on ensuring traceability, visibility and trust that the data that was introduced in the system is accurate and that it was not modified by a malicious actor.
Modex BCDB an easy to use and customizable blockchain solution
Of course, blockchain does come with its own set of challenges, especially concerning implementation. A “pure” blockchain is much too restrictive to be utilized in a production environment, especially in SCM, as it is too slow and cumbersome. To bypass all of these challenges and help companies tap into the benefits of this technology, Modex has created its trademark Blockchain Database solution, a technological layer that fuses the advantages of blockchain with a database system, a technology that is already deeply ingrained in every business and industry sector, to create a hybrid software product that makes blockchain easy to use in existing systems, to streamline operations and data security, or to build an entirely new infrastructure from the ground up that has a blockchain engine running in the background.
Modex BCDB is a middleware software solution that combines the functionality and familiarity of traditional database systems with blockchain, a technology designed to deliver a slew of disruptive features such as data integrity, immutability, traceability, distribution and decentralization that can help companies rethink the real estate sector. Bundled as an Infrastructure as a Service offering, Modex BCDB is devised to act as a building block that companies can use to build an infrastructure tailored to their specific business requirements. What makes the Modex technological layer stand out is the fact that it incorporates a blockchain component that unlocks a series of powerful features and functionalities without requiring any prior knowledge of blockchain development.
Available on the Microsoft Azure Marketplace, Modex BCDB can be easily deployed in cloud environments as well as on on-prem infrastructures. With a modular and agnostic approach to its two core components, the database engine and blockchain framework, companies can utilize what blockchain and what database is best suited to answer their data-related needs. Organizations can use the Blockchain Database solution to build a new infrastructure for their business or complement their existing IT framework to unlock a slew of data-related benefits.
What Modex brings to supply chain management
By leveraging its blockchain component, Modex BCDB gives access to a series of features that can streamline operations across every aspect of the supply chain:
- decentralization and distribution – due to its design, blockchain promotes a new working model that operates on the basis of collaboration. Each supply chain segment has access to the shared blockchain ledger which means that participants can add data to the network in real-time.
- data immutability – by combining cryptography with hashing algorithms, blockchain ensures data immutability, a feature that brings unprecedented levels of trust to the data utilized in SCM. In turn, immutability provides data integrity which drastically simplifies audit processes, while providing proof to stakeholders that the information has not been altered.
- data accuracy – once data has been introduced in a blockchain network, its integrity is ensured by the complex inner workings of blockchain. Data cannot be altered without compromising the entire data chain. Any data discrepancies are automatically detected by the system, which allows companies to pinpoint in real-time any tampering attempts.
- streamlined auditing – as an append-only structure, blockchain provides an indisputable record history of all the data that has been introduced in the network.
- traceability and record history – blockchain is an append-only structure. This means that it does not follow the traditional CRUD paradigm of standard database systems. Information is never deleted. When a record suffers a modification, a new entry is created and appended to the system. This means that a complete historical version is of every version of the data is maintained in the system. As an industry that is heavily reliant on audit processes to resolve everything from shipping errors to malfunctioning, substandard or perishable products, the supply chain sector can benefit immensely from this feature.
- ideal settlement ecosystem – data traceability, immutability, integrity, and a complete record history can reduce costly business-related disputes from months and even years, to a couple of days
Potential use cases for the Modex technological layer
As an Infrastructure as a Service offering, Modex BCDB enables high levels of flexibility and customization that can support a wide range of supply chain use cases.
Enhanced product traceability
Due to its inherent characteristics, blockchain technology acts as an ideal framework for product and provenance tracking. Modex BCDB can act as the foundation for a platform supply chain platform that combines innovative technologies like blockchain and IoT sensors such as radio-frequency identification (RFID) tags to track products ranging from pharmaceuticals, medical equipment, luxury goods and art. The IoT sensors can be programmed to record virtually any parameter of interest ranging from product handling, mechanical shocks, fluctuations in temperature and store the information on the blockchain component of Modex BCDB, making the information available in near-real-time ensuring complete transparency and visibility. Depending on the assets involved, products can have a digital identity created for them on the blockchain and have relevant information and certificates appended to it such as certificates authenticity, ownership and warranties.
A supply chain platform backed by the Modex BCDB technological layer can be designed to enable the following set of functionalities:
- provenance tracking – the Modex BCDB layer can store any relevant data concerning the product since it has left its point of origin
- monitoring critical parameters – paired with IoT sensors, Modex BCDB can collect and store storage conditions such as temperature, humidity, and pressure during transit
- inbuilt warranties – each product can have its own digital identity created on Modex BCDB, that also stores relevant documentation such as certificates of authenticity and warranties
- regulatory compliance – the BCDB layer can be programmed to store a product’s entire history, allowing regulators to easily determine if a product has been manufactured and handled in a compliant manner
Increased cooperation and efficiency in manufacturing
Multinational manufacturing companies are required to coordinate and keep track of thousands of components, a task made difficult by the low levels of visibility provided by current systems. The issue is that a small delay or disruption in a part of the supply chain usually has deep ramifications such as excess inventory or stock-outs in other parts.
Modex BCDB can work as the invisible framework that supports the operations of SCM systems by facilitating high levels of transparency and visibility. Consider the following example: product P1 requires components A and B, and product P2 requires components A and C. If the manufacturing process of product P2 is temporarily stopped by the stock-out of component C, the logical move would be to allocate the inventory of component A to product P1. However, if the products and components are manufactured by different companies that do not have visibility into one another’s inventory, the most likely outcome will be that an excess inventory of component A will stockpile at the assembly line of product P2, even if the manufacturer of product P1 has a stock-out of component A.
Modex BCDB can be leveraged in manufacturing systems to enhance the visibility of components and inventory flows across companies, without disclosing any sensitive information that would give competitors an unfair advantage.
The supply chain is a sector that comprises a large number of actors that need to seamlessly cooperate with each other as even the shortest delay can have deep ramifications down the chain of operations. Blockchain has demonstrated that it holds the potential to initiate a set of transformative changes in the supply chain sector that can benefit every party involved in the flow of operations, including the end consumer, through the visibility, traceability and trust it facilitates.