Despite the shift to digital, complex, multi-party supply chains are still heavily dependent on paper-based transactions to handle multiple handoffs as goods make their way from manufacturers to warehouses to distributors to end consumers.
Blockchains provide a means for numerous parties to agree on the contents of a shared ledger of transactions, which has the potential to bring vast efficiencies to this process.
For that reason, several global firms have already taken steps to incorporate blockchain-based solutions into their networks. Some of the most famous examples are based on permissioned-solutions, such as IBM’s Food Trust network, used by global retailing giants, including Walmart, Carrefour, and Nestlé.
Global shipping behemoth Maersk’s TradeLens platform is another success story, having onboarded partners worldwide and now handling over 700 million events and six million documents per year.
However, just because these platforms are whirring away quietly in the background while cryptocurrency adoption dominates the headlines, doesn’t mean we’ve heard the last of blockchain in supply chains.
Quite the opposite, in fact. A recent report from ResearchandMarkets estimates that post-COVID-19 blockchain in the supply chain market is expected to grow from $253 million in 2020 to over $3 billion in 2026, a CAGR of 53%.
Part of this will invariably be driven out of the continual push to get the world vaccinated and minimize the ongoing supply rows between countries. According to reports, Moderna and IBM are collaborating on exploring the use of blockchain, AI, and other technologies in vaccine distribution.
Beyond the Pandemic
Even aside from the pandemic, there are plenty of other use cases for blockchain in supply chains. One new project entering the market is even aiming to bring further benefits to the already-growing market by unleashing the utility of non-fungible tokens and DeFi. Trace Network is geared towards the lucrative markets in luxury and lifestyle goods, which continue to struggle with counterfeiting, costing the industry an estimated $320 billion per year.
One of the more common ways that counterfeiters produce realistic-looking goods is through stealth tactics along the supply chain. An example is the “ghost shift,” where staff at a manufacturing site will make goods that have never been ordered or endorsed by the brand itself, even though the intention is for the counterfeiters to sell them as the real deal.
Trace Network aims to combat this issue by giving brands the ability to mint NFT, which will accompany a luxury item throughout its lifetime. So when a brand issues an order to a manufacturer, they could mint a set of NFTs that corresponds to the order.
As the goods pass through the supply chain, each operator takes custody of the physical items as well as the NFT for each one. When the item is sold, the merchant transfers ownership of the NFT to the buyer’s digital wallet.
In this way, even buyers of second-hand goods can be sure they’re getting the real deal. If someone buys an item, they can also check to make sure that the NFT has the appropriate credentials which verify it was issued by the brand.
Another benefit of using NFTs in supply chains is they can help brands track their valuable inventory as it changes hands, making it easier to pinpoint where goods have been lost or stolen.
DeFi for Supply Chain
It’s an intriguing use case for NFTs, which have recently been making global headlines thanks to their utility in digital art that’s changing hands for millions. However, there are also enterprise use cases for another big crypto trend — DeFi.
Operators often find that it can be a costly and time-consuming process to access credit lines. In contrast, DeFi’s decentralized lending and liquidity pools could help to lubricate the flow of financing throughout the supply chain.
The current growth predictions of blockchain in the supply chain are based on the success of first-generation platforms like Food Trust and TradeLens. By adding innovations such as NFTs and DeFi to the mix, there could be even further unrealized growth potential in the blockchain supply chain markets.