Blockchain in the Supply Chain – A Practical Introduction [blockcentric #2]

Our article series “blockcentric” discusses Blockchain-related technology, projects, organization and business concerns. It contains knowledge and findings from our work but also news from the area.
Blockchain in the supply chain is covered in several parts:
Part 1 (General introduction)
This article (Supply Chain platform)
Part 3 (Implementation on the shop floor)
Part 4 (Smart Contracts for asset tracking)
Part 5 (Deploying Smart Contracts on the blockchain)
You can find an implementation on our demo site: https://asset-tracker.codecentric.de/

Blockchain-enabled supply chain platform

With this in mind, we started to dig deeper into this problem domain and strived to create a solution-approach that will create added value for the industry. The feature set of the implementation roadmap is divided into value-adding and enabling features.

With this set of aspects, we have an end-to-end process in mind that starts at the production facility, touches warehouses, logistics, services and continues at the end-user. What is charming about the approach is that it is quite modular and can be approached step by step. For Digital Ownership Certificates, for example, you won’t need to implement the Trusted Maintenance Tracking or Collaborative Product Master Data Modules. Let’s have a look at the idea of each module.

Components of the platform

  Digital Ownership Certificates

The foundation of the platform is the digital mirror asset, a digital equivalent to the physical asset. You can imagine the digital ownership certificate like an official vehicle registration document (Fahrzeugbrief) that officially entitles ownership. The blockchain permits to securely store an ownership relation by storing physical properties of the asset, such as a serial number, to the wallet of the owner. Due to the nature of the smart contracts, this cannot be manipulated, altered, or duplicated. Neither by the owner nor by third parties. Only legitimate transactions can take place, such as passing on an asset to the next owner.

     Asset & Assembly Tracking

By having the ownership certificate and a transaction to pass on assets, it becomes reasonable to track down assets in the supply chain. For each transaction, you get the involved parties and the timestamps for free. Furthermore, some blockchain implementations do allow to look for events that will notify you on each next step. Nowadays, a lot of worry in the supply chain goes into the area of traceability. It’s the law! Here a short introduction into EU regulations. Traceability becomes hard as soon as you compose products from components. In the blockchain this can be achieved by building a smart contract tree, referencing to different assets. Transactions will become heavily expensive, due to the fact that each time an assembly is passed on, each asset ownership certificate has to be updated. As an alternative, assemblies will be a special form of a meta asset that needs only one ownership certificate. While the first form allows for easier ‘dis-assembly’, the second form is cheaper. In any case, it simply means that you need to be able to track down parts of assemblies and backtrack them to their origin.

     Proof of Origin

An interesting sub-use case that we will have a closer look at in another article is the proof of origin. Basically, this is the original product that someone wants to sell me. Along with these questions, side use cases like warranty tracking becomes available. The proof of origin intends to tackle product piracy by giving a strong hint if the asset in question isan original, and this is done for both sides – producer and end customer. The end customer sometimes has difficulties to tell if this ‘product’, e.g. a piece of art or luxury watch, is an original. For the manufacturer, there have been cases where supposed clients asked for the manufacturer’s warranty while having a pirated product at hand with real identification insignia.

      Trusted Maintenance Tracking

Maintenance plays a vital role for the after sales services of delivered products. Maintenance can have different intentions: ensuring safety, a prerequisite for manufacturer’s warranty, providing on-top service to the clients as a value-adding service. For each of the motivations it is important that the maintenance activities are recorded with a reference of time with correct content and remain unmanipulated for the future. Furthermore, the owner does not trust the third party maintenance staff and the manufacturer trusts neither the owner nor the maintenance staff since both have the motivation to cheat. The process in the case of the elevator inspection would be the following: The maintenance staff would

• identify the asset to inspect according to his work plan or by scanning the asset ID
• the maintenance agreement smart contract is attached to the asset as agreed upon between manufacturer and end user
• the service staff performs and documents its work tasks, work effort, replacement parts, … and performs a confirming transaction in the blockchain
• the owner signs the transaction, like an ordinary work slip, confirming that the work has been performed and that the given effort was correct.

From now on, the data remains unchangeable in the blockchain for all time and can be used for all kinds of follow-up tasks.

      Integrated Financial Transaction

One aspect of follow-up tasks would be integrated financial transactions. If we focus on the third party maintenance clerk, he has to be paid for his work hours. Due to the fact that smart contracts allow for atomic/indivisible linking of data transactions and financial transactions, it is possible to pay him his amount of cryptocurrency at the moment the elevator owner confirms the completion of the task. The amount could be determined according to the smart contract between him and the manufacturer. Often you do not want to pay in volatile cryptocurrency. This is when you need to use a second blockchain that is bound to a real value or you integrate a service that acts e.g. as a cryptocurrency-to-paypal gateway.

      Distributed Product Master Data

Finally, we have some intermediaries in the supply chain that might become replaced in the future. One key intermediary, e.g. for the whole retail sector, is the service provider that standardizes, collects, and re-distributes product master data, e.g. title, description, pictures, ISBN, … . This data is aggregated in central data pools and re-distributed to everyone who needs the content to populate the ERP systems and online stores. Often both sides, the product manufacturer and the retailer, will have to pay for the service to get a centralized data pool. If you are interested in how these pools work today, you can have a look at https://www.gs1.org/how-gdsn-works or https://www.gs1-germany.de/gs1-solutions/stammdaten/gdsn/ . Blockchains will flip this relation in the near future. It is not only possible to build a distributed network to deliver product information for a fraction of the cost, but it is also possible to implement smart contracts that allow for a decentralized standardization gremium.

       Trusted Devices

Trusted devices in our terms are devices that are involved in a step in the supply chain that changes the state of the blockchain. For example spawning a digital mirror asset on the blockchain at the moment that a physical asset is produced. Or automatically updating the tracking information in case of a goods delivery. Trusted devices have a cryptographic identity and should be misuse-resistant.

       Production Integration

In order to bring the platform to life, it is necessary to industrialize the generation of digital mirror assets. This is done by deeply integrating into production lines. Our approach allows for two ways:

1. The use of a dedicated physical trusted device with a cryptographic identity that generates serial numbers and creates digital ownership certificates.
2. A headless approach that integrates into the production bus systems, which in turn  takes serial number information from existing marking systems, e.g. etching, laser, needle, printer, …

     Asset Management Platform

The asset management platform allows manufacturers or owners of assets to manage their assets. It is a web interface that enables them to check for transaction history, originality, or to transfer the asset to another owner. It is your go-to point to manage everything. We will have a look at a concrete example in an upcoming post. One key to the success of the asset management platform and to the whole supply chain platform is that you do not feel that you are working on the blockchain. What does it mean? Well, blockchain technology must be totally transparent at all times. It should behave like any non-blockchain system, only exploiting the beneficial properties around decentralization, trust, persistence, etc. .

     In-the-field Interface

Summing up user experience is key to obtaining acceptance from the user base. This also means that things that are done in this field should not be implemented to run on a desktop computer. Furthermore, tech such as beacons, NFC, and QR Codes should be used to identify assets and support the process. A concrete example is the use of a mobile interface to access asset information and to log maintenance activities.

Conclusion

The blockchain-enabled supply chain platform is far from being complete by now and a work in progress. You have probably developed your own ideas while reading about the different use cases and parts of the platform. If you can relate to one or another topic, please let us know. I would like to hear your comments and amendments. Feel free to drop me a few lines: kai.herings@codecentric.de and follow me on twitter: https://twitter.com/kherings

Part 1 (General introduction)
This article (Supply Chain platform)
Part 3 (Implementation on the shop floor)
Part 4 (Smart Contracts for asset tracking)
Part 5 (Deploying Smart Contracts on the blockchain)
You can find an implementation on our demo site: https://asset-tracker.codecentric.de/

Previously published blockcentric posts