Provenance and Traceability
Mario Wiedl
March 4, 2021

How Blockchain Technology can be used to make products traceable along their supply chains

In our article about blockchain technology, we have introduced its unique technical characteristics. Apart from today's most popular use cases in the financial services industry (i.e., cryptocurrencies), the underlying distributed ledger technology can be used to run secure end-to-end traceability systems for virtually any product, organic or made in a production process.

What is a traceability system?

A data-based model of a product that shows every step along the product lifetime - from the production all the way to the delivery of the finished product to the end client. A digital version of the product is created in the system and linked with all data related to it: production data, transport data, processing data, transaction data, and any other data where stakeholders have interacted with the product along its supply chain. With this dataset at hand, we develop an easy-tuse application that shows the user, step-by-step, the product's journey along its supply chain.

Coffee Farm Supply Chain

Why do we need traceability systems? 

There is a variety of industries where the demand for product traceability has been rising in recent years. The outbreak of the Coronavirus is supporting this trend. With booming globalization in the past decades, few products are produced in the country where they are being sold. Outsourcing of production processes to cheap labor countries or those with favorable production conditions is common even in sensitive industries, like the food and beverages or the Pharma sector. This growing opacity, along with scandals, manipulation, and recently the outbreak of a pandemic, has led to consumers losing trust in products originating from long and cloudy supply chains. It's becoming common knowledge that the technical capabilities (i.e., blockchain) are available to establish such a system, and consumers don't see the reason why companies shouldn't implement it then. In the fashion industry, where reports about corporations achieving huge profits at the expense of producers working under inhuman conditions have caused an outcry in developed countries, demanding traceability. In very few industries, traceability is mandatory yet. Still, it becomes more and more apparent that businesses have to adapt and follow the demand for sustainable and transparent supply chains to stay competitive in today's and tomorrow's business landscape. 

Who are the users of a traceability system?

The most prominent use case is providing supply chain data to the end customer of a product so that he can trace back the product's journey from origin to the final point of sale. With all this data at-hand, an organization can support other stakeholders, internally and externally. Let's have a look at internal use cases first. With the level of detail required to power a traceability system, data can be used by decision makers inside an organization to identify inefficiencies along the supply chain and plan ahead better (e.g., for the transport process). The availability of a new dataset for every product allows for agile planning. 

External users of the traceability system technically include any stakeholder who needs the data as proof of some sort. That may be any transaction process where the seller uses the collected dataset to prove origin, quality, production timeline, transport conditions, and storage information. Regulatory bodies, NGOs, customs, and other government agencies require product-specific data in many cases. Depending on import regulations, reporting standards, and country-specific requirements, this process can be tedious and time-consuming. In many cases, this process is still paper-based, prone to manipulation, and in general, largely inefficient. As data inserted into a blockchain database via IoT-enabled devices can't be manipulated, government agencies are starting to show interest in blockchain-powered systems to simplify import and verification processes. 

How does the data get into the database?

In short: this has to be assessed individually for each use case. Supply chains vary widely depending on the nature of the product, production locations, and the transport process's complexity. In any case, a data input has to happen at any point along the supply chain where the product is being touched. For products originating from or being transported through inaccessible parts of the world, this sounds very complex - but in most cases, it is relatively straightforward. Internet of Things (IoT) is the technology that automates data input and makes product traceability possible. IoT-enabled devices or smart devices can be found in any environment today. Smart household devices like washing machines or fridges analyze data and communicate with the owner ("no more milk at home"; "your laundry is ready). Smart medical devices automatically transmit health data to a doctor and can trigger alerts if benchmarks are exceeded. In the production industry, inefficiencies and mistakes of machines are being measured using IoT-enabled sensors. All these devices have one thing in common: they submit data without human intervention, fully automatically. Just like any smartphone sends data automatically when using certain apps (e.g., GPS data being uploaded into the database of a sports app). Automated data input doesn't require the user to do anything for the data to be sent. It happens fully automated by the device itself, given that it has an active internet connection. 

That makes the technology not only easy to use but also secure. IoT-devices don't need human intervention, but they also don't allow for any human intervention. That means human manipulation is eradicated from the process of data input. This is important for the company providing the traceability system: they can not always rely on their stakeholders to provide accurate and complete data. If manipulation happens along the supply chain, it will always reflect back on the company, as they provide the system. In the case of end-user-traceability, this could seriously harm the reputation. In the case of data provided to regulators, this could lead to legal consequences. How and where the IoT-sensors are employed along the supply chain has to be assessed individually, but there are devices for virtually any kind of data collection. Once put in place correctly, reliable data is constantly and automatically sent to the database. 

Why does this system need to be blockchain-based?

Blockchain databases are immutable, decentralized, and based on distributed ledger technology. What does that mean? 

Immutability means that it is impossible to change the data after inserted into the database. Decentralization means that there is no central authority that has the capacity to alter, delete, or manipulate any data in the

database. Distributed ledger technology provides a universally accessible record of all data inserted into the system, including the creator of the data and a timestamp. In short, we can say that the data in the blockchain database can not be manipulated. This is attracting consumers, governments, and NGOs to use the tech for tamper-proof and fast verification processes. So a traceability system doesn't necessarily have to be blockchain-based. Any common type of database can be used to store the data and present them to the user. For the traceability system to be relevant, it should leverage the security benefits of IoT and blockchain technology. Otherwise, the admin of the database can manipulate the data as he sees fit. No consumer and no organization will trust a system that can be manipulated. 

How is the data associated with each individual product?

Tokenization is the technology in question here. In simple terms, a digital version of a physical asset (the product) is being created in the system. Data is then linked to this asset along the process whenever new information about this product becomes available.

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