Double Dose: Blockchain and IoT drive supply chain well-being

Supply chains are half-healed

Global supply chains have recouped from the seismic disruption of COVID-19 but continue to experience aftershocks from acts of war, natural disasters, and trade upheavals. Based on a recent survey of 88 supply chain leaders around the world, a leading consulting firm reports that 90 per cent faced supply chain issues in 2024.

Overall, supply chains are in better shape than five years ago, thanks to strategic, resilience-building initiatives, such as diversification and/or regionalisation of sourcing, adoption of advanced planning and scheduling systems (APS), and enhancement of risk management and decision-making capabilities. However, several challenges prevail, not least of which is a consistent drop in visibility beyond tier-1 vendors over the past couple of years: the earlier mentioned survey found that while insight into tier-1 suppliers improved between 2022 and 2024, the percentage of respondents who said they had good visibility into tier-2 and lower levels of the supply chain dropped by a massive 26 percentage points, from 56 percent to 30 percent. This is quite concerning because it makes compliance with laws, such as the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD), which requires organisations to identify, remediate, and report environmental and social impacts throughout the value chain, from company-owned operations to those of indirect suppliers,  extremely difficult.

A blockchain-IoT remedy

The good news is that with technologies such as blockchain and the Internet of Things (IoT), organisations can address the visibility challenge, among others, to improve the accountability, resilience, and performance of their supply chains. 

Blockchain offers a distributed, decentralised, digital ledger for recording and sharing information with the participants of a network. Because the data is completely traceable, immutable, and visible to and verified by the network before it is uploaded, it provides a trusted basis for even parties that do not know each other to transact confidently without an intermediary or central supervisory authority. The IoT is another kind of network of connected devices and objects that exchange data amongst themselves without human intervention. Very capable individually, together, blockchain and IoT create a formidable combination, which can transform operations in every industry. 

Fixing the supply chain

By connecting components in a supply chain to the IoT using sensors, organisations can monitor their performance and status in real time. As the connections expand to cover even indirect suppliers, they allow much-needed visibility into tier-2 and tier-3 vendors, right down to sustainability levels, labour practices, and governance mechanisms, to enable enterprises to meet the expectations of customers and regulators. This information from the IoT can be stored securely and authenticated on the blockchain, creating a trusted repository that the network can use—in this case, the supply chain ecosystem—for analysis, decision-making, and reporting. For example, a fashion company can leverage this information to ensure that only those factories that comply with CSDDD requirements produce merchandise bound for Europe. 

Companies in the pharmaceuticals or perishable goods business can ensure product integrity by using IoT-enabled sensors to monitor real-time ambient conditions (for example, temperature and humidity) from when their shipment leaves their premises until it is delivered. This data, stored on a blockchain, serves as authentic proof of fulfilment of all conditions of delivery. Further, the transacting parties can significantly reduce the time, effort, and cost of trade processing and financing by uploading invoices, shipping documents, letters of credit, etc. on a blockchain.

For the automotive industry, with its extensive supply chain operations, the benefits of blockchain and IoT are even more marked. By tracking the supply of components and parts, OEMs can identify any bottlenecks early and take timely action (divert the order, change production schedules, find alternatives) to prevent operations from getting disrupted. Importantly, this transparency allows them to spot the weak links that must be fixed to build supply chain resilience. 

Given adequate focus, blockchain and IoT can integrate vast supply ecosystems, enabling seamless, real-time flow of information, both upstream and downstream, to drive all-round excellence in supply chain management. Global supply chains, which are still fragile, should welcome these technologies with open arms. 

Written by - Vikas Gupta, AVP and Delivery Head - IoT, Infosys

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