Blockchain Enabled Supply Chain Traceability: Enhancing Transparency and Efficiency

Blockchain Enabled Supply Chain Traceability: Enhancing Transparency and Efficiency

Blockchain technology can revolutionize supply chains' operations by providing transparency, security, and efficiency

  • By Ajay Kapoor , VP & Head Procurement, BSFI | October 26, 2023

In the digital era, trust is a valuable commodity. Secure, transparent, and trustworthy systems are paramount as our lives become increasingly interconnected and reliant on technology. Enter Blockchain, a transformative technology that has captured the imagination of industries worldwide. The core of Blockchain is a decentralized and distributed ledger technology that enables secure and transparent recording of transactions across multiple participants. Each block in the blockchain system has details of new and previous transactions, a unique identifier called a hash.  

 Here's how Blockchain can be used in supply chain applications:

Traceability and Transparency: Blockchain enables end-to-end traceability of products by creating an immutable record of every transaction and movement along the supply chain. Each participant in the chain can add information to the blockchain, creating a transparent and auditable trail. This helps identify products' origin, location, and condition, reducing fraud counterfeiting and ensuring regulation compliance.

Example: The automobile supply chain often spans multiple countries and involves numerous suppliers, making tracking the origin and movement of components and parts challenging. Blockchain technology offers a solution by providing end-to-end traceability and transparency. By incorporating data from various stakeholders, including suppliers, manufacturers, distributors, and retailers, blockchain can ensure the authenticity and provenance of automotive parts, reducing the risk of counterfeiting, fraud, and product recalls.

Enhanced Security: Blockchain employs advanced cryptographic techniques to secure data. Blockchain works on distribution data rather than centralized data, making it difficult for malicious actors to alter or tamper with the information stored in the chain. This increased security helps protect sensitive data, intellectual property, and trade secrets.

Example: Blockchain can be used to securely store and verify a vehicle's identity and ownership. Each vehicle's unique identification, including the vehicle identification number (VIN), can be recorded on a blockchain. This immutable record ensures that a vehicle's identity cannot be altered or falsified, reducing the risk of car theft and fraudulent sales. When buying a used car, potential buyers can easily verify the vehicle's history and ownership through the blockchain, providing both parties more trust in the system.

Smart Contracts: Smart contracts are self-executing agreements that automatically trigger predefined actions when certain conditions are met. In supply chain management, smart contracts can be utilized to automate processes such as payments, quality control, and logistics

Example: Smart contracts can optimize the supply chain for automotive manufacturers. With the help of blockchain, the system can optimize the inventories, and re-order levels can be enabled. A smart contract can automatically trigger reorders from suppliers, ensuring just-in-time delivery of parts. Payment to suppliers can be automated upon successful delivery and verification of the components' quality. Additionally, a smart contract could automatically release payment to a supplier once the buyer has verified and accepted the shipment.

Efficient Inventory Management: Blockchain work on the distribution ledger, and all node of the warehouse are well connected, and the system can provide real-time visibility into inventory levels and movements across the supply chain. This information allows companies to optimize inventory management, reduce stockouts, and improve demand forecasting. Additionally, blockchain can facilitate data sharing among stakeholders, enabling more efficient collaboration and coordination.

Example: Blockchain can be employed to create a decentralized ledger that records the movement of inventory items in real-time. A new block is created in the system, and all transactions are marked with a unique identifier (e.g., RFID tag) linked to a blockchain record. As items move through the supply chain, their status and location are updated on the blockchain. This gives manufacturers an accurate, up-to-date view of their inventory, helps to optimize inventory carry costs, and reduces the risk of overstocking or stockouts.          

Supplier Verification and Compliance: Blockchain can streamline the process of verifying and onboarding suppliers by securely storing and verifying their credentials, certifications, and compliance records. This helps ensure suppliers meet the required standards and regulatory requirements, reducing risks associated with working with unreliable or non-compliant partners.

Example: When a new supplier wants to work with any manufacturer, they must undergo a rigorous onboarding process. This process includes providing documentation, certifications, and other compliance-related information. This data is entered into a blockchain network designed explicitly for supplier management. Additionally, the blockchain network verifies the authenticity of suppliers' documents/ product reports and test certificates or an ISO 9001 certification; the blockchain can cross-reference it with a database to ensure it's legitimate, and verified documents are then stored as immutable records on the blockchain.          

Ethical and Sustainable Supply Chains: Blockchain can track products' origins and certifications related to ethical and sustainable practices. Blockchain creates more trust and allows consumers to make more informed choices by accessing information about fair trade, labor conditions, environmental impact, and product authenticity.

Example: A blockchain can be used to trace the origin and journey of pharmaceutical ingredients and raw materials. Each element is assigned a unique identifier (e.g., QR code) that links to a blockchain record. This record contains information about the source, quality, and ethical practices associated with the ingredient. Second, the pharmaceutical industry relies on clinical trials to develop and test new drugs. Blockchain can ensure the transparency and integrity of clinical trial data. Every clinical trial stage, from patient recruitment to data analysis, can be recorded on the blockchain. This prevents data manipulation, ensures ethical conduct, and allows regulators and stakeholders to verify trial results independently.

Additionally, these examples demonstrate the versatility of blockchain technology in improving transparency, traceability, security, and efficiency in supply chain management across various industries.



Use cases

Food and Agriculture


Provenance Tracking

Blockchain is used to trace the origin of food products, ensuring food safety and quality. For example, Walmart uses blockchain to trace the journey of mangoes from farm to store shelves, reducing the time it takes to trace the source of contamination in case of a recall.

Supply Chain Transparency: Companies like Nestlé use blockchain to provide consumers with transparency about the sourcing and production of their products, including data on responsible sourcing and ethical practices.

Fashion and Apparel



Luxury brands like LVMH and fashion companies like H&M use blockchain to verify the authenticity of products, reducing the circulation of counterfeit goods.

Supply Chain Ethics

Blockchain helps ensure ethical sourcing of materials, such as verifying fair labor practices and sustainable sourcing of materials like cotton.


Vehicle Lifecycle Management

The automotive industry uses blockchain to track the entire lifecycle of vehicles, from manufacturing to maintenance and resale. This ensures transparency and traceability for vehicle component recalls, maintenance, and provenance tracking.

battery swapping in EV vehicle

Battery swapping is a concept in the electric vehicle (EV) industry that involves replacing a depleted battery with a fully charged one, providing a quick and convenient way to extend an EV's driving range. Blockchain technology can play a significant role in enhancing the effectiveness and efficiency of battery-swapping systems. Blockchain can be used to create a decentralized registry of batteries, verifying their authenticity and certification. This helps prevent counterfeit or substandard batteries in swapping, enhancing safety and performance. Ownership of batteries can be recorded on the blockchain, making it easy to transfer requests during the swapping process. This eliminates disputes and ensures a clear ownership history.


Drug Traceability

Blockchain is used to verify the authenticity of pharmaceuticals, reducing the circulation of counterfeit drugs and ensuring patient safety.

Clinical Trials

Blockchain helps secure and validate clinical trial data, ensuring the integrity of the results and ethical conduct of trials.

Energy and Utilities

Renewable Energy Trading

Blockchain facilitates transparent and secure transactions in energy trading, allowing users to buy and sell renewable energy directly to and from each other, promoting sustainability.

Grid Management

Utilities use blockchain to improve grid management, monitor real-time energy production and distribution, and optimize resource allocation.

Logistics and Shipping

Cargo Tracking

Blockchain enhances the tracking of goods in transit, providing real-time visibility into the status and location of shipments. IBM and Maersk's TradeLens platform is a notable example

Customs and Compliance

Blockchain simplifies customs documentation and compliance by securely recording and sharing shipment information across borders.

Letter of Credit Management

i)Smart contracts can automate payment processes upon successfully fulfilling LC conditions. This can expedite the payment to the exporter and reduce the time it takes for the importer to receive the goods.

ii) All parties involved in the LC process, including the importer, exporter, and bank, can have real-time access to the smart contract. This transparency ensures that everyone is on the same page regarding the status of the LC.

Good tracking & Supply Chain Transparency

i)Blockchain can track the movement of goods from the exporter to the importer. This provides real-time visibility into the location and status of the shipment, reducing the risk of lost or stolen goods.

ii)Importers can use blockchain to verify the authenticity of the goods and their source. This is particularly important in industries where counterfeit products are a concern.

Immutable Records for Dispute Resolution:


Inventory Management

Retailers use blockchain to optimize inventory management, ensuring products are stocked efficiently and reducing waste.

Customer Trust

Brands leverage blockchain to build consumer trust by providing transparent information about product origins and ethical practices.


Parts Traceability

The manufacturing industry uses blockchain to trace critical functional components' origin and maintenance history, ensuring safety and compliance.

Blockchain helps verify the compliance of suppliers with safety and quality standards.


Supplier Verification

Blockchain helps verify the compliance of suppliers with safety and quality standards.

It's worth noting that while blockchain offers several potential benefits, implementing it in supply chain applications requires collaboration and standardization among multiple stakeholders. Additionally, scalability, privacy, and interoperability challenges must be addressed for the widespread adoption of blockchain in supply chains.

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