Use-Case Analysis: Distributed Ledgers for Supply Chain
When talking about Distributed Ledger Technology (DLT) based solutions in the market, one common business process cited as ripe for disruption is Supply Chains. Although on the face of it this makes good sense, one needs to dig a little deeper to understand what the pain-points are and how DLT-based solutions can address them.
Supply Chains today are complex, global processes with multiple participants fulfilling specialized roles to achieve efficiencies and enable businesses to meet their goals. This is the case across business sectors, right from shipping logistics, consumer goods, automotive, and manufacturing. These efficiencies, however, haven’t reached their potential due to high transaction costs which emanate from a large number of intermediaries, paper-based processes, and siloed data records.
Blockchain and DLT-based solutions have received significant attention in recent years as a solution to many of these challenges. With its promise to reduce costs and increase process efficiencies, DLTs can replace paper-based processes which require significant man-hours with a digital, tamper-proof event history of all transactions. By creating an event history, it allows for provenance which is gaining importance as regulators and consumers demand greater transparency in supply chains.
Due to existing legacy systems, and the multi-party access involved, DLT solutions need to be light-weight, fast, and easy to build with the flexibility to be adapted for different business requirements. This, however, has been limited in scope as current DLT systems haven’t been able to meet the challenges of handling a large number of participants and simultaneously verifying transactions speedily.
Moreover, as supply chains deal with proprietary information related to customers and pricing details, a privacy layer is often required to protect sensitive aspects of the information. In addition, most Blockchain and DLT platforms are based on a token exchange with smart contracts layered on top to coordinate the parties and their transactions. This standard DLT model makes the technology far more complex and costlier than it needs to be.
We believe these challenges can be addressed by Tupelo, making it an ideal fit for supply chains.
How can Tupelo scale for Supply Chain?
Tupelo is built to model real-world objects, their current state and their history. Instead of a single blockchain maintaining a shared ledger of all transactions on the network, Tupelo maintains a separate history for every object in the supply chain. This history is maintained in a new data structure called a ChainTree. It’s a combination of any relevant data and the immutable history of that data. The data flexibility allows for multi-party processes like supply chains to conduct a large number of verified transactions at speed and for a lower processing cost to the network itself. The unique data structure also enables data privacy as owners of ChainTrees can determine which elements are public, which are shared among a group, and which stay private. This enables even competitors to join-in on a shared DLT platform.
As the underlying system models things (as opposed to tokens), supply chain use cases on Tupelo do not need complex, pre-negotiated smart contracts. As components move through the supply chain, their digital twin is simply transferred between responsible parties. They then update the item or batch of items with their relevant updates and pass it along to the next link in the chain. This greatly simplifies the use of DLTs and reduces the level of coordination needed between parties.
An additional benefit of using Tupelo as a supply chain DLT is the flexibility of how the data is organized and what can be included. Different actors in the supply chain can (while they are the temporary owner of the object) create their own "folder" of information and attach a variety of types of information. The information attached could be as simple as some text fields relevant to their process but could also include scans of paper documents not yet digitized or locations from the mobile phone used to scan the identifying RFID tag. Because of how the information is stored, a player in the supply chain can add information without negatively impacting other players and this helps the gradual adoption and evolution of the system. Other DLTs do not have this flexibility as it is derived from the unique structure of the ChainTree.
Manufacturing Supply Chain Use-Case: SF6 Gas Cylinders
To see the benefits, let’s consider the example of tracking and updating the flow of SF6 gas cylinders in supply chains.
Although SF6 gas works as a much needed electric insulator for industrial applications, it has the highest potential for global warming among all greenhouse gases. For this reason, the handling of the gas has to be reported to regulators for meeting environmental laws and safety requirements.
Currently, relevant information on the gas cylinders are with different actors in the supply chain at a given time. Due to limited coordination between the actors, it’s difficult for everyone to arrive at a single source of truth, making the process of generation of reports to regulatory authorities, fragmented and cumbersome.
By creating a digital twin of the SF6 gas cylinders represented by individual ChainTrees on the Tupelo platform, the suppliers can transfer ownership of the cylinders to the commercial users like switchgear manufacturers or service providers.
The commercial users can track the gas cylinders from their inventory to different project sites where the machines using SF6 gas are located. Any updates on the delivery, handling, maintenance, use of the gas cylinders can be made to the individual ChainTrees as transfer of ownership and appended data. This allows for real-time update on the status of the cylinders. Compliance teams thus have it easier to track the incident reports of the cylinders and prepare regulatory reports for various agencies.
Physical flow of SF6 gas cylinders by Andrew Holz
Regulators, if required, can also be given access to specific pieces of information on the ChainTrees for audits. Potentially, this allows for competitors to share a common platform for standardized reporting.
This enables collaboration between the suppliers, commercial users, service providers, handlers of the gas cylinders, and regulatory authorities to arrive at a single source of truth in real-time with blockchain properties of a tamper-proof event history of each gas cylinder. This greatly eases the process of tracking and reporting safety and compliance requirements.
It’s clear that DLTs have the potential to revolutionize every aspect of supply chains as we know it. However, concerns remain on how the technology will mature to address the challenges. We haven’t discussed other solutions in the market here but we believe that Tupelo addresses some of the significant concerns that stop participants from adopting the technology today.
As a platform, Tupelo is meant for real-world applications. Today our TestNet is live and we invite you to build on our platform.
Build with Us: www.quorumcontrol.com/build
Thanks to Andrew Holz, Topper Bowers, and Stephanie Mello for their inputs.