Giovanna Zarrebini
Since COVID struck in 2020, consumer expectations revolved around a two-hour delivery model. When the pandemic disrupted that model and Just-In-Time frameworks, consumers soon discovered the implications that the term ‘supply chain’ had when the delivery of household goods was delayed. New consumers and corporations are looking into technology to improve supply chain efficiency and alleviate potential bottlenecks in the system (Deloitte, 2023). Supply chains can be transformed through the application of blockchain technology because it allows for equal knowledge among players in the market, enhances trust in the system and more importantly makes the services to small scale operators, especially in developing countries. It is important to note that when supply chains are considered, vertical integration and information asymmetry exist making it easy for the dominant market players who can easily afford the costs of adherence to such systems, to take over and control how data is controlled. The technology of blockchain with its decentralised ledger, enables transactions to be validated, addressing these power imbalances within the supply chain through improvement in accountability, reduction in fraud and in essence, support the importance of sustainable practices.
This article assesses the prospects of blockchain as a means of equalising competition in global supply chains. It discusses the advantages of transparency with regards to the supply chain management, the extent to which blockchain technology will go in increasing visibility and decreasing differences amongst players, and the implications of those issues for the development of appropriate policies. Finally, it details policy recommendations on the adoption of equitable allocation of blockchain-based opportunities in supply chains.
Introduction
Supply chains are increasingly global and complex, involving numerous stakeholders from suppliers and manufacturers to retailers and consumers. Traditionally, large companies have had the resources to manage and verify their supply chains effectively, while smaller businesses, especially those in developing regions, often lack access to such tools. This disparity results in a lack of transparency, inefficiency, and often, unfair competition in the market. Blockchain technology has the potential to address these issues by providing a decentralised, tamper-proof ledger that enables all participants to access and verify information equitably.
As noted by Tapscott and Tapscott (2016), blockchain enables a new kind of economic interaction by offering transparency and accountability that is inherently democratic. When applied to supply chains, it can create a system where each stakeholder, regardless of size or location, has equal access to trustworthy information.
Role of Blockchain Technology in Supply Chain Transparency
The ability of the blockchain technology to achieve decentralisation makes it suitable for product tracking in a supply chain system. From a survey conducted with 100+ industry leaders by the World Economic Forum (2024), 86% believe that blockchain offers a competitive advantage to the supply chain. Every transaction is entered in real-time, forming a ledger that can be accessed by the parties involved whenever they wish, which is permanent. This degree of transparency is especially useful in industries such as farming and housing textiles, where the need to source raw materials ethically and sustainably remains a concern among consumers (Kamath, 2018; Adams, H.S., 2024) ). To illustrate, small-scale farmers may apply this technology to record their farming practices as well as the quality of their products which will earn them better prices and access to wider markets (Kshetri, 2018).
Blockchain seeks to solve information asymmetry which is prevalent in global supply chains in which multinationals often favour a large share of the information making it difficult for smaller suppliers. Blockchain allows sufficient data access to the small producers and helps them to achieve such international requirements, even those about protecting the environment and respect to labour, thus enhancing healthy competition (Dobrovnik et al., 2018).
Counterfeit products exist in the supply chain and pose potential threats to buyers as well as honest suppliers, and this is one of the issues harming global supply chains. Using blockchain technology helps to eliminate this issue by offering a safe process of verifying the source and authenticity of products. For example, manufacturers of high-end products and drugs, among others, are adopting blockchain systems in order to safeguard the image of their products and curtail the level of unfair competition due to the existence of fakes.
Furthermore, the technology is useful in promoting compliance. In the case of the textile industry, for instance, this technology can be used to trace the labour as well as the raw material used in production enabling the ‘good’ suppliers to compete with competitors who may not be ‘good’ (Saberi et al., 2019).
Case Studies
Taking an example of the agricultural sector, it is common for smallholder farmers in developing nations to struggle to reach out to global markets because they cannot be seen or held accountable. With the help of blockchain, farmers can give proof about the quality and source of their produce, opening avenues for better markets. For instance, through the use of the Food Trust blockchain launched by IBM, small farmers have been able to farm gaze and track their products from farm to fork increasing trust and income levels (IBM 2020).
In the pharmaceutical sector, the existence of fake drugs presents challenges within the healthcare system and especially within the pharmaceutical industry. It poses a serious threat to health and causes heavy economic losses. The use of blockchain-based systems, which are capable of confirming each stage of the supply chain from manufacturing to distribution, can help maintain the quality of the pharmaceutical supply logistics. An interesting case is that of the MediLedger Project in relation to blockchain technology where the use of drugs suffering from counterfeiting is prevented, therefore, making it fair for all the manufacturers in the industry (Mackey et al., 2019). The U.S. Drug Supply Chain Security Act of 2013 requires pharmaceutical companies to identify and trace prescription drugs to protect consumers from counterfeit, stolen, or harmful products. Driven by that mandate, companies are now collaborating with supply chain partners to use blockchain for this purpose (Guar, V. , & Gaia, A, 2022).
Policy Recommendations
Several policy recommendations are imperative in order for blockchain technology to be used as an equaliser in the global supply chains. The transition to blockchain for everyone will require the intervention of governments and policymakers to set up enabling conditions.
Firstly, global standards and regulations will ensure interoperability across systems and allow for a unified global approach to streamlining data collection, verification and compliance for smooth adoption of blockchains (Casino et al, 2019). These standards could involve technical specifications, security protocols and data formats, facilitating seamless data exchange across international borders. This is critical for companies who are willing to expand to multiple regions across the globe and those who are offices internationally. International bodies like the International Organisation for Standardisation (ISO) and the World Trade Organisation (WTO) along with national governments should work towards this goal together.
Secondly, poorer regions are characterised by limited internet access and resources (Choksy, 2024). Blockchain technology requires a robust digital infrastructure, including reliable internet access, and compatible software systems. Thereby, in impoverished and rural areas, especially in developing countries, this creates a barrier to blockchain adoption since infrastructure is limited. It is crucial to design policies to account for these barriers. Investment is crucial and goes beyond physical infrastructure such as training problems to tackle the complexities of this technology.
Thirdly, whilst blockchain technology may promote transparency, it raises privacy concerns since information on transactions and product journeys are visible to all those involved in the blockchain network. In order to protect sensitive data, policymakers should provide clear data privacy guidelines. This should allow for a balance between transparency and privacy to ensure that sensitive data is encrypted or anonymised.
Finally, policies should also be based on encouraging blockchain use for sustainability tracking. Governments could offer financial or regulatory incentives for those who use the technology to verify sustainable and ethical practices. The incentives involve tax credits, grants or a certification scheme. This would allow for a quicker integration of blockchain for companies who are willing to align with their ESG goals. Thereby, policymakers can help ensure that blockchain technology supports sustainable business models.
References
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Guar, V. , & Gaia, A. (2022) Harvard Business Review.
Casino, F., Dasaklis, T. K., & Patsakis, C. (2019). A systematic literature review of blockchain-based applications: Current status, classification, and open issues. Telematics and Informatics, 36, pp. 55-81.
Choksy, U. (2024). How blockchain technology could help to prevent child labour in global supply chains.
Deloitte. (2023). Using blockchain to drive supply chain transparency. Use cases and future outlook on blockchain in supply chain management
Dobrovnik, M., Herold, D. M., Fürst, E., & Kummer, S. (2018). Blockchain for and in Logistics: What to Adopt and Where to Start. Logistics, 2(3), pp. 1-14.
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Kshetri, N. (2018). Blockchain’s roles in meeting key supply chain management objectives. International Journal of Information Management, 39, pp. 80-89
Mackey, T. K., Kuo, T. T., Gummadi, B., Clauson, K. A., Church, G., Grishin, D., & Liang, B. A. (2019). “Fit-for-purpose?”–Challenges and opportunities for applications of blockchain technology in the future of healthcare. BMC Medicine, 17, p. 68
Saberi, S., Kouhizadeh, M., Sarkis, J., & Shen, L. (2019). Blockchain technology and its relationships to sustainable supply chain management. International Journal of Production Research, 57(7), pp. 2117-2135.
Tapscott, D., & Tapscott, A. (2016). Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World. New York: Penguin.
World Economic Forum. 2024. The State of Blockchain Transformation in Supply Chain.
Adams, H.S. (2024) Blockchain: The Secret Sauce for a Secure Food Supply Chain.
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