The disruption of supply chains worldwide by coronavirus proves blockchain is needed as a tool of trade, according to the World Economic Forum.
Even before most countries began shutting factories and retailers by making workers self-quarantine, coronavirus lockdowns in China had forced the shutdown of a Chrystler Fiat plant in Serbia and a Hyundai plant in Korea, according to an article by Ziyang Fan, the WEF head of digital trade, and Rebecca Liao, executive vice president of SKUChain.
The problem, they argued, is that most major manufacturers know the production and shipping schedules of their major suppliers, “they usually have little to no knowledge of suppliers further up the [supply] chain.”
Obtaining and digitizing that information would vastly increase manufacturers’ ability to predict upcoming supply chain disruptions, and blockchain is key to making that happen, said Fan and Liao said.
“Supply chain visibility is crucial to understanding the impact of disruption,” like coronavirus, they said.
Privacy blocks progress
There is a simple reason they cannot get this information, even in industries where that information has been digitized—suppliers don’t want to be cut out by customers, Fan and Liao said. These “upstream suppliers will not reveal information to end customers, even if it’s easy for them to do so, is that they fear losing commercial advantage if their customers know even more about their operations, pricing, and sourcing.”
However, those suppliers would be willing to supply the information if they could independently control, and audit, the details of the data that is shared. That requires both data privacy and data sharing.
Both private enterprise blockchains and public ones built on platforms like Ethereum can do that in the same way they could put patients’ personal health records on a blockchain while giving individuals control over who sees what.
Thus, a company seeking to reduce insurance costs could learn how many employees have diabetes or high blood pressure without knowing who has them. Or an auto manufacturer could track whether an airbag supplier, for example, is getting the parts it needs on schedule.
By allowing suppliers to “audit their data-sharing permissions directly on their own blockchain node,” Fan and Liao said, that “data can be securely distributed to others in the blockchain network without revealing proprietary information.”
That means blockchain solves “a key technology problem in getting suppliers to participate in supply chain visibility initiatives,” they added.
Coronavirus proves blockchain is needed.
Nor is this only a way to predict upcoming supply chain disruptions, according to Fan and Liao. It is key to surviving a large-scale disruption like coronavirus and restarting after one.
While automakers may shut down car production lines, the same benefits would apply to the manufacturing of ventilators—which GM is trying to start at high speed—that cannot wait for long supply chain delays.
“Global trade and supply chains are going through an unusual and massive shock, which strikes from both ends—the supply and the demand side,” they noted. “Companies, whether buyers or suppliers, are facing tremendous challenges in keeping the goods and services flow at a time of global lockdowns”
As for the coronavirus pandemic, the “situation changes daily,” Fan and Liao said. “It’s crucial for all parties to have visibility into the supply chain, to share data, and communicate effectively.”
Updated at 5:22 p.m. on April 6, 2020 to change the word “shows” to “proves” in the headline and lead sentence.