At the beginning of the year, the corona virus kept China in suspense – Western nations thought that the virus was not a serious threat. Today we know that these assumptions were wrong. The corona crisis has not only plunged the economies into a severe recession, but above all has shaken the supply chains. Now there is an opportunity to use blockchain technology to regain trust in the established systems – we take a look.
COVID-19 shakes the global economy
Since the financial crisis in 2008, global economic development has known only one direction – upwards. As a result, there have been increasing voices that we will soon experience a recession. With the COVID-19 pandemic, this sworn recession finally set in. However, none of the crash prophets should have expected such an extreme crash.
Due to the strong globalization in the past few years, the pandemic also showed that this approach has certain limits. As a result, entire supply chains were disrupted within a few days and weeks. Some experts now completely question globalization and global trade. However, it is unlikely that entire countries will forego global trade in the future. Nevertheless, new approaches are now needed to rebuild trust in the systems.
On the one hand, the pandemic set us back a few years from an economic point of view. On the other hand, there is now a unique opportunity to introduce new technologies and thus to establish new trust in the existing economic sectors. We see blockchain technology as one of the most important key technologies in the following change.
Blockchain for more trust and efficiency
In recent years, we have already seen the digitization of numerous industries. This process has intensified due to the corona pandemic – in one month alone we could see a digitization advance that was otherwise planned for the next two years.
Nevertheless, digitization could not change the working behavior of the business areas. These will still work in silos in 2020 and this will lead to discrepancies in the company's internal accounting.
As a result, there is a need for rapid processing, creation and transfer of transactions. Companies that can meet these requirements benefit in their own business environment. If you want to make your supply chains more resilient, you also have to offer more transparency and integrity. In this area in particular, distributed ledger technologies , with the focus on blockchains, can create real added value.
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The fact that this is not an empty phrase is shown by the rapidly increasing demands from customers for more transparency in production conditions. For example, if we take a look at the food industry, there are basically two key groups that communicate demands for more food safety:
- Consumers: This category includes the end consumers and consumer advocates who demand greater transparency. More and more customers are demanding proof of the origin of the product and the production conditions.
- Tax officers: Tax officers, on the other hand, need a classification of the product and the legal systems that have been passed so far. There is also a need for certificates of arrival to ensure correct registration at customs – along with the correct taxation.
As a result of the COVID pandemic, new challenges arose in addition to these demands, which made some processes particularly complex. The reason for this is the blocking and restrictions of certain channels.
To rebuild our disrupted networks, we now need trust and a way to verify information. Blockchain technology offers the necessary building blocks to ensure the required transparency and security. In particular, companies that had to cope with severe supply chain restrictions due to the pandemic can now benefit from blockchain technology.
Implement blockchain at the start of the supply chain
The starting point of the supply chain is best suited for the introduction of blockchain technology. This is the company or process in which the first transaction is initiated. For companies, this means that they use supply chain data such as order or storage units and thus become part of a blockchain network.
Functions such as a non-corruptible truth enable companies to optimize the tracking of their own products. In this way, critical questions can be answered more quickly. These include, for example:
- Where is the delivery located and when is it expected to arrive?
- Have you had any problems during transportation?
- Did the delivery suffer from too high a temperature?
- Have customs inspections been carried out?
- What are the reasons for the delay in delivery?
- Who is responsible for the delay?
- Who assumes liability in the event of a dispute?
All in all, there would be a clearer picture for everyone involved, which would create trust and significantly increase efficiency.
More transparency for the entire supply chain
The introduction of distributed information systems would have a clear advantage. After all, almost all questions that arise can be answered by synchronized transactions – the principle is "you see what I see".
However, blockchain technology can also be used to validate a product's source data. In this way, end consumers can ensure that the product comes from the promised region of origin.
It also shows that the use of blockchain technology has another decisive advantage: the closer interlinking of business and financial transactions . In this way, the flow of products and goods as well as the flow of information can be better linked to the financial side of the transaction.
With blockchain technology moving into the supply chain, there will also be improved access to financial and insurance products in the coming years. This results in faster and seamless handling of the corresponding processes. Documentation and data related to the transactions can also be triggered more easily. In this way, they act as a central source of truth for the respective trading partner – the need for third parties, on the other hand, decreases and increases efficiency.
Taken as a whole, most of the manual coordination processes that buyers and suppliers go through are eliminated. In addition, there is no longer a need for third-party control or logistics systems. Since the processing of all data on a blockchain takes place almost in real time and thus offers maximum transparency, the blockchain can support companies in the sustainable optimization of business and operating costs. Companies using blockchain technology are likely to gain a competitive advantage over their competitors in the near future.
Case study: Transparency and trust can increase brand value
Some companies can already understand the added value of introducing a blockchain. Danish Crown, the leading exporter of pork, shows that the blockchain has increased the company's brand value.
In the first place, the company wanted to grow primarily in the important Chinese market. To implement this growth, the company has examined consumer buying decisions.
As a first, extensive consumer study shows
e that consumers reward the trust and safety of products. The focus is particularly on companies that provide digital channels to demonstrate security and origin. If the framework conditions are met, the companies enjoy greater brand value and greater brand awareness.
Based on these findings, Danish Crown was able to develop a blockchain-based system in cooperation with its partners. By scanning a QR code using the widely used WeChat app, Chinese consumers can now check the authenticity of a product in the supermarket. In addition, the solution provided provides a unique overview of food safety information. In this way, end users can quickly review the most important requirements related to meat in China.
Overall, Danish Crown has managed to develop a blockchain-based solution that provides Chinese consumers with transparent and traceable information, while at the same time proving the quality and authenticity of the product. It has now been shown that the company also wants to use this competitive advantage in other areas.
Conclusion: Blockchain can transform the post-corona supply chain
The corona pandemic plunged us into the worst recession since 1930. Although experts do not expect the effects of the stable real economy to take comparable extracts, numerous companies have had to go bankrupt.
The manufacturing companies, which mostly depend on complex supply chains, are particularly hard hit by the pandemic. One solution that has transformative potential is the blockchain. The Danish Crown case study in particular shows how companies can use the new technology to open up new markets.
However, the change is to be tackled gradually. Nevertheless, it helps companies to become more resilient and to cope with new extreme situations better. No matter which industry we are in, trust and transparency are two fundamental success factors for the supply chain of the future. In addition, even after the COVID 19 pandemic, blockchain technology can help us experience fairer trading systems that offer benefits for consumers and producers.