Supply chains are a crucial aspect of any business, but they’re not as simple as they used to be. As trading has become increasingly global, modern supply chains have been encompassing an ever growing network of third parties across the globe, each with differing business policies and procedures. It’s not hard to imagine, then, how this can become a breeding ground for fraud — and COVID-19 hasn’t improved things. With the pandemic creating supply shortages, weakened approval processes and immobile workforces, criminals have ample opportunities for exploitation.
To combat fraud, companies are looking to new technologies to clean up supply chains. One such technology is blockchain, which has huge potential for stopping supply-chain fraud and making supply chains more efficient for all parties.
It’s more important than ever for businesses to ensure that they are sustainable, and with supply chains reportedly making up 90% of companies’ environmental impact, this is a crucial place to start. The importance of sustainability makes supply chains an obvious area for fraud. Without a secure supply chain, companies could unwittingly be using products that are produced unsustainably, or could be provided with unsustainable materials. Using blockchain, organizations can monitor their supply chains to ensure that sustainability is truly being prioritised. Blockchains store tamper-proof, immutable data, meaning that companies can be sure that the origins of their products are sustainable and avoid fraudulent data.
Companies need to show how sustainable their products are not just for their own organizations, but also for their consumers. Not only are consumers increasingly interested in the sustainability of the products they’re choosing, though, but they also want to know the authenticity of the brands they buy, particularly when it comes to designer goods. Statistics from 2019 revealed that the trade in counterfeit and fraudulent goods now accounts for 3.3 percent of global trade. Blockchain can be integrated into supply chains to combat counterfeit and fraudulent markets and products by tracing and recording products from origins to sale. Companies could even use utilise transparent public blockchains so that customers can be sure they are verifying legitimate products.
Quality Assurance in Real Time
It isn’t enough to just know the origins of products, though; goods have to be monitored in transit as well. For example, when transporting food, companies want to be sure that their goods are staying at an appropriate temperature and aren’t being tampered with. With fraud in supply chains costing the food industry alone over $50 billion annually, it’s essential that every measure possible be taken to prevent the situation from worsening.
This is something that IoT sensors can be used for, but companies can go one step further by pairing IoT sensors with blockchain. This pairing creates an immutable, real-time, provable overview of the state of goods in transport, including temperature and condition. The sensors collect the data, while the blockchain acts as a virtually unhackable digital ledger where the data is stored, stabilizing and securing the IoT Network.
As well as this, with blockchain technology facilitating collaborative supplier ecosystems, collected data can be shared with suppliers, retailers and logistics companies all at once. This gives all members of the supply chain accurate visibility of products and their condition, meaning that all parties can monitor for fraud and spot any issues earlier.
Keeping Workers Safe
Fraud has especially been a problem in supply chains for personal protective equipment (PPE) during the COVID-19 pandemic. The outbreak has highlighted weaknesses in PPE supply-chain management, has left supply chains vulnerable to supplies of fraudulent PPE; by May, an estimated £800,000 had been lost on fraud-related face masks alone. Ensuring that key workers receive functioning PPE has never been more crucial, and governments and providers can look to blockchain technology to ensure the legitimacy of products in the same way that manufacturers can for their products. With a transparent view of the entire supply chain, and immutable data shared across a number of parties, collaboration and visibility of data across entries is made possible, ensuring an efficient and verifiable supply chain.
Businesses are facing an unprecedented variety of challenges to their supply chains, which gives fraudsters more opportunities than ever to meddle. However, there are equally more sophisticated ways than ever to eradicate fraud. With innovative technologies like blockchain, companies can be sure their supply chains are secure from fraud, not only through ensuring accurate recording of data, but also allowing goods to be monitored in real time and providing verifiable proof of the sustainability of products.
Lars Rensing is CEO of Protokol, an enterprise blockchain solutions provider.
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