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One Block at a Time

A look at how automakers are using blockchain to streamline their supply chain operations and gain better transaction visibility.

A digital database containing information (such as records of financial transactions) that can be simultaneously used and shared within a large decentralized, publicly accessible network, blockchain presents some new and interesting opportunities for companies—most of which are in the early stages of figuring out just how it fits into their operations.

Not willing to wait around to see what happens, a few first-movers are jumping into the sandbox and testing the concept’s applicability in specific scenarios. As it turns out, at least some of these experiments relate specifically to supply chain and procurement, both of which stand to benefit from a more streamlined, encrypted, and accountable transaction process.

Most recently, Mercedes-Benz paired up with cloud-based enterprise contract management provider Icertis to develop a new blockchain framework. Working together, they hope to address sustainability and visibility challenges in supply chain management by leveraging smart contracts (built on the blockchain framework), to help ensure that global sourcing and contracting practices adhere to the car maker’s “strict requirements for working conditions, human rights, environmental protection, safety, business ethics, and compliance, without compromising contract confidentiality,” according to an Icertis press release.

“As global supply chains become more complex, ensuring contractual commitments to sustainable and ethical practices are met at each link in the supply chain becomes more challenging,” Icertis continues. “Manufacturers want to ensure their suppliers comply to standards and contractual commitments around privacy, sustainability, ethics, and labor laws. Suppliers similarly want to prove that they comply, but do not want to expose the details of their subcontracts within the supply chain.”

Addressing Key Supply Chain Issues

Mercedes-Benz is using smart contracts and blockchain that merge to create an immutable public ledger of transactions. According to Icertis, the manufacturer and its suppliers will place their compliance terms on the blockchain, ensuring that the required terms are present in all contracts constituting the supply chain.

Visibility of contracts in the chain will be restricted based on privilege, meaning that sensitive commercial information will not be exposed, Icertis points out in its release: “This will ensure the tracking of commitments across suppliers enabling a new level of commercial collaboration, visibility, and accountability.”

“The challenge of managing a global supply chain has never been higher,” said Monish Darda, Icertis’ CTO and co-founder. “We are delighted to partner with Mercedes-Benz Cars, one of the most innovative companies in the world, to apply our cutting-edge blockchain on the ICM platform to address the sustainable sourcing challenge.”

Put simply, if any of the suppliers deviate from the contractual agreement and obligations, the change would be reflected in the distributed ledger, as obtainable with secure accounting systems, BitcoinExchangeGuide reports.

“Distributed ledger technology (DLT) has the potential to revolutionize our procurement processes fundamentally, and could positively affect our entire value chain,” Mercedes-Benz’s Wilko Stark told BitcoinExchangeGuide. “Global supply chains are becoming quite complex. With our blockchain prototype, we are in the first step of testing one of many possible applications with the aim of increasing transparency beyond our direct suppliers.”

For example, the placement of contract clauses in the distributed ledger makes it easier for all supply chain participants to retrace the automaker’s sustainability requirements, ensuring that global procurement and contractual practices meet its high standards.

More to Come

Though blockchain technology is still nascent, BitcoinExchangeGuide says its’s worth noting that Daimler (which owns the Mercedes-Benz brand) is one firm that strongly believes in the capabilities of DLT. In 2017, for example, it joined the Linux Hyperledger Foundation and that same year, the firm collaborated with Landesbank Baden-Wurttemberg (LBBW) to carry out blockchain transactions worth 100 million ($113 million).

Mercedes-Benz isn’t the only automaker that’s delving into blockchain. In 2017, Groupe Renault began created a digital car maintenance book by leveraging blockchain technology. Groupe Renault teamed with Microsoft and VISEO to create the product, according to Coin Rivet. Expect more manufacturers to jump into the fray as these early use cases prove blockchain’s overall value in the global supply chain.

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