The World Economic Forum calls for blockchain technology as the best solution to address the current supply chain crisis.

An article released by the World Economic Forum (WEF) on Monday stated that the global supply chain has been severely impacted by the COVID-19 pandemic. It emphasized that enhancing transparency in the supply chain is crucial for its recovery, and blockchain is seen as the best solution to help the supply chain navigate through this crisis.

Impact of the Epidemic on the Supply Chain

An article co-authored by Ziyang Fan, the digital trade lead at the World Economic Forum (WEF), and Rebecca Liao, co-founder of the blockchain enterprise company Skuchain, highlighted the continuous disruption in global supply chains due to the worsening COVID-19 pandemic. Many upstream supply chains have temporarily halted production, and logistics providers are struggling to transport goods seamlessly, especially across borders.

The authors noted that in mid-February, Fiat Chrysler Automobiles announced a temporary halt in production at its Serbian car manufacturing plant due to the inability to source parts from China. Similarly, Hyundai's factories in Korea issued similar announcements. Prior to the COVID-19 outbreak, international shipping facilitated a significant volume of trade, but since the pandemic escalated, flights have decreased by 55%. The current supply chain system is extremely fragile, and the authors believe that enhancing supply chain transparency is crucial to overcoming this crisis.

Ensuring Supplier Privacy While Achieving Data Sharing

Most communication in current supply chains occurs through Electronic Data Interchange (EDI) and Excel spreadsheets. However, these traditional communication methods make it challenging to grant independent and auditable access rights to each participant. The decentralized nature of blockchain is the best way to safeguard the privacy suppliers need and the visibility buyers require.

"If designed properly, suppliers can directly review their data sharing permissions on their blockchain nodes. Simultaneously, their data can be securely shared with other participants in the blockchain network without the need for point-to-point integrations like in centralized systems. This addresses the key technological issues that encourage supplier participation in supply chain visibility initiatives."

On the other hand, for downstream manufacturers who highly value data, it is a valuable resource, and they are willing to pay suppliers for data to enhance their product's market competitiveness. Through blockchain, downstream manufacturers will be able to quickly purchase real supply chain data from upstream suppliers. Additionally, the authors also stated that blockchain technology can also establish a financing ecosystem for the supply chain:

"Using blockchain, downstream manufacturers can view payment commitments on the blockchain as alternatives to letters of credit, enabling them to pay suppliers later, reducing sales costs, and protecting themselves from supplier bankruptcies. For suppliers, this allows quicker revenue confirmation and replaces their current supply chain financing agreements with more affordable financing options."

Urging Stakeholders to Address Supply Chain Challenges

The global economy is facing massive disruptions that affect both the supply and demand sides. The authors emphasize that during global lockdowns, businesses, both buyers and suppliers, face significant challenges in maintaining the flow of goods and services. The authors urge:

"Countries worldwide, especially developing ones, are grappling with exacerbated supply chain issues due to restricted trade activities. As the situation with COVID-19 evolves daily, it is crucial for all parties to understand supply chains, share data, and communicate effectively."

Related Reading

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• Enhancing part traceability, BMW Group introduces the supply chain solution PartChain

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