Industrial companies must navigate complex supply chains and administrative processes that are weighed down by significant transactional and informational friction. For example, contracting and procurement practices that inhibit collaboration, navigating disparate data structures within and between companies, and other siloed systems protected by firewalls are all obstacles that combine to create labor-intensive, value-depleted supply chains.
With the innate ability to forge and encode secure digital relationships, blockchain can capture data on financial, historical and qualitative characteristics of physical components spread across global geographic locations, entities and carriers. When this operational data is captured into a distributed ledger, companies harness a secure capability to track both tangible and intangible assets, or in other words: provenance.
Blockchain-powered smart contracts transform and digitize supply chains into value chains that eliminate inefficiencies and capture unprecedented digital provenance: an unforgeable record of custody, authenticity, and quality. Provenance provides and secures trust between a buyer and seller, regardless if an asset is tangible or intangible.
Consider the purchase of a luxury good, a vehicle or even an application for a smartphone. Most individuals are comfortable purchasing these types of products because the product brand is a representation of provenance. Due to brand name and recognition, it’s easy to trust that you receive exactly what you pay for.
However, for complex industrial supply chains, provenance can be a real challenge; materials and equipment from material sourcing to manufacturing, fabrication, distribution, installation, and commissioning. This is where smart contracts, powered and secured by blockchain, can provide much-needed trust, reliability, auditability, transparency and security for full-life cycle traceability of both tangible and intangible goods.
For example, consider a multinational oil and gas company that wants to trace drill pipe to ensure steel provenance or an Original Equipment Manufacturer (OEM) that wants to certify provenance for materials, digital weights, dimensions and/or measurements to match intellectual property rights to protect end users in audits or lawsuits.
Smart contracts establish clear and trusted provenance leveraging familiar data sources — like ticketing systems, meter readings, sensors and other systems — to eliminate the administrative burden associated with the sluggish invoicing and payment processes.