Increasing Automotive Supply Chain Efficiency with Blockchain

Published by : Mudit | Sep-11-2020

blockchain for automotive supply chain

  • Among other emerging tech innovations, blockchain technology seems to be gaining traction across various business areas. The article highlights the potential of Blockchain supply chain development for the automotive industry, technology’s mechanics and strength, and what it could mean for the supply chain C-suite.

    Understanding Blockchain

    Essentially, blockchain technology has provided the foundation of a new type of internet. It enables digital data transmission but not its replication at the same time. Picture a Google spreadsheet shared thousands of times over a computer network for a better representation of the protocol. Further, imagine that the network updates this spreadsheet periodically, and you have a clear idea of what is blockchain. Additionally, add characteristics of blockchain to that spreadsheet, like an immutable ledger, consensus mechanism, cryptographic encryption, and more. It makes it an ingenious invention that, if used as the underlying infrastructure, can revamp the entire automotive supply chain. 

    Advantages of Blockchain for Automotive Supply Chain

    Streamlined Administration 

    Blockchain technology’s implementation expedites administrative supply chain processes, reduces additional costs incurred, and maintains transaction protection. Eliminating the supply chain middlemen and intermediaries reduces the risks of fraud, duplicates the commodity, and also saves money. Customers and suppliers can manage payments inside the supply chain by using cryptocurrencies instead of depending on EDI. It would also increase productivity and reduce the chance of missing goods with correct record keeping.

    Trust and Security

    Trusting multiple participants in complex supply chains is crucial for smooth operations. For example, if a manufacturer sells his goods with suppliers, he/she should be able to rely on them for upholding safety standards at the factory. Also, trust plays a key role when it comes to regulatory compliances such as custom enforcers. Blockchain’s irreversible role in the supply chain efficiently prevents tampering with and confidence building. The blockchain avoids the threats that come with centrally controlled data by storing data through its network.

    Its infrastructure lacks central vulnerability factors that hackers can abuse. The internet today has security concerns common to us. To secure our identity and properties online, we all rely on the “Username / Password” scheme. Protection mechanisms used by blockchains use encryption technology.

    The public and private ‘keys’ are the reason for this. A ‘public key’ (a long, randomly generated string of numbers) on the blockchain is a user’s address. Cryptocurrencies sent over the network remain registered as corresponding to that account. The ‘private key’ is just like a code that provides access to its owner’s digital properties. After the data is available on the blockchain, it is incorruptible. If this is valid, it would also entail the safeguarding of the private key by printing it out and making a hardware wallet to secure digital properties.

    Blockchain for automotive supply chainSource: Deloitte

    Also, Read | Reconditioning Automotive Operations with Blockchain Smart Contracts

    How can it Benefit the Automotive Supply Chain?

    Automotive supply chain managers can use blockchain to multiple supply chain problems, like keeping complex databases and monitoring products and services. A far less corruptible and automated alternative to centralized databases is another advantage.

    In the field of monitoring and testing products and services, a blockchain-based automotive supply chain management system allows for accurate record-keeping and monitoring of provenance as product information is accessible via embedded sensors and RFID tags.

    Blockchain may trace the past of a commodity right from its origin to where it is in the present time. Also, this form of exact provenance monitoring can ensure fraud detection in any part of the supply chain.

    The car supply chain is a highly dynamic and big field with numerous participants, ranging from parts suppliers, producers to sellers. Delivering real customer value includes a review of existing infrastructure and business processes, as well as solutions that respect protection, confidentiality, and authorization permissions. Blockchain can prove an ideal solution. Blockchain can be used by automotive manufacturers to protect their brands against counterfeit goods and to build customer-centered business models.

    Also, Read | Blockchain Applications in the Automotive Industry | Advancing Innovation

    Countering Component Counterfeiting

    Falsified goods pose a critical concern for car manufacturers in the automobile industry. It also puts the global demand for counterfeit spare parts at several billion dollars. Such goods may find their way through the supply chain either directly. Or, they may get through suppliers from the OEM and the aftermarket. Fraudulent replacement parts are not reliable because they have often deteriorated quality standards and frequently appear to malfunction. It inevitably causes disappointment to end-users, causing them to revoke their brand faith. Introducing blockchain technology for counterfeit goods is proving to be dramatically beneficial as it enables accurate identification and digital representation of replacement parts. Digital spare parts recognition provides clarity to the framework, which can is exchangeable across different network members

    Also, Read | Blockchain Solutions Development for the Automotive Industry

    Augmented Inbound and Outbound Logistics

    Inbound logistics and blockchain-based manufacturing powered by blockchain smart contract solutions will make the automotive supply chain more efficient. The analysis of individual components of an inbound supply chain is currently problematic and vulnerable to errors.

    For the successful functioning of the supply chain, coordination between multi-tier suppliers, third-party logistics, and transportation companies through the manufacturing facility is essential. By using blockchain, businesses can ensure the availability of accurate and real-time information from various parties. Individuals concerned should verify the status, quantity, and position of individual pieces.

    The outbound supply chain is likewise a complex network consisting of producers, suppliers, importers, and dealers. These participants also don’t have a shared model of data sharing that makes it hard for them to share information. A decentralized blockchain-based framework can boost accessibility and accountability, ensuring quicker transactions and shorter periods of settlement.

    IoT and Blockchain Technology

    By 2023, Gartner forecasts that blockchain will enable global movement and annual monitoring of 2 trillion dollars of products and services. But this growth is unlikely to occur without the support of integrated IoT platforms. By integrating IoT’s real-time tracking and decentralized distributed ledger blockchain, track-and-trace precision, as well as scalability, become more efficient, improving the efficiency of the automotive supply chain.

    Both innovations together further improve the dynamic relationships within the supply chain for automobiles. While this sounds good, further study may be necessary to decide how these activities take place. There are incoming logistics and outbound delivery in every supply chain. These words apply to the selection of a product’s components and how the finished product reaches end consumers.

    Also, Read | Blockchain Automotive Solutions | Making Drivers’ Life Easier


    The rapid pace of advances in blockchain technology means blockchain could offer a solution to many of the problems facing the industry today within one to two years. We expect to see the tipping point within the next five years, with industry-wide acceptance on the wholesale. To realize potential benefits, companies need to analyze their strategic priorities, determine which blockchain technologies are most appropriate for them, and how to invest.

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