Thwarting Automotive Counterfeits with Blockchain Traceability

From the development of Horseless carriage in the 1860s, the automotive industry has come a long way to becoming one of the world's biggest economic drivers by sales. Likewise, the automobile supply chain, second only to the computer market, is one of the most complex and dispersed. The vehicle supply chain includes not just the supply of assembly materials but also the purchase and delivery of replacement parts. These vehicle spare parts are used in after-sales facilities and are a significant source of revenue for car manufacturers and OEMs. Read on how blockchain based supply chain development for blockchain automotive traceability system proves effective in improving the bottom line while preventing counterfeits.

How Counterfeiting Affects the Automotive Supply Chain 

The most influenced by the arrival of counterfeits is the car spare parts supply chain. The number of fakes continues to grow, despite attempts by automotive industry players and the government. Moreover, falsification covers all main parts manufactured in the supply chain. It includes tires, engines. airbags, batteries, electrical parts, windscreens, and more. According to the estimation of the European Intellectual Property Office (EUIPO), €2.2 trillion get lost to counterfeit wheels alone (Peresson, 2019).

Not only does this problem contribute to monetary losses for carmakers and OEMs, but it also has more implications in the form of decreased customer protection and harm to brand image. Fake components are underperforming and are often the cause for casualties that cause significant damage and even loss of life. In such situations, it gets challenging for a car manufacturer to claim that the counterfeit component mounted in the vehicle triggered the crash.

Manufacturers are now facing a growing number of warranty requests for parts replacements that later come to notice as fraudulent ones. Manufacturers also have to trace the real supplier of the failed product painstakingly only to be told that the part in question is a bogus one. Can blockchain based automotive solutions address these challenges? Let's find out.

The Loopholes

The key motivator for counterfeiters is quick money. Nevertheless, the absence of appropriate, end-to-end monitoring of replacement parts across the supply chain results in the implementation of these fake items.

The numbers represent the points where counterfeits can penetrate the supply chain.

• • Sub-standard raw material supply (rare)
  • Fake supply to dealers
  •  Counterfeit supply to retailers
  • Counterfeit product supply to a repair center or going for bogus aftermarket products

Issues in Developing a Solution for Disintegrated Supply Chain 

Maintaining the credibility of the supply chain is the best way to monitor the influx of bogus parts through the supply chain. A spare parts supply chain with a wide range of vendors is a dynamic one. A supplier may deliver different auto components, or multiple suppliers can provide a single part. An auto part may be a compound or a single one. A compound object comprises many other elements. However, it reaches the maker as a package (for instance, seat configuration, gearbox, etc.). It is quite complex to verify whether a faulty subpart has is un use in the case of a compound part. The subparts may or may not bear a serial number in this case and are therefore difficult to trace.

Also, Read | Reconditioning Automotive Operations with Blockchain Smart Contracts

Is Blockchain the Right Solution for Automotive Traceability

The best bet for anti-counterfeit will be a blockchain technology-based network regulated by an auto manufacturer. With IoT devices for the position, data generation can further complement this network. Using RFID tags (for high-value materials) or regular simple barcodes for screening at the time of custody transition makes things easier. While not everything can be barcoded or RFID enabled, for low-value components, a box level execution is more feasible. In a standard application with a centrally owned database, all stakeholders have their systems to run. Thus, it may become an obstacle in establishing supply chain integrity. Making them migrate to a new application would be a challenging task. Also, suppliers may not be willing to share their information via an application operated by another organization.

Blockchain technology, on the other hand, would be more suitable due to being distributed by design. The framework based on blockchain technology will run in parallel to the current systems already in operation and would interconnect via APIs. While the system would be operable by the vendor, each stakeholder (supplier/3PL / distributor/dealer) would get their copy of the same database and would access it using their node. For others (rivals or unrelated participants to an interaction), the information exchanged over the blockchain may remain concealed. It will maintain data protection by making separate streams for various types of a transaction.

A blockchain-based system will register each component's serial number along with the previous owner. It will help in establishing an immutable custody chain and ultimately helping to create a firewall against the entry of counterfeits.

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

Blockchain-based Automotive Traceability System | Benefits 

The blockchain-based automotive solution would provide advantages to the stakeholders involved in the supply chain in the following ways.

Strengthened supplier traceability

Permissioned stakeholders can quickly trace an auto part back to its distributor. In warranty claims, it can prove to be quite beneficial.

Preventing counterfeits from entering the supply chain

As the blockchain network will have an immutable product custody chain, it would be difficult for malign actors to send fake spare parts across the supply chain.

Rapid acquisition

It would be simpler for stakeholders to implement such a solution, as the proposed blockchain implementation would run parallel to the current systems.

Data protection

As mentioned earlier, blockchain technology can mask data for other unrelated parties in a transaction by establishing channels to ensure data security.

Increased transparency

The blockchain-based auto spare part traceability solution will facilitate stakeholders to gain control over the amount, exact positioning, and status of parts in the supply chain. It will lead to enhanced transparency. Also, it will aid suppliers in outlining their production plans.

Targeted recalls

A targeted recall is better than a complete cancellation if a company knows which specific batch of parts is defective. It is because they can individually verify each product based on the custody chain.

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

Conclusion

By adopting modern technologies, the automotive industry needs to act rapidly for sustenance.

Although many examples are emerging rapidly, blockchain technology is still at an early adoption phase. Those examples include a Hyperledger- blockchain based airline spare part marketplace with traceability solution. It is launched by Honeywell. It s a blockchain-based aircraft parts traceability prototype by Thales and an exploration of blockchain technology by the US Navy. The automotive industry has recognized the opportunity of blockchain traceability. It is now showing interest in numerous supply chain tracking-related PoCs. BMW's launch of PartChain (for transparency and component traceability) is one such example.

Indeed, blockchain can act as anti-counterfeit technology. It advances the development of a unified supply chain and proves efficient for the challenges.