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Creating a modern and seamless automotive supply chain with blockchain

2 Mins read

Automotive supply chains are extremely complex. A car is made up of thousands of components and involves an elaborate network of individuals, organizations, resources and tasks. In an otherwise well-connected world, the industry continues to grapple with issues like lack of supply chain visibility, counterfeit products entering the value chain and excessive financial losses due to inefficient recall management.

Financial losses attributed to counterfeit auto parts are estimated to be around USD 45 billion annually. Additionally, reports suggest that industry losses because of recalls are as high as USD 22 billion annually. Blockchain in convergence with technologies like IoT and AI can underpin the transformation that is coming in the automotive sector. This convergence is termed as “Economy of Things”.

Digitizing the automotive supply chain with blockchain technology

The auto sector has always been on a lookout for novel technologies that can help streamline operations, introduce new end-user functionalities, save costs and propel revenues. There are multiple ways blockchain can help automotive industries to transform their products, services and processes.

Blockchain technology can provide a robust support layer for automotive companies and save valuable dollars. It can ensure data interoperability, transparency as well as multiparty trust in the system and provide easy integration capabilities with the existing IT infrastructure.

Manufacturers can leverage blockchain to create supplier transparency and introduce part provenance, wherein the information about vehicle parts (like name of the manufacturer, date of manufacturing etc.) can be mapped to the corresponding automobile VIN. This information is stored immutably on a decentralized network and is updated every time parts exchange hands in the supply chain.

Part provenance also helps establish the authenticity of the product by enabling the members of the value chain to trace and verify the origin of the vehicle parts with ease. Creating an immutable record for a product from the time it leaves a manufacturing unit to the point when the end customer buys it, helps identify the exact point where a counterfeit product could have entered in the supply chain. Part provenance can also help OEMs perform much targeted recalls instead of blanket recalls thereby helping them save valuable dollars.

Blockchain allows automation of shared business processes thereby reducing manual interventions across the supply chain bring about operational efficiencies. While procuring parts from suppliers, automotive manufacturers can save time and cost with the help of streamlined certificate management and automated inventory management through a digital proof of delivery.

As the information silos get eliminated bringing about transparency, logistics firms can optimize their core operations. Blockchain forms the cornerstone for building an intelligent supply chain that is both highly responsive and resilient. Service centers may use provenance to effectively manage product warranty and improve the service quality for their customers.

Empowering customers with access to all warranty-related information on blockchain enables them to track the health of their vehicle and enforce warranty whenever necessary. Through smart contracts and automation, warranty claims can be executed much faster and with ease, resulting in customer delight.

How can regulatory bodies benefit from blockchain?

Government and Regulatory bodies can also be a member to the blockchain network and get access to critical supply chain information in real-time. This would result in faster approvals and timely reporting in case of recalls. Discard of vehicles and extraction of hazardous elements also remain reasons of concern for regulatory bodies. The complete traceability provided by blockchain could help in the identification of parts meant for safe disposal or reuse of hazardous components.

Learn More: How a blockchain-based solution has optimized automotive supply chain


Author: Raghavendra Kulkarni, Head Innovation Strategies and Business Ecosystem