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Luxury goods and the blockchain within the supply chain
Luxury goods and the blockchain within the supply chain
Blockchain

Luxury goods and the blockchain within the supply chain

By Massimo Chiriatti - 16 Dec 2018

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To date, before we upload the information on the blockchain, we still have problems certifying the origin and provenance of raw materials or ingredients during all stages of production/distribution of products, mainly food and luxury goods.

Certification for liquids is considered partly problematic today, but we are beginning to experiment with microscopic sensors to accompany the movement of solid goods in order to have a unique system to combat counterfeiting.

During the testing phase, we must first of all assign to each object a unique digital identifier that always corresponds to its digital counterpart.

For example, when tracing a luxury bag, what should be tracked? The ferrous material purchased for the zipper, the entire zipper or perhaps the entire bag?

Once defined the basic element to trace, the difficult part is to keep it in sync with its digital counterpart, which is not a trivial task, because the date of physical origin must correspond to the date of digital birth.

Finally, the problem is simple to describe: in order to work properly, a blockchain must entail the management of all assets, including payments.

However, to achieve this we must consider the concepts of trust, transparency, tracking and innovation.

And above all, consider that supply chains are very slow to change due to the obvious complexity of interrelationships between many companies around the world.

Until now, they have maintained a governance that has more or less worked, but now, thanks to the decentralized model, we must create new ones in order to tackle the challenges that are beginning appear for the first time.

Just think about the integration process that companies must undertake to ensure that their ERP (Enterprise Resource Planning) manages business information and has a view of the processes of other companies in the supply chain.

After all, proprietary registrations are equivalent to trusting the registrations of everyone else, because these they correspond to each other on the blockchain.

Another important topic is the issue of privacy within the supply chains. We need to understand how to treat data on four aspects: the sender, the owner, the recipient and the content.

The data relating to the content are the subject of reflections in terms of confidentiality.

The confidentiality requirements for supply chain data are not the same in all sectors or for all participants.

The main compromise is between the advantages of sharing data within the business network: visibility and cross-functional optimizations are impossible while maintaining the necessary confidentiality towards competitors. Supply chain information can be confidential, this includes the identity of participants, trading volume, prices and delivery times.

So what’s the main problem? The sensors have to write the data on the blockchain that makes them eternal and, with the addition of a token that represents the managed resource, an automatic system of reconciliation of payments is provided.

What changes everything is that after having synchronized the physical good, such as a luxury good, with its digital counterpart, we must link it to an economic value which can then be exchanged between subjects easily and at high speed. In this way, those who own the token can easily trade it at the high speed allowed by digital solutions.

Even with blockchain, IoT or other technologies, there are always the classic criteria to follow:

  1. Cost and risk
  2. Focusing on core competency
  3. Creating new business growth
  4. Transformation vs. disruption
  5. Competition vs. coopetition.

Now with the new possibilities and the above-mentioned criticalities, we can consider the main question: can the introduction of more technology like the blockchain make us less dependent on human trust?

The answer is yes, as long as, in relation to the digital transit of the asset, the recipient understands the following:

– Immediate evidence of data alteration

– Identification of who does not respect the process

– Refunds will occur automatically.

Is experimentation required? Yes.

We have to have a proper experimenter approach because it is the first time that we merge the IoT, with the supply chain, with the blockchain, the smart contracts and with payment systems.

Massimo Chiriatti
Massimo Chiriatti

Technologist, he collaborates with universities and research centres by organising training events on the digital economy. He actively participates in congresses and forums on topics mainly related to ICT innovation. He is also a member of Assob.it, a non-profit association focused on studying cryptocurrencies and promoting Blockchain technology.

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