As Interest in Blockchain Soars, Firms Recognize the Technology’s Impact on Supply Chain Management for Spare Parts

Now, with 2020 finally over, blockchain markedly accelerates its momentum as supply chain leaders take decisive steps to secure their venture into cutting-edge technology adoption.

It is widely known that the supply chain is inherently volatile — and so, disruption is not an unknown risk to industry players. Yet in the face of a crisis of large proportions, the feasibility of resilient supply chains is met with skepticism by many. Even in China, where industry leaders experienced a fast supply chain recovery, some are questioning the long-term efficiency of their supply chain management for spare parts. In a study conducted by Deloitte among Chinese OEMs and logistics companies, participants recognize the complexity of the supply and distribution network, highlighting that:

“The major barriers lie in […] the stability of parts supply, supplier collaboration, information systems, data management, and supply chain visibility.”

Blockchain technology may prove to solve these issues. Honeywell’s blockchain initiatives for aircraft parts — and more recently, its bid to digitize records for quick, easy, and secure data access — stand as suggestive examples of this possibility.

The interest in digital assets gathered speed amid the temporary slow down generated by new trade restrictions and suspended production lines. In such a case, the inability to source parts results in global shortages and an upsurge in counterfeit products. As shortages occur, it gets correspondingly difficult to avoid service quality distortions — which is likely to foist far-reaching reputational damage onto any business. To circumvent the grim consequences, be it financial or reputational, organizations have to rely on a trusted system that facilitates the tracing and tracking of spare parts ownership and increases supply chain transparency.

Now, with blockchain investment plans on firm ground, organizations are uniquely equipped to optimize their supply chain as they are able to accurately verify the authenticity of a given spare part and provide higher levels of service.

Spotting Counterfeit Spare Parts and Improving Trust Along the Way

Organized counterfeiters continue to make profits from selling parts that wear down faster and reduce consumer safety. The automotive sector is easily the most affected by this issue.

Many customers detect the counterfeit version of a part, but they often become aware of this problem when the vehicle is already damaged. Worse still, this is not where the trouble ends. Clients can ask automakers for replacements when spare parts are under warranty. But warranty claim procedures for replacement parts are disproportionately difficult to manage; service teams find themselves on the receiving end of numerous claims, yet telling counterfeit products and authentic ones apart is an especially laborious process.

The fraudulent imitation of a spare part may be lucrative at first and adobe all, significantly cheaper than the genuine product. Even in the context of warranty claims, counterfeits can come at staggering costs — and not all are immediate. Without knowing if the claim was made against a legitimate spare part or its fake replica, firms inescapably put a strain on their service quality. But not only automakers are tempered by this discomfort; Toyota, for example, articulates that the use of fake parts has a larger implication for its customers, as well — and it can result in “the loss of cover provided by [the] vehicle’s manufacturer warranty.”

Redesigning the supply chain through the use of a well-established blockchain-based system can put the brakes on the sourcing and distribution of counterfeit spare parts. Blockchain technology is set to help firms achieve supply chain integrity as it allows them to:

• Verify the authenticity of spare parts (before they wear out!) by tracking the ownership history of the components. As blockchain helps professionals trace the provenance of parts, it also enables them to handle claim management issues with confidence.
• Lower the risk of sourcing illicit products by establishing a chain of custody available to everyone on the blockchain — which will ultimately foster trust between parties.
• Execute a rapid targeted recall when a faulty spare part is identified. Industry players can immediately locate the malfunctioning component and the particular vehicle it was fitted to. By contrast, a full recall campaign may prove to be financially expensive for any firm.

Powering Superior Supply Chain Visibility and Transparency in a Secure Manner

Through the use of blockchain-powered systems, professionals can identify which cluster of spare parts increased the deficiency of their supply chains. Simultaneously, the technology aids firms in providing evidence of their spare parts validity for better service delivery.

At its core, blockchain technology makes a simple offer: to help firms record, as experts note, “all movements, modifications, [and restorations of spare parts] on a distributed, transparent, and tamper-proof ledger.”

This means that blockchain expeditiously aims to improve the visibility and transparency of spare parts within the supply chain, offering everyone access to a single source of truth. But that is not without controlling data protection first. When professionals store or share a digital representation of their spare part, they can rest assured that blockchain technology studiously secures that environment. It not only makes information difficult to alter but blockchain technology also promotes accountability among professionals, making them transparently responsible for their activity within the network.

Having reliable end-to-end visibility over the supply chain allows industry leaders to access both real-time and historical data to securely control the movement of spare parts — ultimately, helping firms minimize fraud, rely on trusted suppliers, and facilitate on-time delivery by collectively anticipating shortages.

Making Permanent Moves Towards Blockchain-Enabled Supply Chain Management for Spare Parts

The blockchain deployments initiated by modern-day firms aren’t stuck in pilot purgatory; they are currently “among the main, serious enterprise endeavors, rather than speculative proofs of concept,” Forrester analysts say.

While deployments continue apace, the timeline for large-scale blockchain adoption is imprecise but likely prone to speed up. At this very moment, there are reasons to believe that the widespread adoption of blockchain technology is just a few years away. “To lessen stress on the service supply chain, by 2023,” experts predict, “25% of OEMs will leverage blockchain to source spare parts, improving the accuracy of usable parts by 60% […].”

This prediction signals an encouraging development, with more firms actively putting adoption plans in place — plans that are set to extend beyond pandemic-driven response efforts. Blockchain is an industry-wide trend most likely to outlast the COVID-19 outbreak as falling back on restrictive procedures that promote limited supply chain visibility and inadequate counterfeit detection programs is no longer a viable option.

Firms have recognized the need to permanently secure the traceability, trackability, and accessibility of spare parts. Therefore, the breakthrough in blockchain-enabled supply chains is underpinned by sharply-outlined plans that facilitate the transition towards sustainable spare parts management approaches that stand to combat counterfeiting and potential shortages.