The Role of Blockchain in Automotive Supply Chain Management

The automotive industry has a highly distributed supply chain. A hiccup at one of the many supplier tiers can bring production to a halt.

Blockchain technology can track data in an irrevocable record that’s safe from tampering. It’s used for cryptocurrencies but can also help with legal contracts, property sales and more.

Smart Contracts

Blockchains can automate transactions and streamline the record-keeping process. This is because they eliminate intermediaries and guarantors from the chain of transaction, which reduces risk and costs for both sides. It also allows for better visibility into the status of a shipment and reduces delays.

The immutability of the blockchain network prevents any corruption or modification of the data. The verification of a block is accomplished by thousands of computers and devices, reducing the possibility of human error. Additionally, any computer that tries to modify the data in the blockchain network will be blocked by other computers from entering it, resulting in a tamper-proof and accurate transaction record.

Using smart contracts on a blockchain can help close the procure-to-pay gap and increase efficiency in the supply chain. This would allow sellers to be paid immediately, and buyers to lower their account payable expenses. The technology could also reduce dunning and collection costs, as well as minimize working capital requirements for both parties.

Smart Contrast

The blockchain system enables the secure and immutable storage of automobile records. It prevents records from being tampered with or hacked as it is accessible to only certain people with specific privileges and rights. The blockchain network also has the ability to trace tampering attempts by a node using a consensus algorithm. This helps to improve the security of the data stored on a blockchain network and reduce the risk of hacking or tampering in the automotive supply chain (Ayvaz & Cetin, 2019).

The blockchain system’s transparency features allow consumers to easily verify vehicle history and sources. It can also save companies money by simplifying and organizing financial transactions and order placements. Its documentation and traceability features also help manufacturers maximize their production capacity. Additionally, the blockchain system can reduce costs in departments such as auditing and reducing the need for manual work. It also ensures the integrity of the supply chain by allowing insurance companies to examine vehicle history.

Real-Time Identification

The automotive industry relies on a steady stream of incoming and outgoing materials. From the smallest components to the large-scale vehicles that roll out of factories, every part needs to be delivered on time and in the right condition. If one delivery is delayed, the whole chain experiences a disruption that threatens production and ultimately profits.

Carmakers use just-in-time manufacturing to avoid overstocking. They order materials to arrive at the factory as needed, eliminating the need for large storage facilities and cutting costs. However, this also requires a reliable supply network to keep up with demand and provide a flexible logistics solution when sudden challenges arise.

While technology has improved tracking of parts and materials, it’s impossible to make the automotive supply chain completely immune to all risks. Instead, smart companies are embracing pragmatism and agility. The best way to do this is by leveraging autonomous logistics systems that are capable of prioritizing orders and rerouting deliveries when necessary.

Transparency

A lack of visibility has a ripple effect throughout an automotive supply chain. For example, when COVID-19-induced manufacturing disruptions shrank one car company’s end product inventory buffer to less than half its normal level, some customers rushed purchases so they could lock in their desired models before they ran out; the reduced supply (along with inflation) ultimately pushed prices up, but the higher price wasn’t enough to deter them from making their purchase.

For automakers, this translates to increased efficiency and resilience, as digitized business documents enable full supply interactions in real time and reduce the likelihood of unmanageable delays just days or moments before vehicles are set to launch. Moreover, transparency can help them avoid costly overproduction that can lead to unnecessary inventory build and lower sales.

BMW, Mercedes-Benz and Volkswagen have joined forces to establish a new joint venture platform called Cofinity-X that offers products and services to connect carmakers with their suppliers. These include applications for carbon monitoring, ethical sourcing and traceability, supply chain resilience and partner data management.