Your Supply Chain on the Azure IoT and Blockchain Cloud

Editor's note: For more, view the recording of Stefano's presentation on the topic of running supply chain processes in the Azure IoT and blockchain cloud. 

Blockchain technology combined with the Internet of Things (IoT) has the potential to disrupt the manufacturing and retail industries. We have heard of blockchain in the context of cryptocurrency, so how is blockchain relevant to supply chains?

About Blockchain

The original objective of blockchain technology was to facilitate trusted fiscal transactions between two parties without the necessity for a third party, such as a bank, to be involved. This enabled faster and less expensive transactions. Due to the security and immutable nature of the blockchain, it also has complete integrity as the transactions are verified by the system itself.

Transactions on the blockchain are stored and distributed across multiple nodes within the network. These transactions, or records, are very secure due to how the blockchain works (see my article for more information about cybersecurity in blockchain), which makes this technology the perfect method of transparently and securely recording transactions and documents. As the data is held across shared nodes, the technology can be used to create and maintain a common and constantly updated database. This presents a multitude of applications for blockchain outside of the cryptocurrency industry.

In this context, the role of “smart contracts” is to digitally facilitate, verify, or enforce the negotiation or performance of an agreement between two or more parties involved in a digital transaction. Smart contracts allow for credible transactions to happen without authorization and verification by a central authority. Also, these transactions are trackable and irreversible.

About Supply Chain

The synergy between IoT and blockchain has a potential to disrupt the traditional supply chain management structure by utilizing a transparent decentralized smart contract eco-system. IoT, a network of devices of any type all connected to the network, for personal, domestic and industrial use, can include devices that will be used to collect telemetry data at each stage of a supply chain and transfer this information to an IoT hub, which aggregates these streams of data for storage and further analysis. Blockchain smart contracts can use rule-based intelligence to perform validation on this data and update the state of each supply chain stage for all parties involved, in a completely trusted and transparent manner. For example, terms, conditions and any other logic can be coded into a smart contract for verifying the correct execution of a transaction of goods between two stages of the supply chain.

Let's clarify these concepts with a simple example in the dairy industry's distribution supply chain: farmers' production and transfer of milk to a food processing company for packaging and shipping. Milk is sealed at a set temperature and humidity level, and these or similar conditions must be maintained also during transportation to the warehouse and retail store.

Source: Microsoft

Proper IoT devices, with sensors for measuring temperature and humidity, can be installed in containers and carriers storing and shipping the product. All commercial partners involved in the supply chain can monitor delivery times, quality status, and costs in near real-time and create, negotiate, and complete transactions automatically. Combining this with “Industry 4.0” smart devices that are empowered to communicate with each other directly, operating costs will decrease and efficiency of the supply chain will rise – without a centralized control mechanism that would slow them down. In addition, machine learning algorithms may help production decisions, allowing factories to take faster actions autonomously.

Azure IoT Central