Non-fungible tokens (NFTs) have the opportunity to completely disrupt the supply chain industry (in a good way) by simply and efficiently eliminating common pain points that result in massive disruptions. That’s in part because of their digital footprint and data tracking capabilities.
While 2021 will be remembered as the year of the supply chain disaster, supply chain hiccups actually happen quite often and cost companies millions each year. From onboarding to production to transportation, NFTs and blockchain (distributed ledger technology) can reduce costs, eliminate bottlenecks, create greater transparency into supply networks and help to prevent chaos.
Why are NFTs a supply chain solution?
Instead of long, extensive and complex paper trails that go along with transactional ownership and activity of a variety of items, NFTs create digital footprints or a “token ID” that attaches to that item throughout its lifespan. The uniqueness of each NFT is specifically defined by the information stored within the NFT’s metadata – pointing to valuable digital resources that are updated in real-time on the blockchain.
For the supply chain, NFTs enable participants to access the same immutable record on the ledger reducing and potentially eliminating discrepancies in information flow between parties. That transparency and immutability traits of blockchain ensure the reliability and authenticity of the supply chain data. As such, NFTs can increase efficiencies and reduce costs incurred in the process of sourcing and acquiring goods and services a company needs. NFTs also produce an end-to-end view of a parts location, quantity and other useful information.
Avoiding today’s supply chain woes using NFTs
A delay in just one section of the supply chain can result in the complete meltdown of the entire journey. For example, in the automotive manufacturing industry, cars have hundreds if not thousands of parts that come from all over the world. If one of those items, whether it’s an oil filter or a complex dashboard touchscreen, are missing, the vehicle can’t be completed and the production facility grinds to a halt.
Because NFTs create a digital identity to any item (from chips to car batteries), the item’s real-world metadata, such as its identity, current physical location, responsible party, possession, container temperature and other metrics, to be attached to it – garnering useful insights about its condition, location, etc. This data is automatically updated as conditions change (via time-stamping to the geolocation of a transported good), which presents an accurate and timely view of the physical object to all involved parties.
Therefore, if a part in China is delayed, the manufacturer will know well in advance and have options to source from another location like India, keeping the supply chain working.
Many organizations have already started using blockchain for tracing their product’s journey through the supply chain from point of origin to the customer.
Supply chain operators are tapping into the NFT framework, leveraging the uniqueness and traceability of the assets to help demonstrate provenance and prevent counterfeited products from entering the market.
One example of this technology already getting put to good use is in the luxury goods market, where operators have teamed up to launch a blockchain platform. When consumers buy a high-end watch, handbag or piece of jewelry, they’ll be provided with a corresponding unique NFT, which shows the origins of their product, including information about the materials and manufacturing process. This means that all such products can be individually authenticated. The NFTs can be used to identify and trace the complete supply chain.
Moving from fashion and into pharma, NFTs’ traits of transparency and immutability are still appealing and effective. Take pharmaceutical manufacturing, for example. NFTs and blockchain can support the fight against counterfeit pharmaceuticals by streamlining the authentication process. Also, tracking the process via the system will enable the immediate identification of issues allowing problems to be resolved more rapidly.
While the technology can be used to identify fake prescriptions, it also can be deployed as an extremely effective solution to pharmaceutical viability. That’s because when using this technology, customers have visibility into the conditions of each product on its supply chain journey, including storage locations, environmental factors (temperatures and humidity) and duration of storage. An NFT attached to a pharmaceutical product has the potential to protect consumers from some seriously bad medicine.
A “single source of truth” in supply chains
When all parties involved in a particular supply chain are operating off a “single source of truth,” discrepancies, mismanagement and miscommunication can all be avoided. The secure sharing of data and seamless coordination within the supply chain (all enabled by NFT technology) is already being deployed by forward-thinking companies that understand what’s at stake. Further deployment of NFTs (coupled with artificial intelligence) in this industry will only help avoid catastrophes like “The Great Disruption” of 2021.