How Blockchain Will Reduce Fraud in the Supply Chain

Block chain fraud prevention

What is blockchain?

A blockchain is a list of transactions – an electronic ledger tracking the movement of assets from one person or place to another. What makes the blockchain unique is that this ledger isn’t stored by one central authority – it’s stored and maintained by a network of people, each with an identical copy of the ledger. This distributed nature means that the blockchain cannot be changed, altered, or destroyed. It also means that all transactions are fully transparent, and can be viewed by anyone. These traits make it an excellent tool to tackle fraud.

While blockchain has gotten attention due to its connection to the cryptocurrency Bitcoin, the technology isn’t limited to financial transactions. The ledger can be used to track the movement of any asset, such as products throughout the supply chain.

(For a full explanation of how blockchain works, download our ebook).

Tracking Unethically Captured Seafood

Tracking the source of fish in the supply chain is a huge issue. There have been numerous reports of slave labor being using to catch and process seafood, which has gone undetected and then ended up in major grocery stores. And then there’s the issue of sustainably sourced fish, versus fish caught with cheap but environmentally destructive methods.

Using the blockchain, fishermen would send a text message to enter their catch into the blockchain. Then, anytime the fish was transferred, such as for cleaning or canning, that move would also be recorded on the blockchain. Currently a company called Provenance is working on a pilot project, which would even allow consumers to check the source of their meal on their smart phones.

Fictitious Pickups

Fictitious pickups is another source of fraud that could be made obsolete by blockchain. In a fictitious pickup, a freight thief uses false documents to impersonate a legitimate driver, and then leaves with the freight. Blockchain technology could combat this by making documentation easily verifiable and impossible to fake. In fact, there are already dozens of companies using blockchain for identity management. The blockchain would also show a clear history of the carrier’s deliveries, again, information which could not be faked.

Reducing Buyers for Stolen Freight

While it’s a long way away, one day we could see all products tracked on the blockchain. One of the ways to cut down on freight theft is to make it more difficult for thieves to find buyers. If all products could be accessed in a transparent database using barcodes or RFID, then it would be simple to audit any vendor for selling stolen goods. If the ID didn’t pull up a record on the blockchain, police would start asking questions. Or, it could even pull up a record that was reported as stolen. Wholesalers and distributers would, in turn, require authentication of the source of goods on the blockchain before purchasing. The transparency would eventually make it very difficult for freight thieves to find buyers for their goods.