Blockchain in Humanitarian Supply Chain Management
Effective Supply Chain Management (SCM) is essential in disaster relief interventions. The rapid provision of food, shelter, healthcare and subsequent repair of infrastructure demands a different level of speed, efficiency and agility in the supply chain. Humanitarian Aid Supply Chains (HASC) have distinct requirements which separate them from business supply chains:
1) Demand forecasting needs to be calculated under high time pressure and within a continuously changing environment. These conditions make flexibility and adaptability crucial priorities.
2) Perishable and fragile materials must be transported and monitored at exact temperatures, this requires resilience in both design and maintenance to sustain a robust and continuous flow of information.
3) HASC requires strong collaboration between different entities and institutions including NGOs, governments, military bodies and individuals in planning, scheduling, setting objectives and assigning resources.
In this context, the Internet of Things (IoT) enables numerous physical and virtual devices to remain permanently interconnected within a network. These devices can interact and transmit data without interruption and allow the users to establish greater control over environmental variables whilst minimising risks and possible deviations. The number of IOT devices is steadily growing - precipitating a corresponding increase in data management costs and hindering scalability. In addition, centralised models enable data to be tampered with, which limits data reliability and leads to major security challenges.
Blockchain technology has the potential to overcome these difficulties. Primarily, because it is a distributed database that registers and saves all transactions between different members of a network. Cryptocurrencies like Bitcoin use Blockchain as the basis for their development. The integration of Blockchain technology with IOT will allow the process of collecting information provided by devices in a decentralised manner, while reducing the costs associated with maintaining large data centres.
Blockchain is a mechanism of collective action between people or entities that do not necessarily trust each other, but all share a common goal. Until now, trust has been managed by institutions, however, blockchain distributes trust without any institution controlling it as participants place their trust in the system and not in a particular individual. Blockchain technology represents a quantum leap in supply chain management as it generates significant improvements in efficiency, resource management, product and service provenance and security as well as data visibility.
Communication and collaboration between the different organisations involved in HASC is crucial. IT plays a fundamental role in optimising the coordination of logistical flows whilst integrating supply chains of different entities. Some of the uses in how Blockchain and IoT can integrate internal and external infrastructural support of independent humanitarian actions include:
Payments management: Current payment systems involve various intermediaries. This results in high customer fees and prolonged bureaucratic assignments, especially when dealing with antiquated banking systems from different countries or economic regions. Blockchain and IoT allow instant payments and a significant decrease in transaction costs. Tampering risks would also become insignificant, thereby increasing trust.
Monitor and correct inefficiencies: Blockchain and IoT technologies generate a broad spectrum of possibilities to correct inaccurate and inefficient actions by keeping a constant ledger of transactions. These are permanently available for all actors to access and can improve progress on accounting and auditing of humanitarian actions and performance.
Compliance enforcing: For HASC to accomplish humanitarian goals and perform optimally, resources in the form of food, pharmaceuticals or other basic goods need to be in the disaster zone at the right time. Blockchain and IoT enable real-time shipping visibility of goods data so it can be monitored and controlled according to compliance regulations.
Cryptographic security of identities: Real identities can be associated with cryptographic identities through Blockchain. These encrypted communication channels can be especially useful in both protecting the personal data of individuals and also avoiding any duplication efforts when identifying resources, actions or people.
Both technologies offer the opportunity of scalability and security within a cost-effectiveness framework. IoT through device connectivity and Blockchain with cost reduction and information security. As these technologies are increasingly implemented within HASC there will be brand new challenges such as the development of optimal network platforms and strict regulatory policies, however, with the right investment they could offer a promising solution.
About the Author
Daniel Arias Aranda is a Spanish economist and Professor of Management at the Faculty of Economics and Business at the University of Granada.