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Jul 27, 2018

Blockchain applied to industrial environment: Inventory Management

Between the globalization of transactions and the growing ramification of the players that are shaking up the supply chain sector, tracking the location of goods in real time seems really complicated.

Before finding its appropriate solution, namely, monitoring the transfer of responsibilities rather than tracing the product itself, the startup Ownest noticed that numerous professionals in the sector complained of annual disappearances of up to 25% of their product carriers.

In order to optimize their decision making process regarding the management of logistics flows, logisticians and retailers must know the real value of their stock and blockchain can help them do so.

Poor stock management, a vector of negative externalities

The level of inventory has a major impact on the company's profitability, both in the Supply Chain and Retail activities.

The Global Retail Theft Barometer study conducted with Checkpoint Systems and SmartCube in 2013 focused on the financial impact of shrinkage rate (theft, disappearance, etc.) affecting the activity of distribution and logistics professionals.

Thus, this rate, which can be defined as the loss of turnover due to the disappearance of assets belonging to the company, resulting from a malicious act or simple human error, was then estimated at 1.4% of worldwide distribution turnover.

According to this study, the inventory gaps between actual and theoretical stock would represent nearly $100 billion in lost sales worldwide.

When the value found is lower than the actual value, the difference results in a net loss in store for a retailer.

However, if 39% of the observed property losses are due to theft by dishonest employees and 7% to fraudulent acts by suppliers, 16% of the losses would stem from accidental and non-criminal origin.

These disappearances mainly occur at warehouses and loading docks.

A study by Sapio Research in collaboration with Zetes in January 2018 revealed a lack of information from professionals on their actual stock levels.

Thus 62% of professionals say they do not have access to real-time information on the availability of their product and 72% feel they are unable to notify end customers of a problem concerning the order or delivery.

This can lead to incorrect stock accounting when inventorying your products and merchandise supports
. Indeed, since these inventories are carried out in closed environments (such as warehouses or stores) and controlled, imagine the complexity of carrying out an inventory on a supply chain including multiple actors with non-harmonized data.

The inaccuracy of IoTs alone in securing the actual stock

Facing the challenges of traceability of flows and goods, most supply chain players often rely solely on physical tracking solutions embodied in beacons (or tags). This technology is inherent in smartphones.

While the approach is perfectly understandable, it appears that the advances promised by the IoT (Internet of Things or Internet of connected objects) have limits in terms of securing goods and merchandise.

The IoT makes it possible to compile a large quantity of information that can be retrieved in a few seconds (place of manufacture, date of dispatch, transport time, temperature, humidity level of the storage space, etc.) and ensure the follow-up of the good from the place of production to the shelf.

However, whether RFID tags or beacons, these physical media represent a too large an investment for their real effectiveness. To operate, it is necessary for a carrier to equip all its fleet and storage spaces with sensors.

The implementation of the IoT is complex and the deployment of the technology is very expensive.

Moreover, simply affixed to the labels of products, parcels or pallets, they do not avoid theft as they can be easily removed.

Blockchain at the service of the precision of the real stock levels

Good stock management implies having adequate tracking tools and the blockchain is one of them.

In the broad sense, as Blockchain France points out, the concept refers to a secure and distributed ledger, because it is shared by various users, containing a set of transactions that the network has validated by consensus. This validation by consensus is carried out by "minors", individuals responsible for certifying blockchain transactions according to certain rules, with a financial motivation.

Thanks to its reliability and immutability, the distributed technology of the public blockchain allows the professional to benefit from a panoramic view of control, overseeing his goods, from initial sourcing to final delivery. Thus, the tracking offered by blockchain technology is more accurate than IoT to track all products and movements throughout your supply chain, regardless of who owns the warehouse. As the blockchain is in the process of acquiring a legal framework, this evidence can be used to resolve conflicts with the actors of your supplychain.

The blockchain is the solution that will allow logisticians to develop a more detailed view of the inventory of their real assets and will help to eliminate the gap between the real and the theoretical stock.

Thus, Ownest is a solution based on blockchain technology to track flows throughout the supply chain and identify, in real time, who is responsible for your property and where it is located. De facto, via the follow-up of the transfer of responsibility, professionals can then know where their stocks are located (pallets, rolls, crates, bins, counters, cylinders, etc.).

The blockchain technology chosen by Ownest does not require any installation costs, easily involves carriers and adds evidence of forgery-proof transfers. In addition, the tracker associated with a digital token is then associated with a physical batch.

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