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Blockchain in Chemical Distribution 4.0

By the European Association of Chemical Distributors (Fecc) - 24/04/2018

Insights on the digitalization of chemical distribution, and whether blockchain-enabled supply chain solutions could be integrated in the current business models to improve efficiencies and reduce costs for industry, from the experts at the European Association of Chemical Distributors (Fecc).
 
In today’s competitive global market, with growing compliance demands, chemical distributors remain committed to increase the added value to their partners in the supply chain.
 
Rising costs, increased global competition and lack of capacity to attract Millennial talent, mean that Chemical Distribution companies need urgently to look at new ways for profitable growth.

In a Chemical Distribution sector characterized by globalization and specialization, technologies enable companies to embark on Chemical Distribution 4.0. where digitalization and circular economy are key pillars to increasing global competitiveness.
 
Digitalization of the chemical supply chain remains, however, both a challenge and an opportunity for the sector. E-commerce, the Internet of Things (IoT), Big Data, Cloud computing, Cybersecurity, Blockchain technologies and data analytics offer a lot of untapped potential for the industry.
 
Digitalization is a big step for a sector which is both mature and conservative, but which looks forward to developing business models that will enable closer interaction with business partners, and hence is increasingly looking to digital technologies as a way to better access customers.
 
During last year’s Fecc Congress, the Chemical Distribution Industry explored the potential of digitalization and how data can be used to generate higher operational excellence, exchanged views on how to find value in social media, discussed cybersecurity, and analysed the next generation of e-commerce in chemical distribution.
 
Chemical Distribution companies are working hard to live up to the digital challenge. With an extremely mobile work force, and hence with a strong reliance on technology, there is a great desire to enable convenient services to a portfolio of customers who are changing their purchasing habits. Sellers now have less time to influence their purchase, with customers increasing the time they spend obtaining solutions for themselves, including information on the product and up-to-date-quotes online, and spending less time on face-to-face negotiations and the actual purchase.
 
Some customers still do require on-side support, but web-shops and e-commerce platforms offer a model to reach the market with a lower cost while providing the opportunity to rethink the relationship with customers.
 
Building on the success of last year’s Congress, Fecc is becoming a permanent platform to exchange experiences of  Chemical Distribution companies in the digital world, and this year will pay special attention to the blockchain technology, exploring how it could be used in the Chemical Distribution sector.
 
What is blockchain?
A blockchain is a continuously growing list of chronologically-ordered records (called blocks) which are linked and secured using cryptography. Blockchain technologies enable parties who are geographically distant to interact and exchange value and information on a peer-to-peer basis with fewer to non-existent central intermediaries.

Invented by Satoshi Nakamoto in 2008 for use in the cryptocurrency bitcoin (the first digital currency), blockchain technology offers:
  • Decentralization: The content of the ledger is shared among all the participants. Every new transaction appended to the ledger is automatically verified and validated by the blockchain network itself, removing the need for a central authority to supervise and validate the process, while minimizing possibility of human errors and reducing transaction costs both in terms of time and money.
  • Distribution and trust: Being collectively validated and shared, once information is transferred and appended to the ledger transactions it cannot be tampered or reverted, therefore reducing if not eliminating the risk of fraud.
  • Security: Modern techniques such as public/private-key cryptography ensures private data within each transaction remains readable only by authorized parties.
  • Transparency: Blockchain protocol specifications and principles of operation, as well as proof of concept source code, are freely available to the public, allowing any party to access the public ledger.
Just hype or a game changer for the Chemical Distribution sector?
Blockchain is moving beyond applications in the financial sector, and new developments are swiftly becoming a reality in other sectors, illustrating the potential of radical organizational shifts towards more collaborative and automated processes.

Potential uses in the logistics sector are currently being explored, as it is considered that blockchain technology can help alleviate frictions in global trade logistics including procurement, transportation management, track and trace, customs collaboration, and trade finance.

Maersk and IBM have started a venture to establish a global blockchain-based system for digitalizing trade workflows and end-to-end shipment tracking. The system allows each stakeholder in the supply chain to view the progress of goods through the supply chain, understanding where a container is in transit. Stakeholders can see the status of customs documents, bills of lading and other data.
 
Since manufacturing has been globalized, supply chains have heavily increased its complexity, while reliability and integrity have to be ensured. Many projects are underway using blockchain technology to improve supply chain transparency and monitor provenance.
 
In the food industry where it is imperative to have solid records to trace each product to its source, Walmart uses blockchain to track the origin of food, where it is processed, stored and its sell-by-date. Unilever and Nestle also use blockchain for similar purposes.
 
Another field of application of interest is the use of blockchain technology to combat the counterfeiting of drugs and false medication, where blockchain-based serialization projects (to track the authenticity of products) are being undertaken to provide sophisticated track-and-trace capabilities to the pharmaceutical industry.
 
As blockchain protocols facilitate businesses to use new methods of processing digital transactions, they could also be of potential use, for example, to track chemicals in the supply chain.
 
The European regulation on chemicals contains specific requirements to communicate information concerning chemical substances in the long and complex chemical supply chains, usually composed of multiple entities, located in different regions and operating across different industry sectors. A wide range of IT solutions are already implemented across the industry to collect and communicate substance information. However, a part of the process remains manual, as companies must sometimes rely on manual data entry and paper-based documentation to complete the processes.
 
Blockchain can achieve cost savings by enabling more automated, and error-free processes, helping to consolidate and simplify the industry procedures to exchange and track substance-specific information exchanged along the supply chain.
 
Moving together beyond the proof of concept
Moving from today’s era of proving concepts and pilot applications to actually deploying solutions at scale requires further technology development, organizational transformation and collaboration between all stakeholders.

The next Fecc Congress (Nice, 4-6 June) will bring together speakers with experience and knowledge in the technology, and stakeholders in the field to kickstart a discussion on whether blockchain-enabled supply chain solutions could be integrated in the current business models to improve efficiencies and reduce costs for Chemical Distribution Industry.
 
Join us in our discussions in Nice (4-6 June 2018)! 

For more information, visit the Fecc Congress 2018 website, www.fecc-congress.com
 
The European Association of Chemical Distributors (Fecc) is the voice of the Chemical Distribution Industry in Europe. Representing around 1,600 companies, Fecc and its members contribute to add value, innovation and sustainability in the supply chain, by sourcing, developing, marketing, and distributing a range of speciality chemicals and ingredients.
European Association of Chemical Distributors, Rue de Luxembourg 16B, 1000 Brussels, Belgium
T: +32 2 679 02 60
www.fecc.org