Blockchain brings visibility to the finished vehicle supply chain

Blockchain brings visibility to the finished vehicle supply chain by Jon Kuiper originally appeared on Blockchain Pulse

 

Anyone who has ever purchased a book on Amazon knows it’s possible to track every step of its journey to the doorstep. In Europe, where it’s increasingly common for people to custom order cars from manufacturers, customers are coming to expect the same kind of tracking ability for their new cars.

Vinturas used the IBM Blockchain Platform to develop a secure tracking ecosystem that securely stores a centralized history of each vehicle on a distributed blockchain ledger as it moves along the chain.

Now, if a vehicle is damaged in transit, it’s possible to determine exactly where and how it happened so measures can be taken to prevent similar damage in the future. The same immutable record-keeping ability also thwarts the mileage fraud issues that have long plagued the pre-owned vehicle market, thus removing a major impediment to its growth.

The increasingly complex automotive supply chain

In the auto industry, it can be said that there are two kinds of supply chains. The first and more talked about relates to the flow of parts and components from an enormous web of suppliers into a relatively small number of car manufacturers, or Original Equipment Manufacturers (OEMs). It’s largely about planning, forecasting and keeping track of parts to make sure they’re in the right place when they’re needed. Already a hugely complex endeavor, it’s getting even more so as new car technologies are reshaping business models up and down the supply chain.

The second kind of supply chain, commonly referred to as finished vehicle logistics (FVL), relates to the long series of stages and processes through which cars get from OEMs to end customers. After leaving the factory, cars go from in-country logistics providers to sea carriers. After arriving in the importing country, they then pass through customs, after which the local logistics provider takes them to the dealer or leasing company, which then delivers it to the customer.

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Game-changing transparency with blockchain

Like the manufacturing side of the supply chain, FVL optimization has a lot to do with cost and speed. But the FVL parameter that stands out most is transparency. For one, lots of things can happen to a car while it’s being transported, including incidental damage and—in the case of pre-owned cars—fraudulent alterations of mileage on the odometer. In the same way an auditable paper trail can ensure the provenance of a piece of art, the transport ecosystem needs a fraud-free way to track the journey of each car—defined by its vehicle identification number (VIN)—to its destination.

The second major reason transparency is important is the fact that every stakeholder in the FVL chain has an interest in knowing where cars are in the process and—perhaps more importantly—when they’re going to arrive. The fact that individual customers have come to expect this in their buying experience is a big part of it. So too is the need for fleet customers to be able to plan their vehicle stocks to make sure they’re in the right place to meet demand. For logistics providers, transparency is critical because it enables them optimize their load planning, helping to speed delivery to dealers while keeping costs down and efficiency high.

Discovery, or analysis paralysis

In the same way that FVL is a collaborative team effort—involving all layers of the chain—stakeholders also need to find ways to transform the way information is shared. Here in Europe, we followed that principle when we founded Vinturas, a consortium of auto logistics providers that includes Axess Logistics, NVD, Koopman Logistics Group and Autolink Group.

When we were looking for the right technology to build a platform to provide end-to-end visibility in the finished vehicle supply chain, blockchain emerged as the clear technology of choice because it hit on all our key requirements around transparency and data sharing. First and foremost is blockchain’s distributed ledger technology, which allows us to create a centralized history of a VIN—a single source of truth for everything that happens to a vehicle throughout the supply chain.

Complementing truth is trust. The fact that all the data stored in the blockchain infrastructure is immutable—it can’t be changed by anyone—means there’s no doubt about factors like mileage fraud or damage. The immutability of documents also means it’s possible to create and execute automated contractual transactions.

Using the IBM Blockchain Platform, Vinturas was able to build an open ecosystem that’s accessible to all the other players in the FVL arena. The fact that these players can trust the integrity and security of blockchain makes them willing to participate in what is essentially a new world for FVL, one in which one-time competitors are now working together collectively to provide end to end visibility to the industry.

Beyond costs savings

By making the finished vehicle supply chain more visible, the new blockchain solution is expected to unleash a cascade of benefits. Car buyers stand to gain a vast improvement in the quality of their purchasing journey, since they’re able to know exactly where their car is in delivery cycle. Car manufacturers are expected to reduce their costs by 10 percent or more as a result of improved supply chain transparency, while fleet owners will gain a huge leg up in their planning and fleet allocation processes.

Finally, blockchain’s ability to certify provenance introduces a whole new set of capabilities that were impossible before. In the sale of pre-owned cars, it has the potential to all but eliminate the debilitating impact that mileage fraud has on buyer confidence, setting the stage for more growth in the future. For new cars, blockchain’s provenance capability can spot exactly where vehicle damage happens, an insight that—over time—can eventually be used to perform root cause analysis, improve the process and lessen the incidence of damage in transit.

Here’s the real take-away. With blockchain technology, we’re able to change the world by making it safe for one-time competitors to collaborate with each other, which unlocks so much additional value for our customers.

Watch Jon Kuiper talk about how blockchain technology creates a “new world” for finished vehicle logistics.