The diamond industry gets disrupted

A failed engagement

Diamond processors in India also saw their precious cargo stall en route from diamond centers in Antwerp, Belgium. This was a significant threat to the industry given the Asian country’s vital role in the production pipeline. “Approximately 90 percent of the world’s diamonds are polished in India,” says Edahn Golan, a consultant and researcher who follows the international diamond industry.

From there, most of the stones are shipped to finished-jewelry manufacturers in Europe and elsewhere. However, in recent years, jewelry manufacturing areas have been growing in India and China.

From 2000 to 2010, India’s and China’s market share doubled from 27 percent to 55 percent, representing about $47 billion of the jewelry manufacturing market in 2010, according to the Antwerp World Diamond Centre.

Supply chains then carry many of the finished luxury items to Europe, China, and the United States, the biggest consumer market for diamond jewelry, with about 40 percent of diamond sales by value, Golan says.

During normal times, companies work to keep counterfeit diamonds or gems mined in war zones in Africa out of the supply chain.

During a large-scale disruption, when less familiar second- and third-tier shippers are called in, processors must be especially wary of relying on paper shipping documents, which can be easily falsified to misrepresent authenticity.

The result: companies run the risk of seeing fake or "conflict" diamonds fill the supply void.

The stakes are high. "With all the concerns about conflict diamonds, and now with so many synthetic diamonds on the market, the appeal of stones is enhanced when customers can trust the provenance and trace back the origin of the diamond," says Paul Zimnisky, a diamond industry analyst.

What diamond processors need are more-sophisticated ways of documenting the custody chain of their products.

They can then digitally track goods throughout the supply pipeline and verify their authenticity at every stage of the journey, regardless of how often they change hands. This is a huge step up in terms of security from what is currently the most common system across the world: paperwork.