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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 both in-land and 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.
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. Outside of the US, when a customer buys a new car, it’s built to order. The buyer may know where the car is built, but from there, it’s a kind of “black hole” until the car arrives at the dealer. In contrast, when someone buys a book from Amazon, they know every five minutes where it is in the journey. At Vinturas, our vision is to provide the same kind of customer experience when people buy a car.
Why is transparency so important? A lots of things can happen to a car while it’s being transported, including incidental damage. When that happens, the damage needs to be inspected and repaired, all of which generates a lot of paperwork, increases costs and slows the process. In other cases, transparency — seeing who touched the vehicle in the supply chain — is critical to ensuring safety, as in the case with batteries and electric vehicles.
Transparency is also important because 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. Fleet customers need 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.
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Discovery, or analysis paralysis
For these stakeholders to optimize their processes, they need to find ways to transform the way information is communicated and shared. Vinturas, a consortium of auto logistics providers in Europe that includes Axess Logistics, NVD, Koopman Logistics Group and Autolink Group, was founded on this principle.
When 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.
From time to time, we invite industry thought leaders, academic experts and partners, to share their opinions and insights on current trends in blockchain to the Blockchain Pulse blog. While the opinions in these blog posts are their own, and do not necessarily reflect the views of IBM, this blog strives to welcome all points of view to the conversation.