German luxury carmaker Mercedes-Benz has become the latest global car manufacturer to implement blockchain technology to streamline its supply chain.
This new development was the result of a partnership with Icertis, an enterprise contract management platform based in the U.S that offers a blockchain framework.
The Mercedes Blockchain Solution
Through this partnership, the two companies have jointly developed a blockchain prototype that allows to store contracts and documentation associated with the carmaker’s complex supply chains. The Mercedes blockchain solution facilitates the creation of a sustainable and transparent mapping of sorted documents across the entire supply chain, ultimately giving Daimler AG, Mercedes-Benz parent company, a valuable tool to vet third-party suppliers. This is achieved through screening of suppliers based on contractual obligations, human rights, and control standards related to safety and quality.
Wilko Stark, Member of the Divisional Board of Management Mercedes-Benz Cars, highlighted the complex nature of modern supply chains, adding:
“Blockchain technology has the potential to fundamentally revolutionize our procurement processes, and could affect nearly the entire value chain […] With our Blockchain prototype, we are in the first step testing one of diverse possible applications with the aim of increasing transparency beyond our direct suppliers.”
The project is currently in the pilot phase with several of the company’s suppliers and partners testing the platform and providing feedback.
Blockchain Increases Transparency in the Supply Chain
The Mercedes blockchain platform employs distributed ledger technology to provide a more transparent mapping and enhanced visibility into the supply chain ecosystem. If one of the suppliers fails to adhere to the initial contractual obligations, an audit trail created on the blockchain can help reveal the supplier’s activity history.
In addition to its blockchain documentation system, Mercedes-Benz is also planning to collaborate with its suppliers to build a blockchain traceability solution for tracking raw materials and vehicle parts.
Blockchain Picking Up Pace in the Automotive Industry
The car industry is changing rapidly and blockchain adoption in this sector is gaining momentum at a fast pace. Daimler, who is a member of Hyperledger, recognized the potential of blockchain two years ago and has been involved in various kinds of blockchain pilots including one that aimed to negotiate and close corporate loans through the blockchain. Porsche completed a similar project in December last year.
As supply chains become more complex, and efforts to increase transparency and efficiency are stepped up, blockchain is going to emerge as the ideal technology to revolutionize the automotive industry. As we have seen with other leading carmakers, it is likely the competition in the industry that is pushing companies to innovate and shift to emerging technologies in order to adapt and stay competitive.