From the development of Horseless carriage in the 1860s, the automotive industry has come a long way to becoming one of the world’s biggest economic drivers by sales. Likewise, the automobile supply chain, second only to the computer market, is one of the most complex and dispersed. The vehicle supply chain includes not just the supply of assembly materials but also the purchase and delivery of replacement parts. These vehicle spare parts are used in after-sales facilities and are a significant source of revenue for car manufacturers and OEMs. Read on how blockchain supply chain development for blockchain automotive traceability system proves effective in improving the bottom line while preventing counterfeits.
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How Counterfeiting Affects the Automotive Supply Chain
The most influenced by the arrival of counterfeits is the car spare parts supply chain. The number of fakes continues to grow, despite attempts by automotive industry players and the government. Moreover, falsification covers all main parts manufactured in the supply chain. It includes tires, engines. airbags, batteries, electrical parts, windscreens, and more. According to the estimation of the European Intellectual Property Office (EUIPO), €2.2 trillion get lost to counterfeit wheels alone (Peresson, 2019).
Not only does this problem contribute to monetary losses for carmakers and OEMs, but it also has more implications in the form of decreased customer protection and harm to brand image. Fake components are underperforming and are often the cause for casualties that cause significant damage and even loss of life. In such situations, it gets challenging for a car manufacturer to claim that the counterfeit component mounted in the vehicle triggered the crash.
Manufacturers are now facing a growing number of warranty requests for parts replacements that later come to notice as fraudulent ones. Manufacturers also have to trace the real supplier of the failed product painstakingly only to be told that the part in question is a bogus one. Can blockchain based automotive solutions address these challenges? Let’s find out.
The Loopholes
The key motivator for counterfeiters is quick money. Nevertheless, the absence of appropriate, end-to-end monitoring of replacement parts across the supply chain results in the implementation of these fake items.
The numbers represent the points where counterfeits can penetrate the supply chain.
Sub-standard raw material supply (rare)
Fake supply to dealers
Counterfeit supply to retailers
Counterfeit product supply to a repair center or going for bogus aftermarket products
Issues in Developing a Solution for Disintegrated Supply Chain
Maintaining the credibility of the supply chain is the best way to monitor the influx of bogus parts through the supply chain. A spare parts supply chain with a wide range of vendors is a dynamic one. A supplier may deliver different auto components, or multiple suppliers can provide a single part. An auto part may be a compound or a single one. A compound object comprises many other elements. However, it reaches the maker as a package (for instance, seat configuration, gearbox, etc.). It is quite complex to verify whether a faulty subpart has is un use in the case of a compound part. The subparts may or may not bear a serial number in this case and are therefore difficult to trace.
Is Blockchain the Right Solution
The best bet for anti-counterfeit will be a blockchain technology-based network regulated by an auto manufacturer. With IoT devices for the position, data generation can further complement this network. Using RFID tags (for high-value materials) or regular simple barcodes for screening at the time of custody transition make things easier. While not everything can be barcoded or RFID enabled, for low-value components, a box level execution is more feasible. In a standard application with a centrally owned database, all stakeholders have their systems to run. Thus, it may become an obstacle in establishing supply chain integrity. Making them migrate to a new application would be a challenging task. Also, suppliers may not be willing to share their information via an application operated by another organization.
The blockchain technology, on the other hand, would be more suitable due to being distributed by design. The framework based on blockchain technology will run in parallel to the current systems already in operation and would interconnect via APIs. While the system would be operable by the vendor, each stakeholder (supplier/3PL / distributor/dealer) would get their copy of the same database and would access it using their node. For others (rivals or unrelated participants to an interaction), the information exchanged over the blockchain may remain concealed. It will maintain data protection by making separate streams for various types of a transaction.
A blockchain-based system will register each component’s serial number along with the previous owner. It will help in establishing an immutable custody chain and ultimately helping to create a firewall against the entry of counterfeits.
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