Insights

Leveraging Blockchain Technologies to Improve the Military Supply Chain

April 3, 2017

There is continued growth in the occurrence of counterfeit items. In 2012LeveragingBlockchain_Typingonlaptop, the Senate Armed Services Committee released a report showing more than 1,800 cases of suspect counterfeit parts, representing over 1 million parts.[1] Ensuring that items are authentic and up-to-standard requires ever more creative tracking mechanisms.

One candidate is blockchain technologies, the driver behind bitcoin. A blockchain is an innovative database method that can unalterably record any transaction conducted between two parties and among a community. The reason why this technology is creating such interest is because it is inherently structured so the data cannot be hacked.

Why Is It So Challenging to Hack a Blockchain?

  1. Every transaction is locked in time: As transactions occur, they are recorded on the blockchain in time-stamped sequence. The blockchain links and locks a new transaction, appending it onto the latest transaction at the end of the chain. To create a link, the blockchain database inserts a one-of-a-kind abbreviation of the last transaction inside the new transaction. Trying to alter a transaction requires a bad actor to unwind and recompute every abbreviation from the altered transaction forward to the end of the chain.

    Blockchain Links

     

  2. The database is distributed: A synchronized copy of the database is distributed among members of a trading community. This ensures the data is transparently viewable. Attempts to hack it in one place would be overridden by the fact that the correct data exists everywhere else.

What Does This Mean for Military Supply Chains?

Most people have heard about bitcoin, a cryptocurrency that exists outside of banking systems. However, the concept of unhackable data can relate to transactions outside of currencies. It can also be used to track the pedigree of an asset—whether that is ammunition, part of a helicopter, a microchip, or a pharmaceutical. As counterfeiters grow more sophisticated, it is incumbent on the military to continuously improve supply chain tracking, working with vendors. The National Defense Authorization Act of 2012 states that if a vendor sells a counterfeit item to the military, the liability is on the vendor. However, military supply chain managers would still need to detect that the items were counterfeit before they could seek recourse from vendors.

Imagine a military supply chain manager received a shipment of microchips or any other supply that is mission-critical. The manager needs to ensure that the original equipment manufacturer is using authentic parts. If the supply chain implemented blockchain technology, the manager could view the entire chain of that microchip’s life cycle. The manager could see when it was manufactured, who manufactured it, and everywhere that microchip had been during the whole history of the blockchain. The manager could view the entire chain or life cycle of that object, and know with confidence that its history cannot be altered.

Blockchain Systems in the Industry

Blockchain technology is in the news daily, and there is a lot of hype around what it could mean across many industries. It is important that supply chain managers and others evaluate this technology methodically. It takes time to understand the types of blockchain systems, their advantages, and pitfalls.

Once the right technology has been identified, the next step is to enlist the entire supply chain community. This means assessing all the supplying vendors, explaining to them the advantages of enlisting in a blockchain, and getting their agreement to participate. It can involve rewriting procurement and vendor policies.

Blockchain Graph2

To become part of the blockchain, every vendor would become a member of the blockchain system of choice.

Once all vendors are in the system, the supply chain manager can watch the journey of any item through blockchain viewing software. This is likely to be a system outside of bitcoin that enables the supply chain vendor to see other types of data. This blockchain viewing software would likely need to be integrated with whatever supply chain software the manager is currently using for daily operations.

Getting Started with Blockchain Technologies

Improving the authenticity of the military supply chain is only one use of blockchain technology for the services. It can be used for any authentication process, such as approving who has access to certain devices or vehicles, or for trading items, such as carbon credits, on a global market.

[1] Hans M. Sassenfeld, Counterfeit Prevention Strategies in the Military Supply Chain: Increasing Reliability at a Higher Price, https://www.utep.edu/liberalarts/nssi/_Files/docs/Capstone%20projects1/Hans-Sassenfeld-Capstone.pdf, page 3.

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