The covid-19 pandemic is a rare calamity where the manifestations have cut across national boundaries. The need for enforcing social distancing to stop the spread of the virus has seen lockdown across several countries, impacting over half the global population. Steps have been taken to place severe restrictions on economic activities barring ‘essential services’. Early analysis of the impact is indicative of a downward pressure on the major contributors of the Gross Domestic Product (GDP)—private consumption, investment, and external trade—leading to a potential global economic depression. This will impact India’s economy severely, and necessitate urgent strategic measures targeted towards adoption processes that are more resilient to future shocks.
Provision of essential services during this period remains one of the major concerns of the government. These services are broadly defined as ‘services the interruption of which would endanger the lives, health, or personal safety of citizens’. An important part of essential services are the supply chains for critical commodities such as food and medicine. Within these supply chains, the government would need to establish an oversight on the production, movement and availability of goods, besides ensuring authenticity, quality, and provenance during distribution.
Shortages in supply of Personal Protective Equipment (PPE) and other critical medical equipment in India and abroad demonstrate the need for a robust supply chain management system. The inability to ramp up production to desired levels is being attributed to ‘challenges in importing raw material due to supply chain disruptions’. The Covid-19 Containment Plan released by the Ministry of Health and Family Welfare (MoHFW) states that the containment of a cluster, lasting for 1-2 months and having a population of 100,000, would require about 2,000,000 triple layer face masks; 200,000 gloves; 100,000 N-95 masks and 50,000 PPE kits. Besides tenders for procuring such equipment, large-scale imports from countries like China are also being explored. For India to ramp up domestic production would require urgent sourcing of machines like the ‘hot air seam sealing’ machines which needs to be imported with estimated lead time of upto 12 weeks.
For businesses and governments to evolve strategies for meeting demand for essential goods during such a crisis would require visibility of suppliers and their details—or established ‘supply chain visibility’ practices. While businesses typically have a clear picture when it comes to their ‘primary’ or ‘tier 1’ suppliers, it gets opaque for suppliers further upstream in the supply chain. As a result, steps taken for diversification are meaningless if dependencies of tier 1 suppliers (and tier 2 or 3 suppliers) are not taken into consideration. Establishing this visibility can be very challenging, given reluctance of suppliers to share information regarding sources and prices, for fear of losing their competitive advantage and misuse of data. This was observed by NITI Aayog during the implementation of a pilot in ‘track and trace’ of drugs in the pharmaceutical supply chain.
In the absence of information relating to various tiers of suppliers, it is very difficult for manufacturers further down the supply chain to fully appreciate the risks and rewards of such an arrangement. Second, a large number of processes in supply chain management are still managed on paper, necessitating physical contact, which makes it costlier and more difficult to plan efficiently. Further, in cases where there is digitization, information is exchanged primarily between the two parties involved in a specific ‘trade’, through siloed proprietary systems, thus limiting visibility for other parties. These concerns are normally restricted to businesses, but in times of crisis they become increasingly important to governments as well, particularly for production and supply of essential equipment like test kits, PPEs, masks, etc.
It is posited that blockchain technology could offer a technological means for meeting these challenges, and enabling potential steps for improvement. This theme has been explored by NITI Aayog in its recently released paper, ‘Blockchain: The India Strategy’, which explores the potential and challenges in applying blockchain in the case of a pilot project on pharmaceutical supply chain.
A ‘private’ blockchain could be used for two important functions, namely to serve as a trusted common platform that would facilitate interaction between the large variety of IT systems in a manner that maintains privacy through stakeholder specific accessibility controls; and secondly, to serve as a potential source of data regarding overall supplier dependencies to enable strategies for risk mitigation. The blockchain platform also lends itself to ensuring quality assurance through tracking the supply chain and compliance with norms for transportation and storage (temperature, etc) with minimal manual intervention. Onboarding various tiers of suppliers of various supply chains onto a common blockchain platform would thus enable businesses and government to form a data driven view of their supply chains, and help minimize disruption caused by future disasters. BMW, Tesla, Walmart, Nestle, and the Global Shipping Business Network (GSBN) are some of the major organizations exploring this approach.
Consortium-driven ‘blockchain networks’ may be facilitated by the government through regulation. But they would require a shared ownership model that allays fears of centralization across supply chain stakeholders. Clear incentives must be created to ensure the participation of multiple tiers of suppliers so as to make the initiative a success, with special care taken to ensure that businesses trust the system. It may be argued that these steps are premature for addressing the present crisis, but acting quickly in the aftermath of the pandemic is critical to avoid similar situations in the future.
As other businesses and governments look to diversify their sourcing strategies to reduce dependence on China, steps to increase domestic supply chain visibility may also be critical for improving the attractiveness of India as a potential alternative manufacturing hub. These measures will complement the various initiatives taken towards improving the ease of doing business, as also improving logistics, which in turn can also benefit from adopting a distributed system. NITI Aayog in the second part of the ‘Blockchain: The India Strategy’ proposes to recommend ways to develop such a platform across sectors and use cases.
(Anna Roy is senior adviser and Tanay Mahindru is a young professional in NITI Aayog. The views expressed are personal.)