Digital ID in Supply-chain: Mutual Understanding among Suppliers

Decentralized digital ID is becoming a preferred choice for suppliers to build mutual trust in their supply chain management systems.

Blockchain-based digital ID reflects the way people share their access, control, and sharing their personal information. It gives back to people the power to control their identities. It could be a great potential for supply-chain management where there are still many complications in selecting proper vendors.

The challenges  manufacturing industry

We are living in the manufacturing world.It is recorded that there are millions of manufacturers all over the world. Each of them focused on producing one or different products for specific needs. Thereby, the properties of each production line are also different. But the objectives of the manufacturing industry are the same. It’s all related to quality, safety, vendor selection, efficiency, and costs.

It could be a small manufacturing company or a company that relies on manufacturers to make their own products. For example, a ballpoint click pen can be made of many parts like the tip, the ink chamber, springs, barrels, and thrust devices. Each piece will probably be manufactured and supplied by different companies to match the specific technical requirements and the price. 

The problem is, in order to choose suppliers, this pen-manufacturing company has to trust them first. In order to do so, the suppliers have to collect a set of the required information within a limit of time. Then, the company can decide whether they want to cooperate or not based on suppliers’ performances.

Real-life process of verifying digital ID

In reality, the data on suppliers is normally stored multiple times within the information systems of related companies or in a third-party database. This digital ID could be registration details, financial information, quality certifications, and so on.In order to keep up with the manufacturing process, this data needs to be strictly precise and updated. After collected,  the data will be evaluated by different teams for risk assessment and decision making.

To make this happen, analysts and managers need a system where all information is reliable and transparent. At the same time, all the collecting process is mostly manual and still requires numerous paper documents. Otherwise, they can only approach limited information sources, which leads to a lack of needed information and then bad decisions.

Moreover, that information is stored in a centralized database of a third-party provider causes an unconscious dependency on the operation rule of this third-party. These manufacturing partners might also face the problem of a single failure, which means that all data could be violated once the system is hacked. No one wants that situation to happen. Digital ID based on a decentralized database is becoming a potential method to solve these problems. 

(Read more: Best Practices for Global Integration Strategy in Manufacturing)

Seeking for a reliable supplier with Decentralized ID 

The purpose of vendor selection is for manufacturers to ensure that they can obtain raw materials from vendors that are reliable and affordable,which can be a challenge to any manufacturing business. With Decentralized ID, this challenge is no longer a burden.

Decentralized ID is a type of identity stored in the digital environment using blockchain technologyAdecentralized ID of a company is not only about registration details, financial information or quality certification but also all the transactions, actions that ever implemented. These pieces of information can reflect a lot about a company with high reliability. With a digital signature, the information stored in the blockchain database is verified by using cryptography with immutability. The information once verified, is unchangeable and tamper-proof. 

Besides, information is stored only one time with many copies stored in every node of the blockchain database. This creates transparency required in every transaction - a highly appreciated factor of reputation of a business.Decentralization means that there is no third-party that can interfere in the information of vendors and their transactions. Vendors control their data and decide what and how to share it with their partners. At the same time, the crucial requirements of a transaction can be automatically collected and implemented with smart contracts. Furthermore, this decentralized database helps vendors to avoid a single failure and secure their data.

Decentralized ID is a simple and effective solution in evaluating potential vendors. It allows accessing the types of raw materials they make, their old and new customers, the age of their facilities and the technology they use, and the quality of the systems and standards that they have implemented. Thereby, reducing the costs of dealing with the consequence of bad services from bad suppliers. 


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Author Dao Ngoc Linh