Proving the Business Case for the Internet of Things

Mercedes-Benz project for blockchain in supply chain

Steve Rogerson
March 6, 2019



Mercedes-Benz is counting on blockchain technology for more transparency in complex vehicle supply chains following a partnership with Icertis, a Washington-based provider of enterprise contract management in the cloud.
 
The partnership aims to provide a consistent documentation of contracts in the supply chain. Daimler requires its direct suppliers to vigorously pass on and control standards and contractual obligations with regard to working conditions, human rights, environmental protection, safety, business ethics and compliance within the supply chain.
 
The blockchain prototype allows a transparent mapping and understanding of this transmission across the entire supply chain. Should one of the sub-suppliers deviate from the contractual obligations, this becomes visible in the blockchain, similar to a secure accounting system. Mercedes-Benz Cars and a number of Icertis experts have developed and programmed a prototype. Acceptance by suppliers and partners, it is now being tested in a pilot project, and feedback is being obtained.
 
"Blockchain technology has the potential to fundamentally revolutionise our procurement processes, and could affect nearly the entire value chain,” said Wilko Stark, member of the divisional management board at Mercedes-Benz Cars. “Global supply chains are becoming increasingly complex. 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 placement of contract clauses in the blockchain creates a sustainable transaction book. The disclosure and confirmation of the Daimler sustainability requirements can be retraced by all participants in the supply chain. This ensures that global procurement and contractual practices meet the stringent requirements of Daimler. Confidential information is not visible. The prototype creates trust in the integrity of the supply chain by disclosing sustainability-related information, without revealing competition relevant information.
 
"The transmission of contracts to each member of the supply chain is the prerequisite of cooperation with our suppliers, especially in terms of sustainability and ethical conduct," said Sabine Angermann, head of purchasing at Mercedes-Benz Cars. “The blockchain prototype opens up completely new ways to make purchasing processes simpler and safer.”
 
The intuitive and user-friendly operation of the blockchain service platform is significant for the success of the project. Only then can the company help its suppliers easily get started with the technology, and attract the necessary users. Consistently establishing blockchain technology with all suppliers in the respective supply chain is a fundamental requirement for the achievement of the goal: close cooperation for more sustainability.
 
Another application is the traceability of components and raw materials. Complex supply chains can be disclosed, the origin of which can be traced across the partners involved. The effectiveness of a blockchain depends on the quality of the data and the level of digitisation. For this purpose Mercedes-Benz will cooperate in partnership with its suppliers.
 
Daimler has already been using blockchain technology in other domains. Since 2017, Daimler has been a member of Hyperledger, a project of the Linux Foundation for the development of technologies and applications based on blockchain. In the same year, Daimler and Landesbank Baden-Württemberg (LBBW) for the first time jointly used blockchain technology to execute a financial transaction. Through LBBW, Daimler launched a €100m corporate Schuldschein in parallel with the process that is required by regulatory authorities. The entire transaction was digitally carried out via blockchain technology. Daimler is convinced that this technology offers even more potentials along the value chain.