Mercedes-Benz Cars has announced a partnership with contract management software provider Icertis to improve transparency in its supply chain and procurement via the use of blockchain technology.
Mercedes-Benz C-Klasse Saloon and Estate (2018)
Blockchain technology, which creates a distributed electronic ledger, allows parties involved in the supply chain to view, share and update critical documents such as bills of lading, invoices, terms and agreements relating to a particular shipment or transaction.
While unwilling to provide specific details, a spokesperson for the carmaker said it had worked with Icertis to test the system from the supply of raw materials through their refinement and use in components up the chain of suppliers to eventual factory delivery.
Mercedes-Benz Cars said the use of blockchain would give it greater ability to see whether its sub-suppliers were meeting contractual obligations on such things as working conditions, human rights, environmental protection, safety, business ethics and compliance within the supply chain. Additionally, it said, it would improve the traceability of components and raw materials.
The carmaker and its software partner are now assessing how many suppliers will take part in the next stage of the project.
“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 and supplier quality for raw materials and strategy at Mercedes-Benz Cars. “The blockchain prototype opens up completely new ways to make purchasing processes simpler and safer.”
As a form of distributed ledger, blockchain requires each supplier working with Mercedes-Benz to record the details of its contract, including its sustainability requirements. That disclosure and confirmation of requirements creates a ‘transaction book’ that can be retraced by all participants in the supply chain, ensuring that suppliers meet the carmaker’s stringent requirements. Confidential information is not disclosed and the technology limits access to data relevant to a particular shipment or transaction.
“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 board of management for procurement and supplier quality at the OEM. “Global supply chains are becoming increasingly complex. With our blockchain prototype, we are in the first step of testing one of diverse possible applications, with the aim of increasing transparency beyond our direct suppliers.”
Mercedes-Benz said it would work in full cooperation with its suppliers to ensure a high enough standard of data was put in to make the system as effective as possible.
The system being used is built on the Icertis Blockchain Framework and uses ‘smart contracts’ to build an immutable public ledger that Icertis said would help to ensure suppliers adhered to sourcing and contracting practices specified by Mercedes-Benz.
In addition, Icertis said participants in the system would have the option to use its AI capabilities to automatically verify the contractual obligations around agreed terms, such as sustainability. The technology can also be used to enforce compliance requirements like data privacy (including the GDPR), information security, the International Trade in Arms Regulation (ITAR), the Foreign Corrupt Practices Act (FCPA) and other regulations.
“The challenge of managing a global supply chain have never been higher,” said Monish Darda, chief technology officer and co-founder at Icertis. “We are delighted to partner with Mercedes-Benz Cars, one of the most innovative companies in the world, to apply our cutting edge blockchain on the ICM platform to address the sustainable sourcing challenge.”
Mercedes-Benz Cars’ parent company, Daimler, has been applying blockchain technology in other areas. In 2017, it joined Hyperledger, a Linux Foundation project aimed at the development of technologies and applications using blockchain. In the same year, it used blockchain for financial transactions with Landesbank Baden-Württemberg (LBBW) for the first time.