Blockchain technology makes it possible to trace a raw material back to the point of origin digitally. Volkswagen Group plans to use this technology when sourcing raw materials in future.

Supply chain transparency is a major issue in many industries, including the automotive sector. Responsible raw material procurement is fundamental for sustainable mobility. Going forward, Volkswagen will use blockchain, the technology behind various cryptocurrencies, to ensure more transparency and security in the supply chain.

As of this month, Volkswagen is working with Minespider to trace the supply chain for lead from the point of origin – either the mine or recycling source – to the factory. A pilot project will involve suppliers and sub-suppliers that deliver more than two thirds of the group’s total lead starter battery requirements.

The solution developed by Minespider is a proprietary protocol built on a public blockchain. A multi-layer architecture guarantees security of sensitive supply chain data despite the open source approach.

One layer of the protocol contains generally accessible information, a second layer contains the private data blocks which cannot subsequently be changed, and the third layer is the encryption layer.

The advantage versus a private blockchain is that everyone – from suppliers and sub-suppliers through to those directly responsible for mining or recycling the raw material – works with one system, even if several supply chains are involved.

This creates a common digital infrastructure that enables transparent exchange of information. “Digitization provides important technological instruments that enable us to track the path of minerals and raw materials in cross-border supply chains in ever greater detail,” said Marco Philippi, head of strategy for procurement.

This pilot project will also enable development of a framework for broader collaboration. Following successful completion, the technology will be used for other raw materials and their supply chains.

Nathan Williams, CEO of Minespider, said, “We are witnessing a transformation of global supply chains. Companies have the right to know that their suppliers are operating responsibly and with blockchain we finally have the tools to prove it.”