Implementation of

Blockchain Technology in the

Supply Chain System of
GlaxoSmithKline plc (GSK)

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Table of Contents
Introduction................................................................................... 3
Value & Benefits ............................................................................ 4
Organisational, Technological and Social Impacts ........................... 6
Potential Problems & Challenges of Implementation ...................... 8
Possible Strategies to Implementation & Transition –
Recommendations & Long-Term Issues ........................................ 10
Bibliography ................................................................................ 12

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Introduction
Implementation of Blockchain technology in the supply chain
system of GlaxoSmithKline plc (GSK).

What is blockchain technology?

An electronic, decentralized ledger system which is secured by
cryptography. It helps keep track of transactions without central
recordkeeping. Transactions are recorded in a chronological
order in the form of ‘blocks’.

GlaxoSmithKline plc is one of the largest manufacturer of

healthcare products in the world with over 6 billion units produced
in 2016. At such a large scale of manufacturing and logistics, the
supply chain system of GSK is one of the most important aspects
of the business that can possibly be improved.

Supply chains involve everything from creating to distributing the

goods/products. Therefore, supply chains can have many stages
of supply at various geographical locations around the world,
making it difficult to trace the process or investigate incidents -
many environmental incidents are hard to be tracked (Dickson
2016). It is also difficult for the customers to know the true value
of products due to lack of transparencies in the supply chain.
Even though organisations have made improvements in their
supply chains over the years, it is still difficult to reduce risk as
there is no ability to use outside-in data.

In the upcoming sections, the benefits and the potential

challenges of the implementation of Blockchain technology will be
analyzed, as well as its impact on social, technological and
operational aspects of the organization. This will be followed by
the analysis for possible strategies to control the transition, along
with recommendations.

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Value & Benefits

Security is one the major benefits of blockchain technology if it

is implemented in supply chain. As each block in a blockchain
is connected to the previous block, manipulation and fraud is
impossible. Trying to falsify data would mean changing data on
all the nodes in the supply chain system at the exact time which
is not feasible. Having an enormous supply chain system will
leave more room for manipulation, but using blockchain can
greatly reduce such potential risks.

End to End Transparency – All the parties in the supply chain

will be able to track, as the products manufactured will be
recorded in the system. This encourages commercial
transparency which is an important aspect in current society.

Traceability and Cold Chain Monitoring – The medicines and

other products often need special storage in a specific
temperature. Adding sensors on products and linking them to
the blockchain via Internet of Things can help record
temperature, humidity, vibration and other essential
information. As these readings are recorded in the blockchain,
it is tamper proof – therefore informing each member of the
blockchain about the situation. This could potentially help with
the need to change expiry dates, declaring products unfit or
investigating into situations.

Improved efficiency – With no central regulation, each

transaction within the supply chain system can take place
within minutes without any third-party involvement (banks, etc.)
which results in quicker product movement and delivery time.
This can help in reducing product shortages which can
potentially be lifesaving in countries with lack of medical
accessibility. Companies can use the distributed, publicly
verified, and nearly real-time ledger of transactions for

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bookkeeping, data mining, and records verification. This could
reduce the effort spent on reconciling information among
various computer systems. It could also link the systems to
external information sources, such as pricing feeds (electronic
vendors of trading data), in a more customizable and secure
way. Verification of sources and ownership of medical products.
Also, if blockchain is used as a new communication hub
between manufacturers, providers and regulatory authorities,
operations will be streamlined.

Cost Savings- Using Blockchain could also enable GSK to cut

transaction costs which can substantially save costs due to the
sheer size of the supply chain system as transactions can be
made decentralized and without the involvement of banks.
More flexible reserves management. Faster settlement and
immediate notification would reduce the amount of cash and
other collateral that a bank must hold to mitigate settlement
risk. Blockchain’s innately transparent tracking of capital flows
could require banks to keep less money on reserve for working
capital or foreign exchange capital needs. Ability to adapt and
respond to issues rapidly with no critical impact on operational
costs (this is necessary to stay competitive in the market).
Shifting to blockchain can also reduce the company costs due
the reduction of paper usage as every transaction will be
digitized. (Due.com, 2017)

Improved Accuracy- With the availability of the same

information throughout the supply chain, chances of
miscommunication or data verification errors would be reduced.
This can help GSK strengthen their relationship with the
partnered companies in the supply chain. (Deloitte, 2017)

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Organisational, Technological and Social Impacts

Counterfeit Drugs - One of the key issues currently faced by the

pharma industry is the growing market for counterfeit drugs. About
10% of the worldwide drug supply is counterfeit according to the
World Health Organisation (WHO). The drugs enter the supply
chain between the manufacturer and the customer and pose as
legitimate drugs which cause harmful effects which in turn causes
severe damage to the public and the reputation of the company.
Currently, GSK is combating counterfeit drugs by electronically
tagging their products and this, with the combination of Blockchain
technology within the supply chain system can tighten the security
even further. The ownership of those assets can be distinctly
identified at any time with no chance of deception, making it
counterfeit resilient. (Bajpai, 2016).

There are various applications of blockchain technology for the

healthcare industry, for example, drug delivery pipeline for the end
customer. Throughout this process, drug packages are
authenticated, time stamped and placed on blockchain at each
delivery point. Therefore, the drug packages can be tracked.
Blockchain makes the distribution of medicines transparent and
secure because it can prevent the drugs from thefts and reduce the
possibility of price manipulation and delivery of expired drugs.
(Gilbert, 2016).

There is potential not only to reduce the $200 billion in losses each
year but also to increase public safety and prevent some of the
estimated one million deaths per year from counterfeit medicine.

Compliance - Previously, freight forwarders or other entities have

manipulated shipping weights to pay smaller tariffs and lower
shipping fees. Traditionally, those changes on paper documentation
are difficult to find, but not through blockchain, where each party
can see if an event does not correlate to an earlier event.
Ultimately, it assists in the identification of supply chain fraud.

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Challenges corruption – Another example of a social implication is
within a section of social enterprise where lack of trust is a specific
issue, specifically within international aid campaigns. Many
organisations working in this area tend to be in challenging
geographies such as places in turmoil, where facilities are often
poor or even non-existent and where corruption is rife. Blockchain
technology offers a genuine means of finding a way around the
challenges of corruption. Smart contracts for instance could give a
significant advantage for social entrepreneurs operating in places
where dependable third parties are tricky to find.

Go green - As the products are accurately tracked and occurrence

identified throughout the upstream in supply chains will help reduce
the scope of paper rework and product recalls, providing
considerable greenhouse gas reductions due to reduction in
transportation emission. Also since every transaction is digitized,
there will be a great reduction in the usage of paper which can
further improve the standing of GSK with environmentalists.

Supply chain sustainability – Blockchain enables small suppliers

to get paid on time through encrypted trading records which
ensures the legitimacy of authentic transactions. This, in turn, could
make it easier for many small and medium-sized wholesale
companies to access credit, as well as reduce the turnover time for
payments from weeks to days.

Prevent forced labour - Blockchain implementation creates

identity within every section of the supply chain, and along with its
transparency in transaction details, ensures that the cause of forced
labour requirement is prevented.

Decentralization - The decentralised nature of blockchain and

smart-contracts mean that a separate party is not required for an
agreement built upon it. The decentralized structure of the
blockchain would make it impossible for any one party to hold
ownership of the ledger and manipulate the data to their advantage.

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Potential Problems and Challenges of Implementation

Consistency - One of the largest issue to tackle will be the

participation of the supply chain partners of GSK. Every supply
chain member would need to adopt the Blockchain technology
to ensure maximum security and transparency throughout the
process. This can be highly complex as GSK is on a worldwide
scale with multiple suppliers, transportation and warehousing
existing throughout the globe.

Integration concerns: GSK has spent time and money

building the current supply chain system and shifting to
blockchain may pose a risk of breaking relationships with the
involved parties. The shift will also require changes or
replacement to the old IT systems which will cause disruption in
the ongoing systems that have been established for a long time

Technological Environment - Blockchain is relatively modern

technology. Personnel with skills and the technological talent is
scarce and many financial institutions who have adopted
Blockchain are already on the lookout for such talent. GSK
would have to offer attractive packages which could lead to be
excessive costs. There will be training costs for existing or new
employees throughout the supply chain. Some of the current
employees may need to be made redundant which can give
rise to redundancy costs as well as affect the company
reputation negatively. This not only affects GSK, but also the
other companies that are part of the supply chain that would
have to accept the change and its effects.

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Investment - The initial cost to implement the technology on
such a large scale will be massive as the entire IT system
architecture would need to be overhauled. Such an investment
in a relatively recent technology may not be appealing for the
shareholders of GSK or the companies in the supply chain.

Delay- There could be a possible delay in transactions as GSK

has a complex supply chain system and every transaction
within the process will have to be validated by every individual
computers (nodes) within the supply chain network.

Linking digital to physical: Radio Frequency Identification

(RFID), 2D barcode, and near field communication (NFC) are
used today to link to physical product. However, to ensure flow
of information, all steps of the supply chain and all products will
have to be tagged digitally, requiring an overhaul in today’s
supply chain practices.

Legality - Different laws and regulations are present in different

jurisdictions which also pose a challenge to global scaling of
blockchain. As GSK has presence worldwide, it will face legal
obstacles as the shipping routes and the rights of ownership
are governed differently by multiple jurisdictions and the
decentralized nature of Blockchain technology might be
frowned upon.

Irreversibility - As the transaction is hardcoded within the data,

it is impossible to delete or edit a transaction after it has been
recorded in the Blockchain. Although this is a good security
measure, it may prove to be inconvenient for GSK.

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Possible Strategies to Implementation and
Transition - Recommendations
And Long-Term Issues

GSK will need to develop a detailed long-term plan to

identify transition requirements for systems required to
support blockchain adoption.
Transitioning to a new IT system is an immense and
expensive process, and ‘change’ may not be accepted
well in the beginning. GSK will have to be on the lookout
for experts in this technology who can help the company
make the change smoothly. Hiring experts aside, GSK
will also have to train the current staff to adopt this
technology and operate it daily. There may be
redundancies in the current staff which might not be
favorable for the reputation of GSK.
Also, GSK will have to cooperate with the network of
suppliers, freight forwarders, port and customs
authorities too to implement it effectively, and if not,
GSK may need to change their supply chain partners as
not all of them will find it feasible to adopt blockchain
technology.

As the nature of blockchain technology is decentralized,

GSK will have to set out the rules of the trade along with
its supply chain partners to prevent future conflicts.

GSK can start strategizing how to physically track

objects, and add the digital tagging in existing supply
chain to prepare for blockchain implementation.

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Socialize the idea of implementing blockchain in your
company and collaborate with stakeholders prior to
implementation to minimize excessive cost or adoption
risk.
Blockchain companies.

GSK could also outsource its supply chain function to

third party companies that have adopted blockchain
technology (e.g. IBM HYPERLEDGER, SUCHAIN,
FACTOM). This can smoothen the transition in the long-
term process.

Blockchain technology is relatively new, and adopting

such technology at an early stage may not be intriguing
for the company. However, many of the organisations in
different sectors have already adopted this technology
as the benefits outweigh the risks. It also helps GSK
place a positive impact on the society by making it
harder for counterfeit drugs to enter the pharma market.
With added security and transparency, blockchain
technology not only reduces the costs for the company
but also improves the Corporate Social Responsibility
standing of GSK.

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Bibliography

Dickson, B. (2016). Blockchain has the potential to revolutionize the supply chain. Available
at: https://techcrunch.com/2016/11/24/ [Accessed 7 December 2017].

Due.com (2017) Could Blockchain Save Your Business Money? Available at:
http://www.nasdaq.com/article/could-blockchain-save-your-business-money-cm850341
(Accessed: 12 December 2017).

Deloitte (2017) Using blockchain to drive supply chain transparency - Future trends in supply
chain. Available at: https://www2.deloitte.com/us/en/pages/operations/articles/blockchain-
supply-chain-innovation.html (Accessed: 11 December 2017).

Bajpai, Prableen. (2016) Blockchain Technology Can Help Reduce Flow Of Counterfeit
Drugs. Available at: http://www.nasdaq.com/article/blockchain-technology-can-help-reduce-
flow-of-counterfeit-drugs-cm721230 (Accessed: 13 December 2017).

Gilbert, D. (2016). Blockchain Technology Could Help Solve $75 Billion Counterfeit Drug
Problem. Available at: http://www.ibtimes.com/ [Accessed 12 December 2017].

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