Power of Blockchain in Supply Chain
A supply chain is a system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer. It is designed to maintain the quality of sensitive goods during the whole shipment. Centralized supply chain management systems expose the supply chain to corruption, fraud, and tampering. Blockchain has emerged as a new distributed information technology; it represents a new approach in the supply chain area, where visibility and transparency of product flows are the principal challenges.
Blockchain has the potential to become a universal supply chain operating system – more security, more transparency, and scalability. Blockchain won’t solve all supply chain problems, but it will have answers for most of them. If innovators can efficiently combine blockchain with AI, smart contracts, and IoT-like technologies, all the ills of supply chain management can be cured.
What is Blockchain?
Blockchain is an internet-based technology that allows for the public validation, recording, and distribution of transactions in immutable, encrypted ledgers. Because transactions and ledgers are encrypted, blockchain technology offers more security than the banking model, and instant transmission over the Internet avoids the banks’ two to three-day clearing process and associated costs of transfer funds from one account to another. The term “blockchain” is derived from the “blocks” of validated and immutable transactions and how they are linked in chronological order to form a chain (exposure). Hence the term “blockchain”.
Importance of Blockchain in Supply Chain
Since the 1990s, thanks to the introduction of enterprise resource planning (ERP) systems, significant progress in supply chain information exchange has been made, led by corporations like Walmart and Procter & Gamble. Visibility, on the other hand, remains a problem in vast supply chains with numerous transactions.
Blockchain can enable more transparent and accurate end-to-end tracking in the supply chain: Organizations can digitize physical assets and create a decentralized immutable record of all transactions, making it possible to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both businesses and consumers.
Applications of Blockchain in Supply Chain
- Payments in Automotive Suppliers
- Tracing the Food
- Monitoring Cold Chain
- Monitor and Distribute Energy
- Maintaining Health Records
Blockchain can provide increased supply chain transparency, as well as reduced cost and risk across the supply chain. Specifically, blockchain supply chain innovations can deliver the following key benefits:
Primary potential benefits
- Increase traceability of material supply chain to ensure corporate standards are met
- Lower losses from counterfeit/grey market trading
- Improve visibility and compliance over outsourced contract manufacturing
- Reduce paperwork and administrative costs
Secondary potential benefits
- Strengthen corporate reputation through providing transparency of materials used in products
- Improve creditability and public trust of data shared
- Reduce potential public relations risk from supply chain malpractice
- Engage stakeholders
- Reduce or eliminate fraud and errors
- Improve inventory management
- Minimize courier costs
- Reduce delays from paperwork
- Identify issues faster
- Increase consumer and partner trust
Regardless of the application, blockchain offers business to capitalize the following:
- Enhanced Transparency: Documenting a product’s journey across the supply chain reveals its true origin and touchpoints, which increases trust and helps eliminate the bias found in today’s opaque supply chains. Manufacturers can also reduce recalls by sharing logs with OEMs and regulators (Talking Logistics).
- Greater Scalability: Virtually any number of participants, accessing from any number of touchpoints, is possible (Forbes).
- Better Security: A shared, indelible ledger with codified rules could potentially eliminate the audits required by internal systems and processes (Spend Matters).
- Increased Innovation: Opportunities abound to create new, specialized uses for the technology as a result of the decentralized architecture.
– Tejo Joseph