How Blockchain Technology And Supply Chain Complement Each Other?
The supply chain consists of a complicated network of suppliers, manufacturers, retailers, distributors, and customers. Subsequently, a product goes through various stages in its supply chain lifecycle. It gets transferred through numbers of hands, from one geographic location into another. This complete activity may take months.
The supply chain is complex, as it’s hard for consumers or buyers to trail back the product’s source. As a consequence, it becomes both intransparent and expensive. Additionally, due to this obscurity, it’s hard to examine supply chains whenever the officials speculate illegal or unfair practices.
Blockchain can help tackle this by bringing clarity and transparency to the table. Therefore, it can affect the way transactions are inducted, recorded, processed, authorized, and reported. It can help businesses to save energy, money, and better consumer experiences.
How blockchain can facilitate supply chains
Blockchain is a distributed ledger technology; a block registers each transaction. These blocks are organized one after another. The network operates across various computers (nodes), consequently making it less exposed to hacks; it’s also extremely transparent. Central authority cannot control the transactions on the blockchain.
Blockchain can positively influence everything from delivery to warehousing and payment. It can be utilized for building agreements/smart contracts, reconciling, tracking, and payments.
Accordingly, companies can use technology to decrease forgery and analyze product recall. In case a product is defective, a manufacturer will be capable of locating affected products immediately and smoothly.
Below are some qualities which are an indispensable part of any supply chain process that blockchain supports:
In a universal operational environment, companies want to be docile with a broad range of global regulations. That said, the digitization of global trade has created new complexities; the size and complexity of transactions are also growing. Blockchain can assist in addressing these issues.
It can assure automated compliance and recording, which will lessen friction and recording costs as well as reduce errors connected with manual activities.
The technology can additionally improve corporate governance by contributing information in real-time and seamlessly distributing data to the proper stakeholders. Critical areas where blockchain could develop compliance and reporting include manufacturers, medical devices, prescriptions, and other consumer goods.
Furthermore, data on the blockchain is almost immutable; i.e., it cannot be modified or deleted. That is why blockchain can be used as a document or evidence for the transfer of any digital asset.
Ownership and licensing
When it comes to precious assets like cars, real estate, art, it’s essential to record information about them most accurately. This is necessary to:
- preserve owners’ rights (e.g., in case of theft)
- resolve conflicts
- verify the correct transfer of ownership to a new owner after-sale
- prevent sales of frauds
It is essential to keep an accurate and complete record so that it can be prevented from illegal and fraudulent changes. That said, blockchain provides standardized licensing procedures in various industries. With the use of products, smart contracts, services, software, etc. licensing can be done automatically.
Reliability and integrity
Reliability and integrity are also indispensable in the supply chain. The fact that all active blockchain nodes have full copies of the blockchain ledger is crucial in this regard. Therefore, if one node is attacked, the data is still held by other nodes, making the system reliable.
Besides, since there is no particular point of failure, the network’s integrity and reliability will remain intact irrespective of who is managing the nodes.
Everyone in the supply chain, the warehouse, the supplier, the buyer, and the end-user — have the chance to find out what’s happening to the product when it’s being transported. As a result, the producers can be sure that the label correctly reflects what’s inside the product.
Besides, customers will also sync with companies with whom they share the same values of environmental stewardship and sustainable manufacturing.
Can privacy and transparency go hand in hand? Yes. Users on the blockchain can stay incognito. This way, they are more content with the idea of sharing data and far more open in the way they associate with the technology.
The benefits of adopting blockchain technology in the supply chain industry include:
- Reduce or eliminate fraud and errors
- Improve inventory management
- Minimize courier costs
- Reduce delays from paperwork
- Identify issues faster
- Increase consumer and partner trust
- Transparency into the provenance of consumer goods— from the source point to the end-user
- Asset tracking
- Licensing of services, products, and software
Examples of blockchain use cases in the supply chain include:
- Walmart employs blockchain to keep track of its pork sources in China. The blockchain records contain information about the source of meat, processing, storage, and sell-by date.
- Australian vehicle manufacturer Tomcar employs Bitcoin to pay its suppliers. Currently, three partners in Israel and Taiwan take such payments.
- Diamond-giant De Beers utilizes blockchain technology to trace stones from the digging point to the store. This way, the company dodges “blood diamonds” and ensures the consumers about the product’s authenticity.
Blockchain is just starting to enter the supply chain area. There are many exciting examples of its usage on the market, for instance, VeChain. There are also projects such as Origin Trail, Tael (formerly Wabi), Te-Food, Ambrosus, Accenture, etc.