To create reliable supply chains, blockchain technology is quickly becoming the preferred method of operation. Stakeholders in the supply chain may use blockchain, the digital ledger-keeping environment originally designed for cryptocurrency networks, to build a full, transparent, resilient, documented chronology of all information, financial, and inventory movements in the supply chain.
There are, of course, preliminary requirements for implementing blockchain in SCM:
- Supply chain “standardization” necessitates a new consensus procedure.
- Create a worldwide online identification system to make it simpler to verify the identities of internet service providers.
Blockchain has the potential to bring about tremendous benefits for businesses across sectors, including the creation of robust supply chains, but only if it is applied with care.
What is supply chain management and how does it work?
Managing the whole manufacturing process, from the procurement of raw materials to the delivery of the finished product or service, is what is meant by “supply chain management” (SCM). It also manages the flow of resources (such as materials, information, and money) linked with a product or service.
However, logistics is simply one aspect of the supply chain, despite common misconceptions to the contrary. In order to maintain centralized control over the supply chain, conventional supply chain management systems implement activities such as planning, sourcing, manufacturing, delivering, and after-sales support.
In other words, the first step is figuring out how to cater to the market and choosing vendors from where to get the necessary components. The next stage is to ascertain whether or not delivery will be outsourced or handled by the manufacturer. Networks also play an important role in providing after-sales services, such as product returns and repairs, which are essential to maintaining happy customers long after a product has been sent.
Instead, software controls contemporary SCMs in their whole, from product development to storage to order fulfillment to information tracking to shipping to customer support. Amazon uses a wide variety of robotic and automated technology, such as stacking and storing items, and picking and packing orders. In some areas of the United States, the business has also started using electric drones to deliver items that weigh less than five pounds.
Why Is Blockchain Used in the Supply Chain?
Blockchain is utilized in supply chain due to its ability to establish a verifiable and immutable record of all transactions, which boosts transparency and trust among all parties involved. It significantly reduces the potential for fraud, errors, and discrepancies, and eliminates the need for third-party validation.
Blockchain’s real-time visibility enables immediate identification and rectification of issues, enhancing efficiency and cost-effectiveness. In essence, it delivers a secure, interoperable and scalable solution, transforming the supply chain into a more reliable and streamlined operation.
TO IMPROVE TRACKING AND TRANSPARENCY
Smart sensors and RFID tags are only two examples of IoT devices that may be used with a blockchain to keep track of when and where goods are in the supply chain as well as their environmental conditions (temperature, vibration, humidity, etc.). Following its addition to the blockchain, smart contracts are implemented to guarantee the data’s transparency in near-real time.
Enhanced tracking visibility implies timelier problem identification and resolution for businesses. It also implies that costs might be reduced. Distributed networks that digitally exchange resources and data can cut down on stock loss and waste, and they can do away with paper-based workflows, saving money on things like space, labor, and other overhead.
TO ADDRESS FOOD SAFETY ISSUES
Producing, processing, packing, storing, and distributing the food we consume is a complicated global supply chain in and of itself. Because of this, people are eating more and more processed foods that have traveled long distances. Cross-contamination and the spread of foodborne pathogens are only two examples of the difficulties in isolating food safety concerns. Traditional supply chains are hampered by a lack of data and visibility, which makes it difficult to respond rapidly to problems that develop and may have a negative impact on a company’s bottom line and reputation.
The immutability and trustworthiness of the blockchain make it an ideal solution for these types of problems.
In 2017, many prominent figures in the food business got together to discuss how blockchain technology may be used to enhance food safety on a worldwide scale. Companies like Unilever, Nestlé, and Walmart are now using blockchain technology to speed up the process of tracing and eliminating the origin of foodborne disease.
Nestlé’s global sustainability performance and innovation manager Benjamin Dubois told TechHQ in 2020, “The food marketplace is evolving, and we have this scale of operation, providing this healthy food throughout the world — but it’s about showing customers where we’re sourcing it and what we put in place to ensure that you know the food is good and healthy.” He went on to call data and transparency “critical” to consumer trust.
TO PROMOTE MORE ETHICAL AND SUSTAINABLE SOURCING
In recent years, shoppers have started to consider the wider effects of their purchases, such as those made in the areas of sustainability and social responsibility. Customers expect the firms they purchase from to follow all relevant ethical and environmental standards when sourcing the materials used in their goods.
“There’s a complete shift in how companies see their role, and it’s enabled by supply chain transparency,” Leo Bonanni, founder and CEO of supply chain mapping company Sourcemap, told Built In in an interview earlier this year. “Today’s businesses don’t just see their interactions with consumers and suppliers as business. Their self-perception is that of “global actors.”
There are two ways in which blockchain technology might assist here. First, it may confirm the authenticity of a product or material’s provenance, or origin, and share that information with buyers so they can make an informed decision. Second, because of blockchain’s immutability and tamper-resistance, buyers can more easily track the origins of their purchases across the supply chain, from raw materials to final delivery.
You may also like reading: What are global supply chains, and why do they matter?
3 uses of blockchain in supply chain
Supply chain management stands to benefit greatly from the enhanced openness, security, and efficiency made possible by blockchain technology. The supply chain may make use of the technology in the following three main ways.
Blockchain in supply chain: Transparency
Products and materials may be tracked in real time as they go from manufacturer to retailer to retailer be customers using blockchain technology. As a result, there is more openness and trust in the supply chain.
Blockchain in supply chain: Product authentication
Because it permits secure and unchangeable records of a product’s origin and movement along the supply chain, blockchain may be used to verify the authenticity of items and prevent counterfeiting.
Blockchain in supply chain: Quality control
In order to reduce waste and increase consumer happiness, businesses may utilize blockchain technology to keep tabs on the quality of items as they make their way through the supply chain.
What are the Benefits of Blockchain in Supply Chain Management?
Smart contract programming capabilities, together with blockchain technology, make it possible to do the following:
- Transparency into the provenance of consumer goods— from the source point to end consumption
- Accurate asset tracking
- Enhanced licensing of services, products, and software
Supply chains can still be made more effective, tracked more precisely, and less exploitative in today’s modern technology environment. Half of the cost of transporting containers is attributable to administrative paperwork. From 2010 to 2012, Oceana, an international ocean advocacy group, performed a statewide investigation in the United States and found that up to 87% of seafood is mislabeled. Makeup, electronics, and car paint all include mica, which is often mined illegally by children.
In addition, counterfeiting and fraud are problems for a wide range of consumer items, but notably electronics, medications, and high-end labels. In fact, according to a PwC estimate, counterfeiting generates more than 2% of global GDP.
Goods and commodities can be tracked more easily, transparently, and responsibly thanks to the use of public, private, and hybrid blockchains. Logistics may benefit from this technology since it will streamline procedures and save expenses in the supply chain.
Blockchain and supply chains – the future?
Businesses may learn from the experiences of market leaders who have already started experimenting with blockchain as this technology gains traction. The network effect is especially helpful for blockchain technology, since it encourages further adoption once initial interest has been piqued.
For instance, the new supply chain communications system Supplain will first be used by a small group of organizations before being adopted by the industry at large.
More trust, transparency, sustainability, and traceability may be introduced to supply chains thanks to blockchain technology. There are many people and organizations involved in today’s supply chains, and stricter regulations are placing a premium on detailed audit trails.
To facilitate their high-volume operations, most participants in the supply chain today rely on proprietary, siloed databases storing data with poor connection and traceability.
Hundreds of new innovations that depend on transparent, verifiable, and trustworthy supply chain data are made possible by the introduction of blockchain technology into supply chains. Without a doubt, there will be IT innovation firms prepared to provide a hand to supply chain firms throughout this time of change.
Q: Why is blockchain technology beneficial for supply chains?
Blockchain technology provides transparency, traceability, and efficiency in supply chains. Every transaction in a blockchain is stored in an immutable ledger, making it possible to trace the origin of goods, track their movement, and validate their authenticity. This transparency can help prevent fraud, improve trust among parties, and streamline operations.
Q: How does blockchain improve traceability in supply chains?
Traditional supply chain systems often struggle with traceability due to complex networks of manufacturers, suppliers, and logistics providers. With blockchain, each product can be recorded on the ledger with a unique identifier. As it moves through the supply chain, each transaction is added to the blockchain. This provides an immutable, verifiable record of every movement and transaction, making it easy to trace a product back to its origin.
Q: How can blockchain help reduce fraud and counterfeit products in supply chains?
Blockchain’s immutability means that once a transaction is recorded on the blockchain, it cannot be altered or deleted. This makes it much harder for fraudulent activity or counterfeiting to occur since every transaction is traceable and verifiable by all participants. It’s also possible to use blockchain to authenticate products, verifying that they are genuine and haven’t been tampered with.
Q: How does blockchain increase efficiency in supply chains?
By providing a single, unified record of all transactions, blockchain eliminates the need for disparate, often manual record-keeping systems. The automation of these processes reduces errors and administrative costs. Blockchain can also automate contractual transactions through smart contracts, speeding up processes that would otherwise require manual intervention.
Q: What are the challenges in implementing blockchain in supply chains?
While blockchain has many benefits, implementation can be challenging. This includes technical complexity, a lack of standardization in technology, legal and regulatory uncertainties, and the need for a significant cultural shift towards collaboration and transparency. It also requires a network effect – the more parties in the supply chain that adopt the technology, the more effective it becomes.