One of the many areas that blockchain technology is poised to revolutionize is the supply chain.
Today, supply chain management is immensely complicated. A single supply chain can involve hundreds of stages depending on the product, and these stages can be spread throughout the world.
Considering supply chains can last a period of months, this division of management is far too complex to leave to chance or without careful monitoring. After all, an issue in one of the early stages of the supply chain can impact another step months later, even if those in charge are unaware of the connection.
To make matters worse, current supply chains are not only incredibly complex but also lack transparency. Because of these challenges, those with an interest in the supply chain are looking forward to blockchain technology simplifying the entire process. This will help those who actually manage the supplies and logistics as well as manufacturers, retailers, and even consumers.
Supply chain applications using blockchain technology could be used for all kinds of things, from streamlining the process of tracking items to preventing counterfeits to stopping expired products from reaching the shelves. The use cases are vast, and many developers have already started creating platforms and apps to put the blockchain to use.
Current Issues with Supply Chains
To better understand how the blockchain could improve how supply chains are managed, we need to take a closer look at the current issues with supply chain management. Supply chains used to be relatively simple, but the management strategies have not evolved as the chains themselves became more complicated.
Now that commerce no longer remains local, there are simply more elements at play. Supply chains have simply become more complex as shipping methods, the internet, and other factors expanded their scope. Meanwhile, the methods for dealing with supply chains have not changed.
Additionally, the current supply chains have almost no transparency. This means that customers and buyers do not have a clear idea of what products are worth. They also cannot tell if a particular supply chain includes unethical or even illegal practices due to this lack of transparency.
That lack of transparency also hurts vendors and suppliers, who must deal with a lack of efficiency in a system that doesn’t clearly show them where their products come from so they can protect against fraud or even just be proud of ordering from certain sources.
A Quick Overview of Blockchain Technology’s Benefits for Supply Chains
The blockchain could improve the supply chain in numerous ways thanks to its nature. Before delving into more detail, we’ll give you a quick overview of its numerous benefits.
The blockchain creates an immutable record of every transaction. This record cannot be changed, so it prevents fraud and clearly shows the history.
When harnessed by the supply chain, that type of ledger would deliver the transparency that is currently lacking. It would also make it simple to see where a certain product has been throughout its life.
Additionally, the blockchain is distributed over various nodes and highly secure, with each block connecting to those before and after them. Since there is no central authority in charge of the blockchain, there is no risk of a single organization adjusting information on it related to the supply chain.
Similarly, the supply chain information is protected since there is no single point of failure. Thanks to the distributed network, most nodes would have to fail or be attacked for the information on them to fail.
Overall, using the blockchain can lead to enhanced efficiency and transparency of the supply chain. Every aspect of the process, from creation to storage to delivery, would be improved by adding blockchain technology.
Blockchain in Supply Chain Transparency
One of the most significant ways that the blockchain could change supply chains would be by adding transparency, as mentioned above. Everyone wants transparency from the products they buy, and retailers want to know exactly where the products they sell come from.
However, few realize just how transparent blockchain technology could make the supply chain. Remember that the blockchain logs every single transaction on a record that cannot be changed or hidden (unless it is a private blockchain).
In terms of the supply chain, this would mean that every single step a product takes would be recorded, and this record couldn’t be changed. Each time the product goes into new hands, whether for shipping or storage, that transaction is recorded.
In this way, there is a permanent, detailed record of the product’s journey from its manufacture to its sale. The result is not only assurance that a product is not a counterfeit but also improvements to the actual tracking process.
There is no possibility of human error such as accidentally adjusting the record inaccurately. There will be no question as to where the product was at a specific time.
Perhaps most importantly from a business perspective, using the blockchain to keep records of the supply chain is significantly more affordable than traditional methods, as it’s less labor intensive.
Specific Transparency Benefits
Every aspect of the supply chain receives enhanced transparency with blockchain technology. It becomes possible and seamless to record the transfer and quantity of assets, from individual products to trailers or containers of them, as they go between nodes on the supply chain.
Everyone involved can enjoy transparency with tracking. Customers, retailers, and suppliers will be able to track purchase orders and change them, get shipment notifications and appreciate transparency on other related documents.
With the blockchain, manufacturers can assign certifications for properties of a physical product with confidence, since they can see where it comes from. An example would be having proof that a food item is truly fair trade or organic.
Similarly, you can use the blockchain to track where dangerous or restricted products pass through, ensuring that all regulations are followed during the process.
Transparency with blockchain technology lets you connect a physical good to its digital tag, barcode, or serial number. In this way, it is clear that the item you have information on is the one you are interested in.
Finally, you can transparently share information regarding manufacturing, assembly, delivery and maintenance with the vendors, suppliers, and clients.
Blockchain in Supply Chain Record Keeping
In addition to the lack of transparency in supply chain record keeping, there are scattered records and reporting systems. The use of multiple systems leads to incomplete information that is hard to access at times or unreliable.
However, blockchain records are seamless, making it possible to securely store the information and have it accessible to everyone who needs it. In this way, there is no need to worry about the sender, shipper, receiver or even regulators accessing the information or trusting their reliability. Everything is accessible via the blockchain.
Blockchain Tech to Resolve Supply Chain Issues in Real-Time
Things like natural disasters, spikes in demand and unforeseen shortages all pose a serious challenge to the supply chain. As soon as a problem occurs in one step of the chain, this ruins plans for the following ones.
Since today’s supply chains are particularly long, a simple delay or small problem can lead to expensive and time-consuming problems.
While the blockchain cannot prevent delays due to errors, weather or other unforeseen causes, it can help mitigate the problems caused by these delays. You can set up the blockchain so that as soon as it detects a shipment isn’t complete or has a risk, it can take remediation steps before a crisis occurs. Examples include adjusting the price or getting a substitute from the supplier.
Blockchain in Supply Chain Scalability
Another immense benefit of blockchain technology for the supply chain is its scalability. Since the blockchain is scalable by nature, there is no concern about a supply chain becoming too complex.
You don’t have to worry about adding more steps to the chain or even where in the world they are since the blockchain takes care of it all.
Blockchain in Supply Chain Security
The fact that the blockchain’s ledger is immutable and shared dramatically improves security. As mentioned earlier, a hacker cannot simply attack the records at a single point and change the information.
They would have to do so with most of the nodes thanks to the blockchain’s decentralized nature and consensus mechanism.
The shared ledger features codified rules, as well, something that some feel might even eliminate the requirement for audits, at least to a vast degree. After all, if everything is clearly outlined on the blockchain and must follow the rules for it to be included, there is no real need to confirm the processes.
How to Integrate the Blockchain into the Supply Chain
Although the benefits of the blockchain for supply chains are clear, there is still the challenge of applying the technologies. This cannot typically be done at once since that would require a complete overhaul of a company’s supply chain. Instead, most experts suggest a gradual approach.
Start small with something like a blockchain used internally within the company before expanding it to include direct suppliers and others in direct contact with the company.
From there, businesses can expand the blockchain to include the entire supply chain. Of course, organizations are still trying to determine whether this is the ideal method or if a better alternative is available.
Blockchain to Prove Food Security in Supply Chains
While the blockchain’s impact on all supply chains is important, the advantages become even more clear when you look at an industry like food. After all, retailers and manufacturers alike must confirm that their products are safe for people to eat, something that the supply chain plays an important role in.
The specific supply chain for food will vary, but it typically includes steps such as the farm, processing plant, distributor, and retailer. Between each step in the chain, there is always the potential for problems.
If products are compromised via tampering, substitution or misrepresentation, this can lead to an economic loss. If the products are contaminated along the way by viruses, bacteria, toxins or insects, this could lead to legal culpability.
Alternatively, if food items spoil from incorrect storage temperatures or humidity controls or simple expiration, this could cause an economic loss (from waste), legal culpability (if they are still sold) and social backlash if the reputation of the product worsens.
With the blockchain, however, every step of the supply chain for food is traced digitally. Along the way, food products will be scanned and recorded, letting everyone involved authenticate the products. Processing plants can confirm they use fresh ingredients that are what they claim to be.
Distributors and retailers can then confirm the products they get are as advertised and safe to sell. Finally, consumers can confirm it is safe to eat their purchases and know exactly what they buy.
This same application of the blockchain can work for medication supply chains or anything else that people consume.
Real-World Applications of Blockchain in Supply Chains
There are already numerous real-world applications of blockchain technology in the supply chain today, many of which are in use or will soon be. One Australian automotive manufacturer pays suppliers using Bitcoin for direct, rapid payments with low fees. Using Bitcoin to pay third parties is a secure way to conduct business, and we’re sure to see more of this throughout the supply chain network.
Walmart uses the blockchain to track its pork sales within China so it is clear where each cut of meat comes from as well as information such as its sell-by, processing and storage dates. This way, if a recall becomes necessary, Walmart can see which batches were affected and where they were sold.
Systems are already in the early steps of monitoring pharmaceutical and food products that require cold storage. Sensors record vibration, humidity, and temperature, storing the information on the supply chain to guarantee product safety for consumption.
Another excellent use case of blockchain technology at work in real-time is IBM Blockchain. The tech giant uses blockchain to optimize their business transactions and trading relationships both in America and worldwide with the peace of mind knowing that data and essential information is secure. IBM’s use of blockchain is another testament to how major corporations are benefitting from using digital ledgers and are able to make vast improvements to their management systems.
As with many other areas of business, blockchain technologies are poised to revolutionize the way that supply chains function. By taking advantage of the blockchain, companies can delivery transparency in the supply chain, have more faith in their ability to keep up-to-date records, enjoy a scalable solution, appreciate the enhanced security and see numerous real-world applications.
Numerous major companies already use the blockchain in their supply chains, and other businesses have sprung up providing these same services to businesses of all sizes. The connections between supply chains and the blockchain, as well as the use cases, will likely continue to expand in the coming years.