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How Blockchain Technology Could Affect Supply Chains for the Better

How Blockchain Technology Could Affect Supply Chains for the Better

March 31, 2022
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Managing a supply chain, from production to distribution, is an extremely complex process. Even with existing information systems that allow them to track orders and shipments, most businesses still have limited real-time visibility and awareness of their inventory due to gaps in Supply Chain.

Welcome to Blockchain 

First, a bit of history: Blockchain is the technology behind Bitcoin and other cryptocurrencies. It is a tamper-proof digital ledger that records all types of transactions — purchases, sales, contracts, funds transfers, etc. — in a series of secure, permanently identifiable data files called blocks. Each new block of transactions is linked to previous blocks, creating an unforgeable chronological record, hosted simultaneously by millions of computers. Blockchain data is not all stored in one place, so it is truly public and easily auditable.

Think of blockchain as “an intelligent spreadsheet” whose immutability, verifiability, and disintermediation make it the ideal solution to the supply chain puzzle.

The main difference between the blockchain and a spreadsheet is that it is possible to add information to it, but not to modify or delete it. “Any modification is recorded visibly in the database, which makes it tamper-proof. Moreover, there are always several parties that have an eye on this database: if you decide to modify data in the blockchain, your modification will be visible and verifiable by all other entities that have access to it.

Integrating Blockchain into a Supply Chain 

Supply chain management is the flow of goods and services involving the movement and storage of raw materials. Within each supply chain is a connected network of resources, organizations, people, technologies, and activities involved in the creation and sale of a product or service.

The supply chain begins with the manufacturing and delivery of raw materials and ends with the delivery of the finished product/service to the consumer. Currently, the technology that supports supply chain management is old. It is struggling to keep pace with the dynamics of the global market. For players in this sector, maintaining the efficiency of their operations is becoming more and more difficult, as more data must be processed and analyzed regularly.

Blockchain is the technology needed to improve the current supply chain system. It should be understood that blockchain is not software, but a layer of technology that plugs into existing information systems and complements them. Users continue to see their usual interface with their business processes, but when it comes to inventory, they can also see processes of actors in the supply chain, as well as every change in inventory in real-time.

Benefits of Blockchain to Supply Chain 

One of the main supply chain management issues is poor communication between the organizations involved. This lack of communication can lead to products not reaching the consumer in time, or even to some products being damaged.

Blockchain can help solve current problems with the supply chain system. With the decentralized blockchain ledger, all records of ownership, location, and movement of coins and goods can be tracked and greatly enhanced.

Blockchain technology is immutable, meaning it cannot be changed retroactively. By implementing blockchain technology in supply chains, it should help monitor where products are coming from and ensure that the whole process is legit and legal.

Key stakeholders can also more easily access the necessary data. All information about the condition and integrity of materials and products could be stored on the blockchain. This means companies in the industry can collect, analyse and use data throughout the supply chain to improve their processes.

The application of blockchain in logistics would enable the verification, recording, and coordination of transactions autonomously, which eliminates intermediaries. Thus, blockchain could remove a layer of complexity from global supply chains.

Consumers are now making more conscious decisions to purchase legitimate products. This means that suppliers must provide details of the authenticity and trace of origin of all products. Blockchain proves this provenance by ensuring that shipped goods include a digital passport to prove the authenticity of the products at every stage of their journey.

Companies That Are Moving Towards Blockchain

IBM and Walmart have partnered on a blockchain-based food traceability initiative that will instantly identify the origin of products. Instead of taking nearly a week, data can now be retrieved in just 2.2 seconds. This will prove extremely beneficial in the event of foodborne illness outbreaks and safety recalls.

Another company embracing blockchain technology is WWF-Australia. They partnered with BCG Digital Ventures to launch OpenSC, a blockchain-enabled tool that can track food at every stage of the supply chain.

BHP has also introduced a blockchain solution that replaces spreadsheets for tracking samples both internally and externally from various suppliers.

Final Thoughts

Blockchain can completely revolutionize the supply chain management system, with companies like IBM and Walmart now experimenting with the technology and reaping the benefits. If similar companies don't start implementing blockchain in their systems, they will soon start to fall behind.

Businesses could start small by trying blockchain solutions on their weak spots first. Once everything is working well and progress has been seen, blockchain could be applied throughout the supply chain until all issues are resolved.