Blockchain in supply chain management is being considered as one of the potentially helpful among the emerging technologies. Today supply chain industry has reached a magnitude with its global expansion where it has crossed the limitation of transportation and logistics and embraced far more complexities in operation. The supply chain industry has spanned over multiple geographical locations, which may sometimes involve hundreds of stages, levels of paperwork, and of course, payments related works. Hence, transparency, integrity, efficiency, security, and scalability must be an endeavor for every company associated with the supply chain industry. Generally, the supply chain consists of the following flows :
– Information flow
– Material flow
– Financial capital flow
Unless appropriately managed following problems may occur from the flows as mentioned above –
– Decreased sales
– Increased frauds with overhead costs
– Degradation of the quality of improvisation
– Lack of production and distribution
– Increased cost and complexity of the manufacturing process, especially for the extremely complex processes.
Though supply chains have transformed, organizations have not updated the underlying technology of supply chain management. There comes Blockchain technology. Though primarily famous for its role in cryptocurrency, we must acknowledge that it is the algorithms and architecture working behind Blockchain’s functionality, irrespective of the business domain. Furthermore, as mentioned above, Blockchain in the supply chain can meet supply chain companies’ goals with its technicalities.
Related post – What is Blockchain technology: An Overview
Properties of the Blockchain technology that can disrupt the supply chain management system
– Decentralization
Decentralization is the very core idea of Blockchain technology. With the current supply chain industry, all the suppliers and procurement officials become their own silos of information. Thus there is no 100% assurance that the information they are sharing is 100% authentic or not. However, the Blockchain breaks down this very concept of silos. By decentralization, we mean that any stored data inside the Blockchain is not owned by one centralized entity. However, it is shared by everyone, whoever is part of that Blockchain network.
- Immutable
Immutability means non-tamperable. As mentioned, any data that you put inside the Blockchain cannot be tampered with. This is due to cryptographic hash functions. Hashing means taking an input string of any length and giving out an output of a fixed length.
- Transparency
In the Blockchain system, an object's real identity is secured, while you will still see all the transactions using their public address. This level of transparency adds an extra level of accountability, which is much needed in financial transactions.
How is Blockchain in Supply chain serving the industry?
# Leveraging Transparency and traceability
Whatever be the product in the pipeline of supply chain and logistics, consumers always want that in good shape and quality. Thus authenticity at each stage of the move is necessary with proper tracking of relevant data. Blockchain, which is nothing but a distributed database, records each transaction on a block across multiple ledger copies. In fact, supply chain Blockchain works as a digital ledger. Hence, it is not a difficult task in the supply chain to find the correct journey path of goods from origin to touchpoints with Blockchain. Additionally, the time stamping on the product provides an extra mile of the product history's truth. Thus blockchain for supply chain traceability and transparency is unparalleled service. Besides, it enables useful information sharing on other associated tasks related to manufacturing, logistics, and transportation. Moreover, it has several benefits like improved product safety, increased forecasting accuracy, a reduction in fraud, and collaborative planning within the industry.
# Better data analytics
When the supply chain flow covers a geographically extensive network, it needs to track and manage the product at the ecosystem level. This happens nothing better than with Blockchains, where the payoff is with much greater accuracy. This results in better forecasts and causes companies to maintain less inventory at the same service level.
# Facility of Smart contract
Blockchains in the supply chain leverage digital contracts that flow across enterprises. Besides, it integrates with logistics and banking systems. In the blockchain smart contracts supply chain system, the terms are payable upon receipt, where proof of delivery from a logistics carrier triggers immediately. This also facilitates digital invoicing and payments without any gap between the supplier and the customer. So, such digital contracts through Blockchain integrates banks and logistics across enterprises. This brings a radical change in overall capital needs and simplifies financial operations.
# More Security
In Blockchain, the ledgers are distributed across many nodes, and each node is linked with another node one before and one after it. Thus this chain structure is tamperproof. This higher level of accountability operates as a barrier to players intended to behave opportunistically or unethically. As each participant contains a copy of the ledger, where all transactions and movements are part of that ledger, no manipulation of data is permissible. If any participant tries to manipulating its ledger, it gets immediately out of sync with the rest of the ecosystem. No doubt, this is a powerful deterrent to bad behavior. So, even if you can add or access the data, modification is not allowed as a user. This, in other words, works wonders for humanitarian activities as well. For example, if the fund is being sent to some charitable purpose through this medium, there is no chance of fraudulent activity due to the complete audit trailing facility of the Blockchain system. Hence, the architecture is highly secure.
# Easy Scalability
Since there is no central authority of the Blockchain, it is easily scalable. Thus any number of participants can access virtually from any number of touchpoints and be added to the process.
# Correct record tracking
In a supply chain system, a product may traverse through many hands, consisting of many manual actions. This may make an end to end integration painful as well as cause cumbersome paperwork. Blockchain in supply chain management can significantly contribute to paperless trade, eliminating the document-heavy system. There is no need for a physical signature if Blockchain is introduced in the process. This not only expedites the process but also eliminates any disputes. So, as mentioned above, maintaining transparency is more comfortable using Blockchain, so accurate record tacking like quantity and transfer of assets is seamless between supply chain nodes.
So, key take away in how Blockchain can improve supply chain flow :
- You can record the quantity of the products and how it is being transferred through different phases.
- Tracking of all the purchase orders, receipts, change orders, trade-related details
- Validating the certification of the products. Eg. certain quality standards
- Blockchain can link various physical items to serial numbers, tags like RFID, and barcodes, etc.
- Shares all the information related stages of supply chain flows. It begins from the manufacturing process to assembly and delivery, including maintenance of products with the different vendors in the supply chain.
To conclude, we can say that Blockchain has considerable potential in the supply chain industry in cost-cutting and smooth communication and processing orchestration between different involving parties associated with the global supply chain and logistics business. However, for large-scale implementation of Blockchain, the major barrier is participation. In the supply chain, multiple players work together and, to employ Blockchain technology to gain transparency and efficiency in supply chains, all players have to cooperate. What do we mean by cooperation here? – they must agree to join a shared platform and accept the agreed set of standards.