How can blockchain technology improve supply chain management?

Blockchain is a cutting-edge technology that has been gaining popularity in recent years. While it was initially associated with Bitcoin and cryptocurrencies, it has since expanded its reach. Blockchain technology has demonstrated its potential in various sectors, including supply chain management. Supply chain management currently involves multiple stakeholders, such as suppliers, manufacturers, distributors, and retailers. Supply chain management is a complicated and challenging task that requires visibility, traceability, and transparency throughout the supply chain network. However, supply chain management is far from perfect. Poor visibility, transparency, and accountability issues have resulted in inefficiencies, delays, and fraud.

Blockchain technology can revolutionize supply chain management by increasing transparency, accountability, efficiency, and security. In this article, we will explore how blockchain technology could enhance supply chain management and why businesses should embrace it.

1. Enabling Traceability and Transparency

A lack of traceability and transparency is a significant issue that plagues supply chain management. Multiple stakeholders are involved in the supply chain, from raw material suppliers to consumers. They use different communication channels to coordinate their activities, but there is a lack of visibility into the entire process, making it incredibly challenging to identify the root cause of any problem.

However, with blockchain technology, transparency and traceability can be achieved. The distributed ledger technology of blockchain records every transaction in a secure and immutable way. Every transaction is time-stamped and linked to previous transactions, creating an unbreakable record of events. It becomes easy to trace the origin of any item and to track it through the entire supply chain. For instance, French supermarket chain Carrefour uses blockchain technology to ensure the provenance and quality of products, including connecting producers with consumers to build trust. This means through blockchain, it becomes easy to trace food origin and also to maintain records in the supply chain.

2. Eliminating Intermediaries and Reducing Costs

Another significant issue that plagues supply chain management is the multiple intermediaries involved in the supply chain network. These intermediaries add an additional layer of cost, which affects the overall cost of the product. Intermediaries in the agriculture sector, for instance, add approximately 50% of the product’s value. They are required for quality checks, distribution, and managing the supply chain.

However, blockchain technology can reduce the cost of supply chain management by eliminating intermediaries through the creation of a decentralized network. A blockchain-based supply chain would allow for the direct transfer of goods between suppliers, manufacturers, distributors, and retailers through smart contracts. Smart contracts are self-executing programs that execute when certain conditions are met. This reduces the need for intermediaries to oversee the supply chain. Smart contracts eliminate manual intervention and human error from the process, making “if X happens, then Y occurs” process identifiable and set in stone. Additionally, this reduces the time spent on settling disputes, which could lead to the reduction of hedging costs.

3. Improving Supply Chain Efficiency

Inefficiencies in the supply chain can result in lost time and money, which can negatively affect the entire supply chain process. The existing supply chain is often plagued with inefficiencies such as missing documentation, delayed payments, errors, and disputes.

However, blockchain technology can improve supply chain efficiency in various ways. The use of blockchain in supply chain management can automate various processes, such as payments, reducing manual interventions and time consumed for transactions. Blockchain and IoT (Internet of Things) can ensure accurate temperature tracking and cold-chain management in the Food and Beverage industry. IBM and Walmart, for instance, are working together to use blockchain technology to improve the traceability and quality of food supply chains. They are using blockchain technology to enhance the tracking and monitoring of food temperature during supply chain transportation. By doing so, they eliminate discrepancies and vulnerabilities in the supply chain.

Moreover, creating better demand management is another aspect that could improve supply chain efficiency. Blockchain can establish a decentralized marketplace that connects producers directly with consumers or distributors. This eliminates the need for third-party marketplaces, drastically reducing costs, where raw materials can be directly linked with manufacturing where there is a demand. Reduction in cost could make products less expensive, providing a significant advantage for its producers.

4. Ensuring Security

Security is a critical issue in supply chain management. Supply chain data is shared across various stakeholders, and any security breach can have far-reaching consequences. Cybersecurity threats, fraud, and theft are major security concerns in supply chain networks. Data theft, lack of transparency, and accountability can also jeopardize brand reputation for businesses.

However, blockchain technology can increase security in supply chain management by providing a secure and tamper-proof network. Once data is added to the blockchain, it cannot be modified without the consensus of all the network participants, making the blockchain network virtually tamper-proof. Permissioned blockchains, which are restricted to trusted participants, offer even higher levels of security. Additionally, businesses could use blockchain technology to authenticate and verify suppliers, track assets, and protect sensitive information in the supply chain. This ensures a highly secure environment where counterfeit and fraudulent products can be easily tracked and identified.

5. Facilitating Data Recording and Sharing

The supply chain is characterized by a vast amount of data that is produced at every stage of the process. This includes data on shipments, deliveries, inventory, quality control checks, and more. The data generated in the supply chain network is generally stored in silos, which makes it difficult for businesses to have a complete picture of the entire supply chain process.

However, blockchain technology could facilitate data recording and sharing in a decentralized manner. Blockchain networks can create shared databases among the many stakeholders of the supply chain, allowing businesses to gain a better understanding of the entire process.

Conclusion

The current supply chain management system is associated with various issues that significantly hinder the seamless flow of goods and services. Poor visibility, transparency, and accountability issues have resulted in inefficiencies, delays, and fraud.

Blockchain technology has shown excellent potential to solve the challenges and restrictions of supply chain management. Blockchain technology can increase transparency, efficiency, security, and accountability in the supply chain. Blockchain technology’s potential for increasing transparency and accountability has the potential to establish more significant public confidence in the food industry, especially in cases of disease breakouts associated with food or contamination.

In conclusion, blockchain technology has the potential to revolutionize supply chain management. With its vast potential, blockchain technology can add value to businesses by improving operational efficiency, ensuring transparency, reducing costs, and increasing trust. Blockchain can drive innovation and efficiency, making it a valuable tool for businesses operating in the supply chain industry.