Blockchain In Supply Chain Opens A New Opportunity To Improve Efficiency And Transparency
Managing the supply chain has never been easy but the advent of blockchain has offered a new way to deal with the supply chain. Blockchain is a technology with a unique combination of features including distributed notes, decentralized structure, and storage mechanism to ensure transparency, visibility, and network security. Blockchain has the potential to transform the conventional supply chain functions from SC provenance and business process reengineering to security improvements. Thus, more and more companies now heavily investing in blockchain technology.
According to Allied Market Research, the global blockchain supply chain market is expected to hit $9.85 billion by 2025, growing at a CAGR of 80.2% from 2018 to 2025. Blockchain would transform the industrial sectors including automotive, manufacturing, shipping, aviation, finance, energy, technology, healthcare, e-commerce, agriculture, and education among others. The true potential of blockchain is yet to be realized.
Blockchain and its impact on the supply chain:
Blockchain is a distributive, decentralized state-of-the-art technology that maintains integrity, confidentiality, and availability of transactions and data. It is a digital shared ledger that is distributed over the network. Once the records are added they cannot be edited without changing previous records and consent of all involved parties, which is precisely what makes it the safest mode of business operations. The technology allows distributed consensus mechanism and informs every event and transaction to all participating entities. Thus, it gained tremendous importance in the supply chain.
While the application of blockchain in the supply chain is limitless, there are still some barriers including usability, privacy, security, and cost. Transforming supply chain needs improvement in functionality and security of all digital platforms such as the internet of things (IoT) and other Industry 4.0 related technologies. Blockchain has the potential to transform every step of the supply chain from procurement of raw materials to distribution to the customers. Moreover, it enables supply chain reengineering by creating a blockchain-based business process reengineering framework. Each and every transaction made can be restructured using blockchain technology, making the journey faster and more secure.
As the blockchain is a decentralized ledger, it records as well as protects transaction data that is shared among several users. Virtual currencies such as Bitcoin, Dogecoin, and Ethereum use blockchain to allow an infinite number of anonymous parties to conduct their transactions without any need for an intermediary. On the other hand, in supply chain management, the sole focus is on enabling a finite number of known customers to perform transactions with each other while improving security, reducing costs, and ensuring contract compliance. There are several benefits of using blockchain technology in the supply chain, including:
Enhanced efficiency: As the supply chain depends on shared network infrastructure, blockchain technology enhances collaboration and communication between all involved parties. This creates greater transparency and traceability, eliminates risk of duplicate orders, rogue spending, invoice fraud. What’s more, contract compliance contingencies allow all parties to meet their decided obligations in a complete, timely, and accurate fashion. Blockchain in the supply chain offers suitable financing options for small businesses and reduces overall processing times by minimizing uncertainty and risks.
Sustainable, ethical sourcing: Blockchain offers the utmost levels of transparency and traceability, which make it simpler to validate where goods come from and where they go through the supply chain. Moreover, it offers accurate information about who had access to goods and materials during the travel. Higher savings: Reduction in waste, stock loss, and improvement in efficiency are the prime sources of cost savings with the integration of blockchain in the supply chain. The distributed network shares transactions and resources digitally with allowing parties, eliminating the need for paper-based business operations. The paperless process does not only lower material costs, but also eliminates ancillary costs regarding storage, labor required to manage the physical documents.
Functionality for digital transformation technologies: As blockchain technology easily integrates with other advanced technologies including process automation and IoT through the use of RFID tags and smart sensors, it improves the overall functionality, visibility, and accuracy of the process.
Over the last few years, several major organizations adopted blockchain in supply chain management. Recently, the Indian logistic company, DTDC announced that it has entered the phase of cloud-enabled digital transformation and now aiming for blockchain-based technology to improve the supply chain ecosystem. DTDC has already invested heavily in big data and cloud technology and has benefited from the technologies. Thus, adopting blockchain is its next step to improve the current methods of the supply chain. Apart from this, Walmart, FedEx, and DeBeers have been using blockchain in the supply chain to monitor the source and process of every single transaction.
While Bitcoin has introduced the world to blockchain, business operations have been blessed with a new tool to improve their processes and meet customer demands. Improving efficiency and offering transparency and traceability is the most vital part of the supply chain. Blockchain technology’s role won’t end with virtual currency. The technology has proved that it has the potential to gain better control and visibility into the supply chain than any other tool available. Thus, the companies that are ready to embrace the changing face of supply chain management must invest in blockchain. It will unlock new opportunities to reduce costs, improve efficiency, and offer a stronger position in the competitive marketplace.
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