How can Blockchain Technology Revolutionize the Supply Chain?
Blockchain is a distributed ledger technology that securely stores the digital records of transactions. All the people on the ledger can view the records but cannot edit or tamper them. This makes blockchain immutable and immune to any kind of corruption. Once information is stored on a blockchain database, it cannot be changed; thus, it leaves a permanent trail of each transaction. Blockchain is decentralized, i.e., it is not controlled by a single centralized authority rather jointly managed by all the members on the blockchain network. This property makes blockchain inherently more transparent and secure. Blockchain technology is most popularly known as the technology that powers cryptocurrencies like Bitcoin. However, the characteristics of blockchain technology make it suitable for applications well beyond cryptocurrencies. Some industries which can benefit from blockchain include education, healthcare, government, supply chain, etc. In this article, we will be discussing how blockchain technology can completely revolutionize the supply chain.
The supply chain consists of a network of people involved in creating and distributing a product or service. A supply chain network consists of suppliers, manufacturers, logistics companies, and retailers. Given the rise of globalization coupled with rapid technological advancement, supply chains have become complex. One of the biggest challenges of supply chain management is the lack of transparency. The customers and buyers cannot know the actual value of products and the materials used in their production. This creates a lack of transparency and traceability amongst the members of the supply chain. Further, this also reduces customers’ trust in the company or organization, leading to lesser sales and profits. Since blockchain provides unique ways to record, transmit, and share information, it can hugely impact the supply chain. The following are how blockchain technology can improve the inefficiencies in the supply chain:
- Improves transparency
As discussed above, blockchain is immutable and requires digital signatures to verify the ownership of information. All the stakeholders involved in the supply chain can utilize this quality of blockchain to record their products’ location and ownership securely. Once this data is stored, all the supply chain members can see where the materials are at any given point in time. If there is a problem in the product, it can be identified very quickly, improving the efficiency of the supply chain. Transparency allows companies and stakeholders involved in the supply chain to make better decisions.
In today’s era, customer expectations are changing. They want to know where their product was manufactured, what materials and labor were used, and which parties were involved in making the product. The supply chain’s transparency can answer all those questions. This will instill more confidence in the customer to buy the product. Companies like Walmart are already using blockchain technology since 2016-17. It has partnered with major companies like IBM to improve the traceability of their products, mainly food sources. It uses a similar technology to track the pork it sources from China. The blockchain records can tell where the meat came from, where it was processed, and its sell-by date.
- Increases Cost Savings
The use of blockchain technology by all stakeholders can remove the fees required for transferring funds into different bank accounts and payment processors. Anyone on the blockchain can transfer funds without intermediaries like traditional banks, which take a lot of time to transfer funds. The elimination of middlemen in the supply chain also minimizes the possibility of fraud and thus, saves money. Since all the stakeholders come on a single blockchain platform, time delays, human error, and added costs can be significantly reduced.
We are all aware of the amount of waste generated due to inefficiencies in blockchain, especially in the case of the food industry, where products are perishable. Blockchain technology can efficiently identify where and why the waste is being generated. This can help businesses implement measures dedicated to cost savings and remove these wasteful inefficiencies.
Lack of effective integration is one of the significant problems plaguing the supply chain management system. Employees spend a lot of time on phone calls and emails to request data from their partners. Most of this data is already available on their partner’s systems. This wastes a lot of working hours and human labor. Enter blockchain in this scenario and all the data can be stored in a secure repository which is accessible to all the partners. Besides that, the decentralized nature of blockchain mandates verification of integrity before adding any new data. When new data is added, members on the blockchain can verify that information.
- Improved Efficiency
The use of blockchain can eliminate paperwork, manual processes, and human errors, thus making supply chains highly efficient. Communications and operations between partners are highly streamlined. Using smart contracts, blockchain increases the speed of transactions between different parties. Recently, Walmart Canada started deploying blockchain technology with truck companies transporting its inventory. Through blockchain, Walmart and trucking companies can share and synchronize logistics data, track shipments and automate payment processes. Besides that, smart contracts ensure that all stakeholders meet their obligations accurately and timely.
- Greater Security
The fraud cases in the supply chain are soaring high. According to a report by the UN Global Compact, total money lost to frauds amounts to $2.6 trillion per year. With blockchain and its immutable ledger, you can be well assured that your money is transferred securely. Each transaction is securely encrypted and cannot be tampered with by hackers or third parties. Blockchain’s hash function leaves a permanent digital footprint on the database, making it impossible to tamper with data.
Blockchain technology is transforming the supply chain industry in unthinkable ways. At Unbanked, we believe that blockchain technology has the potential of completely disrupting supply chain management. If you are interested in learning more about how blockchain technology works and its applications in real-life, check out our blog.