How does Blockchain Benefit Supply Chain Management?

One more day, some other element of new technology to ponder over. This time its blockchain, the technology used to facilitate bitcoin transactions. Data from the supply chain is not necessarily visible, accessible, or trustworthy. Using permissioned blockchain systems, IBM Blockchain assists supply chain partners in sharing reliable data.

 

This is more important than ever in times of turmoil. Businesses and consumers expect brands to ensure product authenticity, while supply chain actors seek responsible sourcing and more transparency to reduce conflicts.

 

Strong words, but are they true? Is blockchain technology truly applicable in the supply-chain world? Is it capable of resolving your supply-chain issues while also increasing your profitability?

 

These are among the very important questions that supply-chain professionals have posed to us. We aim to provide you with a better grasp of blockchain technology and to save you time learning, testing, and evaluating its usefulness to your activities.

 

 

Blockchain Technologies and Supply Chain Management

 

Blockchain is a web-based technology that is valued for its capacity to transparently authenticate, record, and transmit transactions in unchangeable, encoded ledgers. The system was created to allow bitcoin transactions, the digital money that functions independently of a central bank. 

 

In essence, blockchain technology creates and distributes the ledger, or record, of every bitcoin transaction to hundreds, if not millions, of computers connected to networks all over the world.

 

The word "blockchain" refers to "blocks" of verified and immutable transactions that are linked together in sequential order to form a chain (exhibit).

 

What is Supply Chain Management?

 

To put it another way, supply chain management includes both integrated planning and the implementation of several activities. This includes material, information, and financial capital flows. 

 

Supply chain management is the integration of the flow of commodities, services, and information including the storage and transit of raw materials, building products, and fully finished things from one location to another. 

 

Within SCM, a supply chain is a network of individual individuals, organisations, enterprises, resources, and technology that work together to manufacture a product or service.

 

Also Read | 4 Types of Blockchain Networks

 

Blockchain in Supply Chain

 

Blockchain can offer more accurate and real-time end-to-end supply chain tracking: Organizations can digitise physical assets and generate a decentralised incorruptible record of every transaction, allowing them to trace assets from manufacture to delivery or usage by the end-user. This improved supply chain transparency benefits both individuals and businesses.

 

Blockchain can enable enhanced supply chain transparency, which can aid in the reduction of fraud for high-value items such as diamonds and medicinal pharmaceuticals. 

 

Blockchain technology might assist organisations in understanding how materials and completed items are passed via each subcontractor, minimising financial losses from fraudulent and grey market trade, and increasing end-user confidence by lowering or eliminating the effect of counterfeit products.

 

 

Advantages and Disadvantages of Blockchain in Supply Chain

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Driving Value in the Supply Chain

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Advantages of Blockchain in Supply Chain

 

1. Supply chain transparency has improved

 

One-up/one-down transparency will limit supply chain management. Blockchain supply chain solutions enable permissioned parties with enhanced visibility across all supply chain operations by utilising decentralized blockchain technology that delivers a shared, single source of truth.

 

2. Create a dependable supply chain

 

A single unanticipated occurrence might trigger a chain reaction of supply chain disruptions. Smart contracts are used in blockchain supply chain systems to automatically activate when predefined business criteria are satisfied. 

 

This provides near real-time transparency into operations as well as the ability to take action sooner if an exception occurs.

 

3. Simplified supplier onboarding

 

For both buyers and sellers in a supply chain, new supplier integration is a time-consuming, manual process. Blockchain supply chain solutions help accelerate this process by maintaining an accurate account of fresh vendor information that professional network members can rely on.

 

Also Read | Best Blockchain Stocks in 2022

 

Primary Potential Advantages

 

• Improve the traceability of the material supply chain to guarantee compliance with corporate requirements.

• Reduced losses due to counterfeit/grey market dealing

• Enhance transparency and compliance concerning outsourcing manufacturing and distribution

• Cut down on paperwork and operational expenditures.

 

Possible Secondary Advantages

 

• Improve business reputation by offering information about the materials used in goods.

• Increase the credibility and public confidence in the data supplied

• Reduce the possible public relations risk posed by supply chain errors.

• Involve stakeholders

 

Disadvantages of Blockchain in Supply Chain

 

Keeping aside all its perks, Blockchain always has several disadvantages when it comes to its role in Supply Chain. 

 

1. Blockchains with Permissions

 

A permissioned blockchain is frequently recommended because supply chain information might be confidential. A permission system, on the other hand, is less secure since the blockchain is made up of fewer networks, and those nodes are often known to one another, making things easier to conspire to modify a block.

 

2. The Human Factor

 

While all parties of a supply chain need to understand that the data on the blockchain cannot be modified once it is established, there is still the possibility of human mistakes or purposeful misbehaviour in entering the first data into the blockchain.

 

3. Scaling

 

Because transactions must be verified on several computers or servers, blockchain systems execute transactions far more slowly than conventional databases.

 

4. Initial Expenses

 

The initial expenses of adopting a blockchain technology may be prohibitively expensive. Employing blockchain developers has expenses, which tend to be more than hiring regular developers owing to their particular field of knowledge. Planning fees, licensing fees, and maintenance fees may all add up to a heavy price tag.

 

Also Read | Blockchain in Financial Services

 

 

What influences the feasibility of Blockchain for a Supply Chain Project?

 

A few critical factors influence blockchain's feasibility for a supply chain project:

 

1. Data Exchange

 

When data must be transmitted between numerous unconnected parties, blockchain is a viable alternative.

 

2. Trusted Partners

 

Because blockchain enables changes to be made by several unconnected parties, you must be confident in the project's partners.

 

3. Shared Benefit

 

If the project provides value to all stakeholders, they will be encouraged to implement the necessary technology and procedures.

 

4. Defined Data Standards

 

Maintaining data accuracy requires a consistent and well-defined procedure and data standards that all stakeholders can work with, ideally using an established standard like electronic data exchange (EDI).

 

5. Integrated

 

To get the most out of blockchain, it should be assimilated with a current tech stack, such as an ERP.

 

6. Cost-Benefit Analysis

 

In addition to capital expenditures, you should include the computing costs associated with blockchain. Transactions conducted using blockchain may have greater or lower fees depending on factors such as how quickly they must be completed. 

 

These transactional expenses, which are frequently neglected, will have a substantial influence on whether a project is successful.

 

Also Read | Big Data in Supply Chain Management

 

 

Organizations Making Use of Blockchain's Capabilities

 

As an emerging technology, it is expected that most businesses will wait until it matures before considering use. However, organisations in a range of industries are already utilising the blockchain's abilities in their supply chain operations:

 

• FedEx

 

FedEx has incorporated blockchain technology into its chain of custody to increase traceability and give a trustworthy record, which will aid in resolving customer complaints. 

 

The corporation has also joined the Blockchain in Transport Alliance (BiTA) and is an outspoken supporter of the establishment of a blockchain-based accepted standard.

 

• DeBeers

 

DeBeers is employing blockchain tracking tools to monitor the origin and journey of every material object mined. The Tracr software not only improves productivity and inventory control but also assists the organisation in addressing consumer concerns regarding the ethical source of gemstones.

 

• Walmart

 

Walmart has adopted a proactive interest in blockchain technology, exploring several projects powered by Hyperledger Fabric. From identifying the origins of mangoes in the United States to controlling pork sold in its Chinese markets, the retail giant has adopted blockchain technology to increase supply chain visibility and traceability — and, in the process, acquire more ethically and strategically sourcing options.

 

• Treum

 

Treum is a blockchain-based reputation platform that focuses on traceability, transparency, and traceability to establish future supply chains. Its traceability function captures an asset's end-to-end sourcing characteristics in real-time. 

 

Its transparency feature enables firms to ensure that their supply chain is meeting product goals. Treum, as a whole, is capable of providing both corporations and customers with the whole product story.

 

Also Read | Blockchain Mining

 

Blockchain Becoming The Game-Changer in Supply Chain

 

Managing a contemporary supply chain is similar to resolving a Rubik's cube. It has many facets, and actions made on one dimension have ramifications on others. It might be challenging to keep abreast among them all.

 

SCM is, in reality, far more difficult than this. Several things are beyond your control, such as legislative changes, whereas a Rubik's cube just performs what it is taught.

 

Previously, a firm would have had a small number of favoured suppliers, and it would know what to anticipate and who to call if there were any difficulties. 

 

Participants in today's business ecosystems frequently don't know one another and don't always have insight into multi-tiered supply chains, as well as each other's data and actions, which might catalyse risk exposure.