Advantages of Blockchain Technology in the Supply Chain: Efficiency, Trust, Accuracy
Blockchain technology, initially famed for underpinning cryptocurrencies, is now making significant inroads into supply chain management.
Blockchain provides a single, verifiable source of truth for all supply chain participants. By ensuring data integrity and authenticity, blockchain builds trust among all stakeholders.
This new merger of cutting edge, next generation tech is offering innovative solutions to some of the industry's most persistent challenges.
Here's how blockchain is changing the game:
Key Takeaways
- Unprecedented Transparency: Blockchain provides end-to-end visibility, crucial for real-time tracking and consumer trust.
- Data Integrity: The immutable nature of blockchain prevents tampering, ensuring data integrity throughout the supply chain.
- Seamless Financial Integration: Smart contracts facilitate automatic payments and agreements, integrating finance with logistics, reducing the need for intermediaries, and speeding up operations.
- Efficient Record Management: A single, shared ledger reduces discrepancies and improves record accuracy for all parties involved. Immutable records ensure regulatory compliance and ease audit processes.
- Enhanced Traceability: Every transaction is recorded, creating a clear audit trail for each product.
Enhanced Visibility
Visibility in supply chains has long been a challenge, with goods often moving through multiple hands from origin to end consumer.
Blockchain provides a decentralized, immutable ledger where every transaction or movement of goods can be recorded and tracked in real-time.
Companies like Walmart use blockchain for tracking consumer products, dramatically reducing the time to trace produce from days to seconds during safety recalls. This level of visibility not only ensures product safety but also enhances trust among consumers and partners.
Maintaining Integrity
The integrity of supply chain data is crucial, especially in industries where authenticity and quality are paramount.
Blockchain's tamper-proof nature ensures that once data is recorded, it cannot be altered, thus preventing fraud and errors.
De Beers employs blockchain to track diamonds from mine to market, ensuring they are conflict-free, as mentioned in articles from Forbes. This application demonstrates how blockchain can maintain product integrity and ethical sourcing standards.
Smart contracts can help ensure the integrity of temperature-controlled shipments, critical in pharmaceuticals and food logistics. Sensors send data to the blockchain. If the temperature deviates from the required range, smart contracts can notify parties, trigger insurance claims, or adjust payment terms accordingly.
Incorporating Financial Transactions
Integrating financial transactions with physical supply chain events like pickups, deliveries, and returns has been a logistical challenge.
Blockchain allows for smart contracts, which automatically execute transactions when certain conditions are met, streamlining processes and reducing the need for intermediaries.
UPS has experimented with blockchain to streamline supply chain finance by using smart contracts for invoice automation, where payment is released once delivery is confirmed. This initiative has helped in providing faster cash flow for suppliers and reducing the time and cost associated with financial transactions in logistics.
Accurate Record Keeping
Maintaining accurate records across a complex supply chain network is vital for compliance, audits, and operational efficiency. Blockchain offers a single source of truth where all stakeholders can access accurate, up-to-date information.
Nestlé has explored blockchain for supply chain transparency, as reported by AWS, to track raw materials like milk from farm to product, ensuring accurate records of product journey and quality.
“Transparency in supply chains is increasingly important to consumers, who want to know what is in their food and where it comes from. While Nestlé has begun to release information on its supply chains for its 15 key commodities, using blockchain technology enables a more precise tracking.”
Armin Nehzat, Digital Technology Manager, Nestlé Oceania
According to the findings of a study by Alqarni et al. entitled: "Use of Blockchain-Based Smart Contracts in Logistics and Supply Chains" blockchain technology can help boost the efficiency of the supply-chain process, "by transforming the paper-based slow and error-prone processes into tamper-proof digital paperless processes. This reduces the burden on bureaucratic procedures while still satisfying the regulatory requirements agreed upon and fulfilled through a smart contract."
How Blockchain Integrates with SCM Stages
Planning and Sourcing:
Blockchain can provide a transparent ledger for all procurement activities, ensuring suppliers' authenticity and product origins.
Example: using blockchain to trace food from farm to fork, ensuring ethical sourcing.
Manufacturing:
With blockchain, each step of the manufacturing process can be recorded, ensuring product integrity through quality control and traceability.
Example: using blockchain for parts traceability to guarantee the authenticity of components.
Logistics and Distribution:
Blockchain facilitates real-time tracking of goods across the supply chain, reducing delays and errors.
Example: using blockchain to streamline shipping documentation and tracking, significantly cutting down administrative times.
Customer Service:
Customers can verify the authenticity of products using blockchain, enhancing trust and reducing counterfeit goods.
Example: using blockchain for proof of authenticity of luxury goods, as reported by Bloomberg.
Frequently Asked Quesions
How does blockchain technology help ensure visibility in supply chains?
By creating a shared, immutable ledger, blockchain allows every stakeholder to see the exact journey of goods in real-time, reducing information asymmetry.
Can blockchain help prevent fraud in supply chains?
Yes, its tamper-proof nature means that once data is entered, it cannot be changed, providing a deterrent against fraudulent activities.
What are smart contracts, and how do they benefit supply chain operations?
Smart contracts are self-executing contracts with the terms directly written into code. They benefit supply chains by automating transactions upon meeting predefined conditions, thus speeding up processes like payments for shipments.
How does blockchain improve supply chain security?
Its decentralized nature means there's no single point of failure, and once data is entered, it cannot be altered, significantly reducing risks of fraud and data manipulation.
In Conclusion
Blockchain in SCM holds the promise of a more interconnected, transparent, and efficient global trade ecosystem.
Blockchain can help in building more resilient supply chains by providing real-time data and reducing disputes.
As more companies adopt this technology, we're likely to see even more innovative applications that could redefine traditional supply chain operations. We can anticipate a future where SCM is more transparent, secure, and efficient, fundamentally changing how goods move from producer to consumer.
Curious about how blockchain can enhance your supply chain's transparency and efficiency?
Shyftbase can work with you to integrate blockchain technology into your operation for improved visibility, integrity, and automation.
Be a first mover with this innovative technology! Schedule a demo with us and let's talk blockchain in action.