Supply chains have grown incredibly complex over the years. Any supply chain progresses by initially delivering the raw materials from a supplier to a manufacturer and eventually ends by delivering the final product to the consumer. Proper implementation of supply chain management can result in benefits like increased sales and revenues, decreased frauds and overhead costs, quality improvisation. Moreover, this will also lead to accelerating production and distribution. Maintaining a supply chain is a tedious task even for small businesses. The interconnectivity of different elements in the supply chain gradually becomes more inefficient when a business grows. In order to resolve these inefficiencies and save a company’s money, different technologies like blockchain are being applied to supply chain management (SCM).
Blockchain is a distributed, digital ledger that has many applications and can be used for any exchange, agreements/contracts, tracking and, of course, payment. Since every transaction is recorded on a block and across multiple copies of the ledger that are distributed over many computers, it is highly transparent. It’s also highly secure since every block links to the one before it and after it. There is not one central authority over the blockchain, and it’s extremely efficient and scalable. Ultimately, blockchain can increase the efficiency and transparency of supply chains and positively impact everything from warehousing to delivery to payment. Chain of command is essential for many things, and blockchain has the chain of command built in.
The very things that are necessary for reliability and integrity in a supply chain are provided by blockchain. Blockchain provides consensus—there is no dispute in the chain regarding transactions because all entities on the chain have the same version of the ledger. Everyone on the blockchain can see the chain of ownership for an asset on the blockchain. Records on the blockchain cannot be erased which is important for a transparent supply chain. Blockchain can be applied to many challenges of the supply chain industry such as complicated record keeping and tracking of products. Tracking through RFID, cost reduction and establishing trust are some of the ways in which blockchain can be useful in the supply chain industry.
One of the most appealing benefits of using blockchain for data is that it allows the data to be more interoperable. Due to this, it becomes easier for companies to share information and data with manufacturers, suppliers, and vendors. Transparency in blockchain helps reduce delays and disputes while preventing goods from getting stuck in the supply chain. As each product can be tracked in real-time, the chances of misplacements are rare.
Blockchain offers scalability through which any large database is accessible from multiple locations from around the world. It also provides higher standards of security and the ability to customize according to the data feed. Moreover, blockchains can be created in a private manner too which will allow the data to be accessed explicitly between the parties who have the permission for it.
The value of adopting blockchain technology can be taken from the fact that it has the potential to connect different ledgers and data points while maintaining the data integrity among multiple participants. The properties of transparency and immutability of blockchain technology make it useful for eliminating frauds in supply chain and maintaining the integrity of the system.
Some other benefits of adopting blockchain technology in the supply chain industry are:
- Reduce or eliminate fraud and errors
- Improve inventory management
- Minimize courier costs
- Reduce delays from paperwork
- Identify issues faster
- Increase consumer and partner trust
Since blockchains allow for transfer of funds anywhere in the world without the use of a traditional bank, it’s very convenient for a supply chain that is globalized. Vehicle manufacturers, automotive industry, food industry, FMCG, drugs and pharmaceuticals and oil mining firms are some of the examples of companies that could benefit from block chain technology.
Blockchain has introduced its potential to bring out positive changes in many industries and businesses till date including the supply chain industry. In fact, the supply chain management is one of the most obvious and useful applications of blockchain technology, therefore, we can expect it to grow at a very fast pace in the near future. The source of successful operation of a supply chain management system is to keep a robust, transparent and end-to-end communication.
Companies are exploring ways to filter the way their supply chains currently work and adopt the change that the blockchain technology has to offer. Once businesses see the bigger picture, they will eventually go through the hassle of applying newer systems embedded with blockchain in order to reap bigger benefits in the future. Dumping the paperwork and centralized databases will bring effective change in terms of higher rewards and increased performance among the supply chain teams.
This can be achieved if and only if the supply chain teams in place take notice of the latest technology trends in the blockchain space and find feasible ways to adopt the technology in their existing systems. The use of blockchain in supply chain management will work as a game changer by eliminating the vulnerabilities and inefficiencies of the current system.
[box type=”note” align=”” class=”” width=””]The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan[/box]