Blockchain has traditionally been considered in relation to Bitcoin and other forms of cryptocurrency. However, this technology can also be applied to minimise many of the problems associated with supply chain management.
Such problems have become more apparent in light of international events such as COVID-19 and the war in Ukraine, with price fluctuations, transportation failures, and cyberattacks becoming increasingly common.
In this guide, we highlight the benefits of blockchain in supply chain management, exploring the key concepts that will help you navigate industry innovations.
Defining the Blockchain Supply Chain Management
There’s always bound to be some scepticism over the trustworthiness of centrally stored and shared data.
However, blockchain can be considered a trustless environment, where there’s no need for such scepticism. It makes for openness in the sharing of data among different parties.
Blockchain allows for a tamper-proof and decentralised record of transactions, making it easier to track and verify the condition of goods as they move through the supply chain.
You can think of it as a primitive database form, where data is stored and shared in blocks. However, users can place much greater trust in blockchain as a consensus layer for different organisations.
New to blockchain? Take a look at our guide to blockchain for beginners.
How Blockchain is Used in the Supply Chain
As mentioned, blockchain can be used to enhance a variety of supply chain processes. There’s no single party with control over data that’s stored in the blockchain; this decentralisation is the core of building trust in blockchain supply chain management.
Besides allowing for the management of large quantities of data, the blockchain also makes processes easier, distributing rights equally among all the parties involved. What’s more, blockchain simplifies tracking products, since any attempt to change the records can be easily identified. This reduces the risk of fraud and enhances efficiency as goods move through the supply chain.
The use of tokenised assets is becoming more common, combining digital tokens with the blockchain to verify the ownership of physical and digital assets.
We’re also seeing the increased use of smart contracts, automating processes such as the payment of suppliers based on the fulfilment of specific conditions.
Real-world Applications of Blockchain in Supply Chain Management
Let’s take the distribution of a factory machine as an example.
This would begin with the assignment of a unique digital identity, including the details of the manufacturer, date, and certification data.
The stakeholders would transfer this information onto the blockchain, creating a traceable record that can’t be easily altered.
As the machine moves through the different stages of distribution, a record of each step will be maintained on the blockchain.
These entries will be time-stamped, allowing users to verify the machine’s origin and authenticity at any time. This way, both legal compliance and consumer confidence are assured.
The transformative benefits of blockchain for supply chain management can also be seen across the retail sector, with the tracking of goods between suppliers and buyers.
For instance, Amazon has filed a patent for a distributed ledger system that will use blockchain to verify the authenticity of all goods sold on the platform.
Blockchain innovations are being driven by such companies as Yojee, OriginTrail, Peer Ledger, Blockhead Technologies, and The CargoX.
Benefits of Blockchain for Supply Chain Management
The use of blockchain in supply chain management ensures the transparency of all transactions, with traceability and visibility for everyone in the network. Some of the key benefits include:
Improved stakeholder coordination: Blockchain increases the level of trust among the stakeholders, with shared access to a secure, transparent, and immutable ledger that’s updated in real-time for better coordination and decision-making.
Greater consumer confidence: Blockchain supply chain management ensures greater confidence in the authenticity of products, with tracking from origin to final destination.
Data security boost: Enhanced cybersecurity is an added benefit, with the separation of supply chain data into blocks, minimising the risk of breaches.
Blockchain Supply Chain Downsides
Despite the transformative potential, there are some drawbacks associated with blockchain and supply chain management. These include:
- Higher upfront costs and ongoing expenses
- Complexity in implementing blockchain supply chain ledgers and managing disruptions
- Difficulties in scaling the blockchain
- Lack of control over data access
- Non-compliance with some international laws
The development of more cost- and energy-efficient blockchain models, enhancements in scalability, and simplified integration are all strategies blockchain developers are planning for tackling these challenges.
Supply Chain Management and Blockchain – Looking Ahead
Supply chain issues continue to have a range of negative impacts, causing the loss of revenue and increased costs. Disruptions also result in product distribution delays, leading to customer dissatisfaction and reputational damage.
However, blockchain can make a major difference, increasing the visibility of goods through the supply chain. Organisations can rely on real-time blockchain-enabled data for the identification and resolution of supply chain issues.
The need to digitise the supply chain in order to improve data integrity, automate processes, decentralise access, and promote the tokenisation of assets is widely recognised across the industry.
Research by the World Economic Forum confirms this, with 86% of industry leaders believing that blockchain offers a competitive supply chain advantage, and 79% claiming they are well-positioned to use the technology.
Going beyond theory, blockchain is solving real supply chain problems and delivering real results. You can discover its transformative potential at the London Blockchain Conference – meet the pioneers, see the tech in action, and connect with the people turning big ideas into real-world change.
Get set with registration for your tickets today!
