With the increasing number of stakeholders and the different roles played by them, supply chain management has become a complicated and cumbersome process. Simple transactions have turned into lengthy procedures as the clients, suppliers, and providers get to interact only through third-party entities.
Payments between stakeholders can take days and contractual agreements involving the services of bankers and lawyers add extra delay and cost. The process gets even more complicated by the lack in traceability of products and parts back to suppliers. Blockchain not only helps in managing the currency transfer, but can also facilitates exchange, agreement, and tracking processes.
Blockchain, being a distributed digital ledger in simple terms, offers a huge advantage when it comes to the integrity of transaction records. Each transaction is recorded in a series of blocks with multiple copies present over multiple nodes or computers. This ensures that any attempt at the falsification of records would require tampering of all the copies at the same exact moment – the chances of which are negligible.
Blockchain Benefits in Supply Chain Management
Blockchain-based supply chain management can help tackle issues like traceability, supply chain auditing, damage, mishandling, contract enforcement and oversight on counterfeiting. The advantages can be further explored by adding technological innovations like smart contracts, Artificial Intelligence (AI) and Internet of Things (IoT) to the equation.
Here are some blockchain features that align with the ‘reliability and integrity’ requirements of a supply chain:
Blockchain ensures that all involved parties or stakeholders agree on the validity of each transaction that can include transport, warehousing, delivery, payment, etc.
The transaction records include details of who owned a particular entity, to whom it was transferred, and at what time, to ensure the traceability of each asset back to its origin. These assets can be anything from money and copyrights to machines and raw materials.
Falsifying a transaction in blockchain based SCM is not possible because of the distributed ledger system. Only a new transaction can reverse the effect of a previous one and will be visible to all the parties involved in the chain, thus establishing trust among them.
Blockchain gives everyone in the chain access to all the transaction data without revealing the real identity of the person. The public address of the person remains visible and adds to the level of accountability and transparency that were earlier non-existent in both financial and supply chain systems.
Instead of “mining” that is used to update and extend the “Bitcoin” ledger, blockchain for supply chain management use “Smart Contracts” for updating records. A smart contract is a software program stored in the blockchain that functions according to its programming to execute an agreement. It can be used to trigger an event based on an entry in the ledger. For example, it can trigger delivery after receiving payment in the ledger. The use of smart contracts saves both time and cost involved in manual checking of events and conditions.
Existing Supply Chain Blockchains in 2019
There have been some innovative solutions involving blockchain to cater to problems faced in supply chain management.
Cargo Booking and Delivery in Shipping Industry –
300Cubits, a Hong Kong-based company issued TEU cryptocurrency tokens in 2018 to both shippers and shipping lines in an attempt to reduce the number of no-shows and facilitate timely delivery of cargo. When a shipper books a cargo with a shipping line, both the parties have to deposit a token in the blockchain. These tokens can only be recovered by the respective parties on the successful completion of the contract. If the shipper fails to present cargo at the time of loading, their token gets transferred to the shipping line. Similarly, the shipping line loses its token to the shipper in case of a failed shipment.
Traceability of Food Item Source by Walmart –
Furthering its steps to use blockchain for tracing the origin of food items, Walmart has partnered with IBM and has announced that the green vegetable suppliers need to join in by September 2019. The 2018 E.coli outbreak in the United States led to the removal of products from Walmart’s shelves as a safety precaution. The use of IBM Food Trust blockchain would enable the tracing of the shipment’s source in seconds and prevent loss in such scenarios in the future.
Like every other technology, the use of blockchain in supply chain management faces several challenges.
- Bitcoin and other cryptocurrencies are volatile as the rate of exchange can rapidly change.
- The ecosystem is still growing so business transactions via blockchain remain limited.
- Technological and industrial knowhow for programming blockchain will require staff training or fresh hires.
- The change in mindset for shifting businesses into decentralized operations will take time.
Blockchain can transform industries and supply chains, but it will not happen overnight. The use of smart contracts can prevent delays caused by manual work, and increase accountability and traceability.
Needless to say that in future we can see efficient, intelligent, and secure supply chains all over the world.
If you are looking forward to integrating Blockchain with your business, Clavis Technologies can help you create a customized Blockchain-based solution based on your requirements. As an IT consulting and solution provider, we develop custom-made solutions for industries ranging from supply chain management and entertainment sector to manufacturing and healthcare.