Blockchain technology makes it easier to record information about quality, pricing, locations, dates, certifications, and other pertinent elements required for efficient supply management. provide chain. Because it involves everything from planning, regulating, carrying out, and monitoring how resources move into and out of the organisation, supply chain management (SCM) is the lifeblood of enterprises.
SCM necessitates efficient resource management for raw material procurement, production, storage, and other relevant logistical components because it also includes a company’s financial capital and data.
This intricate process of inventory management covers inventory, faulty product returns, and other order-related difficulties. The necessity for precise delivery systems and real-time tracking makes supply chain management an industry eager for continuing technical innovation as new technologies continue to disrupt routine corporate operations.
In the transportation and logistics sectors, constantly evolving technical elements incorporating mobile, wireless, and wearable devices are setting the pace, but staying current with best practices and new capabilities is a never-ending process that can be challenging. for companies who have already made IT investments in the past.
The key trick to surviving in such a cutthroat sector is exploiting developing technology, which might require time and money.
A dynamic SCM system ought to produce benefits for the company. When it comes to real-time, cost-effective, efficient, and transparent communication and collaboration between all stakeholders, blockchain technology is the new kid on the block, replacing the existing specialised software that guarantees a functional supply chain.
This essay examines how supply chain systems might be immediately enhanced by the rapid development of blockchain technology.
What is Blockchain Technology?
Blockchain is a decentralised and distributed ledger that is often referred to as Distributed Ledger Technology (DLT). The transactions are recorded on this ledger in a series of blocks.
Copies of records are maintained on several devices, or “nodes,” located in various locations.
Since the blockchain ledger is decentralised, no one central authority is required to maintain its integrity. The “truth” of every transaction carried out on the network is contained in all copies of the ledger on the blockchain.
All copies of a transaction or entry must be handled concurrently in any attempt to fake them.
All nodes are connected to the blockchain network, thus each time a new transaction is made in a network node, all ledger versions are updated.
Blockchain networks often have usable sizes, which almost eliminates the chance of manipulation. The following are some key characteristics of blockchain that make it an excellent option for supply chain management:
Consensus:
All supply chain partners acknowledge the validity of every transaction that takes place, whether it involves distribution, warehousing, transportation, or storage.
Provenance:
Each link in the chain will be aware of the asset’s origin, as well as who handled it previously and when. These assets may include everything from equipment, jewellery, wheat, iron ore, or copyrights.
Immutability:
A blockchain’s distributed ledger contains entries that cannot be used for profit. No one is able to alter any aspect of the supply chain, including payment transactions, delivery dates and times, warehouse conditions, inventory data, or other information.
Finality:
The same entries and transactions are present in every copy of the shared ledger; this finality, which is beneficial for bitcoin networks, is also beneficial for blockchain supply chain networks.
Understanding Supply Chain Management
The activities involved in controlling the flow of products and services from their initial production to their final delivery to the consumer are referred to as supply chain management.
In order to transport products from those who provide the raw materials to those who are in direct touch with the customer, businesses maintain a network of suppliers that serve as links in the chain. The procedure entails:
Planning: includes identifying the metrics used to gauge supply chain efficiency as well as the planning and management of all resources required to satisfy a company’s demand for goods or services.
Sourcing: Select suppliers and establish processes for tracking and managing relationships. They include ordering, receiving, inventory management and payment authorization.
Manufacturing: Delivering raw materials, manufacturing the actual product, testing quality, packaging for shipment, and scheduling delivery.
Delivery and logistics: Plan deliveries, split up loads, invoice clients, and collect money from them.
Sourcing: Establish procedures for tracking and managing connections with suppliers after making your choice. They consist of placing orders, receiving goods, managing inventories, and authorising payments.
Manufacturing: supplying raw ingredients, producing the finished product, ensuring its quality, shipping the package, and arranging delivery.
Logistics and delivery: Organise orders from clients, plan delivery, distribute loads, bill clients, and collect money.
Return: Returning goods that are flawed, undesirable, or excessive is the procedure.
Problems Affecting Traditional Supply Chains
Traditional supply chains are not flexible enough since they do not anticipate quick changes in the market, which makes them expensive, data-intensive, and inefficient. These are only a few of the major issues that typical SCM operations confront.
They often include a lot of paperwork and documents that are in disagreement, which causes delays during manual reconciliation procedures.
Huge E-Commerce Growth
Online shopping is more popular than ever among customers because it is easy, flexible, and affordable. Similar solutions for fulfilment and delivery are needed in response to the rising demand for online goods.
Due to their inability to satisfy demand, most producers and shippers are now handicapped, which has led to bottlenecks like record backlogs at every link in the supply chain.
Centralized Inventory
Traditional supply chains rely on centralised inventories, which are comparable to ancient internet servers that frequently suffered data loss when they went offline.
The major problem with these inventories is that it’s simple to alter them, increasing the possibility of fraud at any point in the supply chain.
Limited or insufficient visibility
Companies in the B2B and B2C sectors frequently rely on a variety of partners and platforms to help them process, pack, ship, and deliver orders. Working with manufacturing, trading, retail, and a variety of goods and package carriers will likely be required for this.
They are then faced with dealing with data from many sources when you add in an enterprise resource planning system. As a result, it is difficult to respond quickly to changing stock levels depending on client requests.
Piecemeal Logistics
Dependence on many third-party logistics service providers to carry out various duties frequently results in a disconnected supply chain that requires additional expertise to address potential special requirements.
Making an effort to link disparate elements, such as order management systems, warehouse management, or business partners, makes it challenging for other parties to be aware of what is happening elsewhere.
How Blockchain in Supply Chain Solved SCM Problems
Efficiency and transparency, two essential elements for ensuring the dependability and integrity of supply chain management, are provided by blockchain technology.
By enabling businesses to use smart contracts to engage directly with each other and prohibit third parties from participating into transactions, blockchain improves the efficiency of supply chains.
Technology encourages deeper integration of financial and logistical services, which increases data sharing between the parties.
To assist in automatically monitor things, businesses may add radio frequency identification (RFID) tags to the blockchain.
The time between making an order and receiving a payment will be greatly shortened by using integrated payment systems, assuring the accurate and timely transfer of finished items. Greater compliance, lower penalties and legal fees, and the abolition of fraud and counterfeiting are the outcomes.
Benefits of Blockchain in Supply Chain
The ability of blockchain technology to simplify, secure, and expedite procedures has caused disruption in numerous sectors. It can be helpful in supply chain management, when products must transit through several partners before reaching the ultimate consumer.
In order to deliver goods as efficiently as possible, partners must be able to communicate and synchronise critical information. Blockchain gathers and secures data from all parties participating in the supply chain.
Blockchain simplifies communication operations in a way that has never been seen in the supply chain and procurement sectors by turning into the single point of access and sharing for all information.
A few advantages of blockchain in the supply chain are listed below:
Increased Security
By filling in the gaps left by existing rules, blockchain technology makes it impossible for any participant in the supply chain to break the law.
The inability to manipulate data, for as by making phantom goods or workers, is one concrete example. Blockchain made this possible by establishing an unchangeable transparent audit trail for every action that is accessible to all parties.
since of the security that underpins blockchain technology, it is difficult for anybody to alter an entry since doing so would require altering hundreds or even thousands of copies at once, which is practically impossible.
Sustainable development
By assisting supply chain management in putting an end to any unethical or unlawful practises, blockchain improves sustainability.
Unparalleled traceability made possible by the distributed ledger helps to cut down on chain-wide shortcuts, bad habits, and criminal activities.
Objectivity
The implementation of blockchain minimises the possibility of any type of entry based on later or unsupported information to maximise profits by ensuring that managers make their judgements using objective and verifiable facts.
Accuracy
Each member in the supply chain blockchain network will concurrently have access to the most recent information since all data is exchanged between participants in real time.
Since neither side needs to email the other to inquire about an item’s status in the supply chain, the likelihood of correctness rises as a result. Everyone involved must accept the data once it has been input because it is encrypted and cannot be modified.
Operational
Our records can be trusted since blockchain records cannot be altered. A permanent shareable record of each transaction between the production, warehousing, procurement, distribution, and retail processes may also be created by integrating them into the blockchain.
As a consequence, data is available to all parties in the supply chain, which decreases the need for stressful paperwork and significantly boosts network efficiency.
Transparency and Traceability
Blockchain’s digitally traceable record improves the transparency and traceability of all processes inside this supply chain. Any member in the supply chain may pinpoint the location of any event along the route, making it simpler to track any product as it moves through the chain.
Blockchain technology has the potential to stop drug or food safety crises before they ever start. Traceability and traceability are particularly crucial in these situations.
Due to the capacity to inspect items from the beginning of the supply chain all the way to the completed product, this developing technology increases product safety and durability.
Consumer Trust
Companies can be certain that their products do not break any rules or are not tampered with along the way thanks to blockchain technology, which enables them to check everything from raw materials to final products. As a result, the firm is safeguarded against any reputational harm.
This may also involve political compliance, since several regional political entities, like the European Commission, are already starting to construct blockchain compliance for their whole area in order to control how business is performed there.
Financial Security
The supply chain may become more dynamic and robust thanks to blockchain, which can speed up processes and provide all partners more control. Every transaction done on the blockchain may be seen by every participant.
The supplier will feel supported throughout the purchase process as a consequence, and they will have to wait longer than required to get paid.
Some Challenges for Blockchain in Supply Chain
Not everyone uses good technology just because it is readily available. The following are a few obstacles to the supply chain’s adoption of blockchain:
Lack of uniformity: While some supply chain players may have embraced technology like RFID chips, others continue to use paper records at the most crucial points, indicating that the adoption process as a whole has to be improved.
Ignorance:
Many SCM leaders today are still unfamiliar with blockchain. Even as some continue to profit from the “hype,” there are still many who think it’s simply a passing trend and are waiting for it to pass.
Possibility cost:
Despite the fact that there could be a lot of interested parties, some are hesitant to devote their time and resources to a technology that is still under development. They think that, at least until it becomes widely recognised, investment in a new technology is too hazardous.
Legal hurdles:
In many places, blockchain is still facing practical and legal difficulties. As a result, interested businesses should engage specialists to teach their legal departments about blockchain technology.
Waiting Game:
Most people just have to wait for the software and its standards to persuade them.
How to Implement Blockchain in Supply Chain
You could require blockchain in SCM unless you run a tiny organisation with straightforward logistics. If so, you can employ our straightforward implementation process.
Step 1: Determine the use case
Outline which of your current SCM processes may benefit from blockchain by deciding what objectives you want to accomplish with it.
Step 2: Developing the architecture
The next step is to decide which blockchain features you’re going to use to help you accomplish your objectives. Data privacy, consensus mechanisms, authentication techniques, data input/output, and the DApps you design will all be covered in this.
Step 3: Create the app
The blockchain will then be put into use when a developer is hired. Think about working with a development firm to create the technology and include it into your sales channel management system.
Step 4: Deployment
Before full implementation, you should conduct a pilot project once the development team has finished the project so you can assess how it functions and what needs to be improved.
Industries where Blockchain in the Supply Chain will be a Solution
The finest illustration of how blockchain may be used is Walmart’s food traceability programme. Using IBM’s blockchain technology, the massive supermarket can monitor and track items all the way through the supply chain, from the farm to the shop shelf.
All monetary, commodity, documentation, custom, and informational parts of the supply chain are covered by Walmart’s blockchain in SCM.
It has decreased the amount of time it takes to trace the origin of every product, as well as expenses and logistical headaches, while boosting consumer confidence.
Jewellery, medicines, and manufacturing are among other sectors that might profit from the deployment of a supply chain using blockchain.
The Future of Blockchain in Supply Chain
It is becoming more and more obvious that firms managing supply chains must become agile enough to proactively remodel their thinking and their market as the globe changes and sectors continue to develop at a blazing speed.
Blockchain is becoming into a crucial component of supply chains because of its potential to improve information flow, reduce waste, fraud, and mismanagement.
Blockchain provides a ready-made solution for firms whose supply chains are experiencing a bottleneck or for their customers who are complaining about price increases due to logistics.
Blockchain in the supply chain will play a crucial part in the company dealing with products since supply chains may have a big influence on items getting to consumers in a safer, quicker, and more inexpensive way. materials used in industry and for consumers.
Last word
The most difficult decision the supply chain sector must make is whether to use blockchain technology. Numerous advantages provided by the technology may enable businesses to overcome their current SCM difficulties.
The road for those who are still on the fence will, however, become more precise as more enterprises implement blockchain. Every company must decide whether there is a genuine need for the installation of new technology and whether any of its operations might be significantly impacted by it.
Infographic created by Track Your Truck, a GPS vehicle tracking devices provider