Blockchain in Supply Chain: Revolutionizing the Way We Do Business
Blockchain technology is fast becoming the number one tool for supply chain organizations to manage and track their goods across the globe.
It is helping those in retail, pharmaceuticals, government, food transportation, and more transparently manage their supply chains.
In this article we’re looking at the problems blockchain technology can solve, how it’s already aiding the supply chain sector, and what organizations need to be aware of before implementation.
Problems in Traditional Supply Chain Management
Before we look at what blockchain technology can do, it helps to identify the types of issues in traditional supply chain management:
- Limited supply chain visibility: Traditional supply chain management offers very little in terms of tracking raw materials and products as they move through supply chains. This makes it difficult to provide superior services and keep partners informed of any changes.
- Challenges in maintaining accurate records: Since there is limited visibility and an inability to track merchandise in real-time, keeping records becomes very difficult.
- Issues in supply chain transparency: The lack of record keeping and tracking causes challenges and trust issues for those working with the products. There are so many ins and outs in goods transportation that it’s harder to track where items go missing or get damaged.
- Limited communication: Good communication is vital to the success of supply chains. Traditional supply chain management methods are often not fast enough. Coupled with the lack of real-time information, it’s near impossible to give customers up-to-date reliable information.
- Time-consuming: Traditional supply chains are extremely time-consuming. Manually trying to input all the necessary information at each stop is not only time-consuming but can lead to serious mistakes that affect the overall value chain process.
How Blockchain Technology Can Help
Now that we understand the issues, here’s how blockchain technology provides modern supply chain solutions:
- Decentralization of data: Blockchain technology uses a decentralized network of nodes. These approve transactions and add them to the ledger. From there each block contains a cryptographic hash.
- Enhanced security through cryptography: Each block with a cryptographic hash contains a hash from the previous block. This is what makes up the chain. To change one aspect of a block you would need to change every single block that comes after it. This decreases the likelihood of tampering, keeping records accurate.
- Key cryptography: Every participant on the blockchain network gets a unique private key and a public key. When you begin a transaction you need to provide your key. The public key verifies the transaction to ensure nothing has been altered.
- Improved complex supply chain transparency and traceability: Since everything on the blockchain network is traced through these keys, it makes it very easy to trace products. Plus, everyone involved in the transaction has access to what is happening on the network, meaning there is nowhere to hide or be fraudulent.
- Smart contracts for automated processes: Blockchain technology allows all aspects of transactions to be done quickly. It keeps all parties aware of what is happening in real-time. Automation also lessens the chance of any administrative accidents which can slow down the process.
- Improved communication: Blockchain technology allows everyone to communicate faster and with more accuracy. This streamlines the value chain process and keeps things running smoothly.
- Automation: Instead of humans needing to take inventory and keep track, a blockchain can automatically inform organizations of low stock. Additionally, if there is an issue, organizations know about it in time to make changes and inform key players.
- Faster processing time: The automation of blockchain technology reduces the time needed to complete certain tasks. It also removes unnecessary intermediaries that might make the process slower.
Blockchain Use Cases in Supply Chain Management
Here are some examples of blockchain use cases, showing how blockchain technology makes a difference.
- Traceability and provenance of products: The blockchain provides each product with a unique identity. This allows things like raw materials to be tracked throughout the global supply chain which helps to keep fraudulence and other disruptions down.
- Real-time tracking and monitoring of goods: Blockchain technology allows organizations to remain in contact with partners and suppliers about products in real-time. This is needed to streamline the supply chains and plan for any delays.
- Streamlining supply chain financing and payments: Partner organizations can implement contracts and make payments directly through the blockchain network. For example, if a 50% payment is made on receipt of goods, this can happen automatically once the stock is accounted for.
- Automating the supply chain process: Blockchain technology automates a lot of the supply chain processes. This includes quality control, inventory, paying accounts, and product security.
- Ethical sourcing: Since organizations have up-to-date information on how their supply chain works, it also provides information on where there may be room for improvement in terms of ethical sourcing and sustainability.
Key Players in Blockchain Supply Chain Management
Now that we understand blockchains in supply chains, let’s explore a few of the key players in the industry and what they offer:
The IBM Blockchain is an industry leader that aims to build trust, break down conflict, and promote value.
IBM Blockchain Services has over 1,600 leading experts in the field that are there to help customers at any time. They aim to help organizations grow and become leaders in the management of supply chains.
Some of the top blockchain solutions on offer from IBM include:
- Blockchain Transparent Supply: Here organizations can build an ecosystem specifically for all their needs. The traceability solution is one of the top features of the goods and manufacturing industries.
- IBM Food Trust: Organizations within the food transportation industry can benefit from safe and sustainable food transportation solution services.
Some of the top industries that work with the IBM Blockchain include:
- Media and Advertising
- Supply chain
- Oil and gas
VeChain is a public blockchain platform involved in anti-counterfeiting and supply chain management.
The platform uses two types of technology (IoT and NFC) to allow clients to track and trace products across the globe throughout the supply chain.
VeChain is focused on building a stable, adaptable, efficient, and transparent supply chain platform. Research and collaboration within the organization are allowing for new and innovative solutions to be implemented.
Founded in 2018, Provenance is an open-source platform that allows over 60 financial organizations to manage and transact across the globe.
The platform enables organizations to work across varying capital markets and scale alternative assets.
As of 2023, Provenance has transacted more than $12 billion, playing an integral role in the supply chain process.
OriginTrail is a decentralized platform that allows organizations to trace products throughout the supply chain.
It has had huge success by building the following solutions:
- Sustainable brands
- Enterprise Data Interoperability
- Pharmaceutical supply chains
- EU food safety compliance
- Global Trade & Customs USA
Potential Benefits of Blockchain in Supply Chain Management
There are many potential benefits of blockchains in supply chain management:
- Increased supply chain transparency and accountability: Usingblockchains in supply chain management allows organizations to be more transparent. All parties have access to the tracking information, meaning there are no ways for anyone to be deceitful. Everyone remains accountable for their actions.
- Enhanced customer trust and satisfaction: Customers want to be informed at all stages of their product from origin to destination. Blockchains can improve satisfaction as customers begin trusting and relying on organizations to deliver.
- Better risk management and fraud prevention: Organizations can reduce their own risk by knowing where products are and monitoring the chain of events. People are also far less likely to defraud a business if they know every transaction and event is being monitored.
- Improved supply chain efficiency and reduced costs: Blockchain technology helps organizations identify where there may be issues. Once resolved, organizations should begin noticing an improvement in efficiency and fewer costs involved in problem-solving.
Challenges in Implementing Blockchain
While implementing blockchain has a lot of positives, there are some challenges to be aware of:
- Technical and regulatory hurdles: Regulations surrounding implementing blockchain supply chain infrastructure are still evolving. This might create some uncertainty or hesitation from organizations.
- Integration with existing systems and infrastructure: Organizations with existing supply chain infrastructure and systems may struggle to integrate blockchain technology. To avoid this, organizations need to plan and find compatible systems.
- Cost: Integrating a new system does come with a cost, so organizations need to select the best option for their needs that fits within their budget.
- Resistance to change from stakeholders: Organizations that have been around for many years might have hesitant key players that don’t want to change supply chain networks and how things are done.
- Complex technology: Blockchain technology is quite advanced. Organizations need to be prepared for the training required to implement the technology across the company. Luckily, all blockchain technology systems provide some sort of training and skills development programs.
Best Practices for Implementing Blockchain in Supply Chain Management
Organizations need to implement best practices when bringing in a blockchain platform. Here are some key tips:
- Identify key pain points in the supply chain: Organizations need to identify the problems they are trying to solve. What are the main reasons for wanting to implement blockchain technology? This could include tracking materials, optimizing logistics, or reducing theft.
- Picking a suitable platform: Once you know what the problems are you can search for a platform that has the capabilities to solve them.
- Collaborate with stakeholders and partners: Organizations should collaborate with all stakeholders and key players. This includes everyone in the supply chain—manufacturers, suppliers, and distributors.
- Start with a pilot project and scale up gradually: Once you’ve established why you want a blockchain solution you can start with something small. When you understand how your chosen platform works you can scale up gradually to see how it does with other sectors of the business.
- Ensure compliance with relevant regulations: Organizations have to ensure that the platforms and networks they’re using comply with industry regulations.
- Monitor: Once the platform has been implemented for a while you can monitor whether it’s having a positive impact on your organization. Monitoring also helps you find potential issues within the supply chain.
Future Trends and Developments in Blockchain Supply Chain Management
Let’s explore the developments in the blockchain-based supply chain:
Emerging use cases and applications
The future of blockchain in supply chains is very exciting. Let’s see how it is being used in the industry today:
- Energy trading: Blockchain technology allows energy providers and individuals to purchase and sell energy credits securely.
- Digital identity: Since blockchain technology works by creating unique keys for identities, organizations are using it to keep supply chain data safe and tamper-proof.
- Decentralized finance: A growing field where blockchain technology offers to operate financial services and systems without the need for intermediaries.
Advancements in blockchain technology
As blockchain technology advances, it changes the impact of the supply chain management industry:
- Integration: As the technology advances it is becoming more compatible with other networks and platforms. This means organizations may not struggle as much with integrating blockchain technology.
- Security: The privacy and security of blockchain technology are improving rapidly. It is becoming one of the most secure technologies in the world. This can help organizations prevent fraud and keep their companies safe.
- Scalability: This has been one of the main issues with blockchain technology. However, it is becoming a lot more scalable with developments like sidechains and sharding. Organizations can enjoy better scalability without worrying about compromising on security.
- Smart contracts: Contracts are written in the code, meaning organizations can easily trade and build relationships. This helps supply chains by making relations transparent, efficient, automatic, and secure.
One of the main considerations with blockchain technology is ethics. There are a lot of things organizations need to consider, including:
- Data privacy and protection: Overall blockchain technology works on public accessibility and transparency. Organizations need to monitor and increase awareness of how personal data is obtained, stored, and shared.
- Sustainability: Organizations always need to consider whether their business practices are sustainable. Blockchain technology often offers more sustainable business methods by providing alternative routes and better collaborations.
- Ensuring fair labor practices: Everything is monitored which might cause some to feel micromanaged and in a sense be unfair to labor laws.
- Addressing potential biases and discrimination: Organizations need to be prepared to deal with any potential discriminations or biases brought on by implementing blockchain technology.
Blockchain in supply chain management is one of the leading developments in the industry. It has changed the entire sector for the better. It not only keeps things much more efficient but also provides incredible security which hasn’t been available before.
Organizations using blockchain technology have found that it provides an overall fantastic service that keeps everyone accountable.
Looking to the future, blockchain in supply chain management is going to grow at an alarming rate. As more global organizations use the technology, the change in global supply chains is going to be enormous.
How does blockchain technology work in supply chain management?
Blockchain technology provides a transparent and secure ledger of transactions. It allows organizations to track goods, information, and assets in real-time. Smart contracts keep everything digital. Plus, with the highest levels of security, blockchain technology makes it increasingly difficult for fraudsters.
What are some of the benefits of using blockchain in supply chain management?
Some benefits include a streamlined process that helps make things more efficient, secure, and manageable. Organizations can securely manage their inventories while ensuring everything is processed and received in real-time. Blockchain technology also helps keep the relationship between organizations and suppliers transparent.
What are some of the challenges in implementing blockchain in supply chain management?
Some of the challenges for implementing blockchain in the global supply chain include struggling to integrate new systems with current ones, and trying to get everyone in the organization on board and trained adequately. Also, finding the right platform can take time.