Blockchain use cases: supply chains

Discover how blockchain technology is revolutionizing supply chain management, ensuring transparency, efficiency and cost savings across the supply chain network.

main ideas

  • Supply chain is the complex process of converting raw materials into goods and delivering them to customers.

  • The current supply management system lacks transparency, efficiency and integration.

  • Blockchain technology successfully addresses these issues, but faces difficulties in implementing it in supply chains.

the introduction

A supply chain is the network of people and organizations involved in creating and distributing a product or service - from initial suppliers to end users and customers. The basic supply chain system often includes food or raw material suppliers, manufacturers (processing), logistics companies and downstream retailers.

Currently, the supply chain management system lacks efficiency and transparency and most networks face difficulties when trying to integrate all parties involved. Products, materials, money and data need to move seamlessly through the different stages of supply chains.

However, the current model does not guarantee a cohesive and efficient supply chain system – negatively impacting not only the profitability of companies but also the final retail price.

The 2020 Covid pandemic has exacerbated the issues, and the average consumer is noticing the negative connotations associated with the phrase “supply chains” when having to wait for goods to arrive much longer than usual due to global restrictions.

Some of the most pressing issues in supply chains can be addressed through the use of blockchain technology because it provides new ways to record, transfer, and share data.

Advantages of using blockchain for supply chains

Because blockchains are designed as distributed systems, they are highly resistant to modification and can be a great fit for supply chain networks. A blockchain consists of a series of blocks of data linked together through cryptographic techniques that ensure that the stored data has not been changed or tampered with – unless the entire network agrees.

Therefore, blockchain systems provide a secure and reliable structure for transmitting information, and although they are often used to record digital currency transactions, blockchain technology can be extremely useful for securing all types of digital data, and can be applied to a supply chain network to offer many advantages.

Transparent and immutable records

Imagine that we have many companies and organizations working together. These companies and organizations can use a blockchain system to record data about the location and ownership of their materials and products, and any member of the supply chain can follow what happens when resources are transferred from one company to another, and since data records cannot be changed, it will not be difficult to determine the responsible party in the event of Something went wrong.

Cut costs

Inefficiencies within the supply chain network create a lot of waste, and this problem is especially prevalent in industries with perishable goods. Improved tracking and data transparency help companies identify where waste is occurring so they can put in place cost-saving measures.
Blockchains also help eliminate fees associated with funds passing to and from various bank accounts and payment processors, as these fees reduce profit margins and are a good thing to keep in mind.

Create operationally compatible data

One of the most prominent problems in current supply chains is the inability to integrate data across every partner in the process. Blockchains are created as distributed systems that maintain a unique and transparent data repository, and each node in the network (each party) contributes to adding new data and verifying its integrity, which means that all information stored on the blockchain is available to all parties involved, so any company can easily verify Information published by the other company.

Switching electronic data interchange systems

Many companies rely on electronic data interchange (EDI) systems to send business information to each other. However, this data is often issued in batches, not in real time. If a shipment is lost or prices change quickly, other participants in the chain may not receive This information is only available after the next batch comes out of the electronic data interchange system. With blockchain technology, the information is updated regularly and can be quickly distributed to all entities involved.

Digital agreements and document sharing

It is important that there is a single copy of the truth for supply chain document sharing in any way, and the necessary documents and contracts can be linked to blockchain transactions and digital signatures, so that all participants have access to the original copy of agreements and documents.

Blockchains ensure that documents cannot be changed. Agreements cannot be changed unless all parties involved reach collective consent. In this way, organizations ensure that they spend less time with their lawyers reviewing paperwork or at the negotiating table, and are able to focus on developing new products or promoting business growth. .

Increase the quality of goods

Blockchain technology allows tracking the quality of products as they pass through the entire supply chain, allowing defective products to be discovered and disposed of faster and more efficiently. This will benefit the consumer, as the likelihood of receiving a damaged item will decrease, and companies will be motivated to focus on producing high-quality inventory, for ease of Detection of defective goods by peers and disposal.

Challenges of adopting blockchain technology in managing blockchain chains

Although blockchain technology has a lot of potential for the supply chain industry, there are some challenges and limitations that must be taken into consideration.

Deploy new systems

Custom-built systems for an organization's supply chain may not be able to adapt to the blockchain environment. Overhauling a company's infrastructure and business activities is a big step that can disrupt operations and take away resources from other projects. Therefore, senior management may hesitate to sign on to this. This type of investment before it becomes widely accepted by industry leaders.

Get partners who are willing to get involved

Partners involved in the supply chain must also be ready to use blockchain technology. Organizations can use blockchain technology to cover only one part of operations, but they cannot take full advantage of it if there are opt-outs, and moreover, transparency is not something that all companies desire.

the management of change

Once the blockchain-based system is implemented, companies must announce its adoption to their employees. The change management plan should address the definition of blockchains, the ways in which it improves their job duties, and how to work with the new systems it includes. An ongoing training program can address new features or innovations in Blockchain technology, but that requires time and resources.

Concluding thoughts

Many supply chain leaders are already adopting blockchain-based distributed systems and preparing resources to encourage their use. For example, IBM Food Trust is using blockchain technology to increase transparency in the food supply chain, and we will likely see global supply chain platforms leveraging blockchain technology. To simplify the way companies share information while moving products and materials.

Blockchain technology can succeed in achieving positive transformation for organizations in many ways and at different stages, from production and processing to logistics and accountability, where every event can be recorded and verified to create transparent and immutable records. Therefore, the use of blockchain technology can contribute to Supply chain networks help eliminate inefficiencies that are all too common in traditional management models.

  • Supply chains

  • Blockchain use cases

  • How does the blockchain chain work?

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