When you purchase a pair of jeans or grab coffee grounds at the grocery store, the complex planning behind that transaction often goes unnoticed. From material extraction to processing, shipping, and more processing, an extensive chain of events enables these purchases.
The global supply chain is a complex system that businesses use worldwide to produce and deliver products globally. It has seen a lot of tech advancements, like adopting blockchain, to handle its complexity.
Blockchain is probably known as the backbone of cryptocurrency and non-fungible tokens (NFTs), but it has evolved to become a solution for a range of industries. Today, blockchain technology is transforming healthcare, government, and even video games. And lately, it has become widely popular in the supply chain industry.
In the upcoming years, it is expected that the blockchain market in the supply chain industry will expand rapidly.
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How is the Modern Supply Chain Evolving?
Advanced technologies like artificial intelligence (AI), robotics & blockchain are transforming the digital supply network. This network integrates data from diverse sources to efficiently distribute goods & services throughout the value chain.
The supply chain infrastructure is evolving from traditional, physical systems to a highly interconnected network encompassing assets, data & operations. AI algorithms empower businesses to gain insights from vast datasets, enabling proactive inventory management, streamlining warehouse operations, optimizing sourcing connections, improving delivery speed & creating innovative customer experiences that boost satisfaction and drive sales.
AI-driven robots play an important role in automating various manual tasks previously handled by humans, including order picking & packing, transportation of raw materials & finished products, managing storage and distribution, and scanning & packaging items.
Moreover, the inherent immutability of blockchain technology enables robust tracking & tracing of product origins, helping identify counterfeit items and combat fraud within the value chain. For example, maintaining specific temperature conditions is crucial when transporting perishable goods like cheese.
By integrating blockchain, the transporting company can monitor temperature variations during transit. This capability allows them to promptly address any deviations beyond permissible limits, minimizing potential issues related to food quality.
How Does Blockchain Technology Enhance Supply Chain Management?
Unlike conventional supply chains, those based on blockchain technology will update transaction records automatically whenever a change occurs, thereby improving traceability throughout the entire supply chain network.
Supply chain networks using blockchain technology might require a closed, private & permissioned blockchain, involving a limited number of participants. This differs from financial blockchain applications like Bitcoin, which tend to be public.
Nevertheless, the chance for a broader range of partnerships might still be present.
In supply networks based on blockchain technology, there are four important participants: registrars, standard organizations, certifiers & actors:
- Registrars assign unique identities to network participants.
- Standard organizations establish rules & technical guidelines for blockchains, similar to Fairtrade standards for eco-friendly supply chains.
- Certifiers validate individuals to participate in supply chain networks.
- Certified auditors or certifiers need to authenticate participants or actors such as producers, sellers & buyers to uphold the system’s credibility.
Image Source: cointelegraph.com
The way a particular actor claims ownership or transfers a product is an interesting aspect of managing structure and flow, particularly within supply chains leveraging blockchain technology. Yet, does blockchain truly enhance transparency in supply chain management?
Before a product changes hands, the involved parties must meet a condition in the smart contract, ensuring the validation of goods or services exchanged between them. Once all participants fulfill their obligations & processes, the blockchain ledger is updated with transaction details. This process enhances transparency throughout the entire value chain.
Furthermore, blockchain technology transparently outlines details such as the nature, quantity, quality, location & ownership of a product. This enables customers to track the complete chain of custody and transactions, from raw materials to the final sale, removing the need for a dependable central organization to oversee & uphold digital supply chains.
How is Blockchain Used in the Supply Chain?
Tackling Food Safety Concerns
The majority of the time, a complex global supply chain that includes a complicated web of manufacturing, processing, packing, storage & distribution produces the food that we eat. Food safety may suffer as a result of all of this moving us more and farther away from the source of our food supply. It can be challenging to monitor several food safety concerns separately, such as cross-contamination & the spread of foodborne diseases. Furthermore, it is difficult to respond quickly to problems in traditional supply chains due to a lack of data & visibility, which may damage a business’s reputation and finances.
Blockchain technology, renowned for its reliability and integrity, emerges as a promising solution to address these challenges.
Since 2017, key players in the food industry have collaborated to explore how blockchain can elevate global food safety standards. Presently, industry giants leverage blockchain to expedite the identification & removal of sources contributing to foodborne illnesses.
To Improve Tracking & Transparency
Implementing blockchain technology alongside Internet of Things (IoT) devices like smart sensors and RFID tags enhances the efficiency of recording product movements within the supply chain. It captures detailed data regarding factors like temperature, vibration & humidity, storing it securely in a blockchain while employing smart contracts for real-time monitoring.
This integration offers high precision in tracking, facilitating quicker issue detection & resolution for companies. Also, it presents opportunities for cost savings. By using a distributed digital network, the system minimizes stock loss and waste, while eliminating the need for paper-based workflows. This elimination of physical document management reduces additional costs associated with storage and labor, streamlining operations significantly.
Improving Payment Efficiency
Within supply chains, the multitude of suppliers, intermediaries & third-party services often complicates the management of goods movement, pricing, and supplier payments. Conventional payment terms via invoices typically span weeks or even months. However, employing blockchain-powered smart contracts facilitates immediate payments.
The decentralized structure of blockchain technology proves beneficial in establishing a transparent payment system. This system allows all involved parties in a specific supply chain to track payment transactions, thereby mitigating fraud & minimizing human errors. Also, blockchain-based cryptocurrencies empower supply chain participants to transact directly, bypassing the need for banks. This approach reduces fees & accelerates the payment process significantly.
Improving Communication & Collaboration
In the intricate web of invoices, order requests & contracts within a modern supply chain, constant exchanges between different entities often lead to friction and delays.
However, the integration of blockchain technology in supply chains holds the promise of enhancing communication and collaboration among all involved stakeholders. By enabling shared databases across multiple parties, blockchain eliminates the necessity for intermediaries to validate, document or synchronize these transactions, as per reports. The report highlights that blockchain’s shift from a centralized to a decentralized system liberates previously isolated data, which were confined within safeguarded silos.
Furthermore, smart contracts play an important role by incentivizing all parties to fulfill their agreed-upon obligations promptly, comprehensively & accurately. This comprehensive visibility into financial data and performance not only enhances financing opportunities for small businesses but also reduces processing times by minimizing uncertainties and risks.
To Advance Ethical & Sustainable Sourcing
In recent years, consumer awareness has significantly grown regarding the impact of their shopping choices on the environment and society. Whether it’s clothing, food, or vehicles people seek assurance that the companies they support prioritize ethical & sustainable sourcing practices.
Companies have undergone a profound shift in their perception of their responsibilities, embracing a broader role as global participants. This shift has been made possible by the transparency within supply chains.
Blockchain technology emerges as a powerful tool in this pursuit for several reasons. Firstly, it enables the verification of a product’s origin, allowing consumers to make informed decisions about their purchases.
Secondly, its traceability & secure characteristics offer customers a transparent view into the journey of materials and products, from sourcing to manufacturing and throughout the entire supply chain. Customers are now better equipped to comprehend and verify the sustainable and ethical features of the products they purchase.
How Does Blockchain Improve Traceability in the Supply Chain?
By utilizing blockchain, involved parties can efficiently track various details such as pricing, dates, origins, quality, certifications, destinations & other relevant information, streamlining the process of tracing activities within the supply chain.
Traceability refers to the ability to precisely locate both past and present positions of inventory, maintaining a comprehensive record of product handling. This process encompasses tracking items as they navigate a complex journey, traversing various geographic regions from raw material sources through to retailers & consumers.
Traceability is a major advantage of using blockchain in transforming supply chains. With its decentralized, open-source ledgers that replicate data across users, transactions occur instantly, enabling real-time updates.
Therefore, blockchain contributes to creating a more intelligent & secure supply chain by facilitating robust product tracking with nearly real-time visibility through a solid audit trail.
By linking supply chain networks via a decentralized system, blockchain holds the potential to facilitate seamless movement between suppliers & manufacturers.
Additionally, manufacturers and distributors can securely input details like nutritional content, product source and quality, and allergen presence through a shared blockchain network. Access to a product’s background offers consumers greater confidence in ethically sourced items, ultimately promoting sustainability in supply chains.
Conversely, if any health risks or safety standard violations are found, the stored traceability information on the decentralized ledger enables appropriate action against the manufacturer.
How Does Blockchain Improve Tradability Within the Supply Chain?
Tradability is a unique benefit of blockchain technology. Blockchain platforms facilitate trade through asset tokenization. Tokenization transforms physical items, like products, into digital assets, assigning one token to each product. These tokens can then be exchanged within the market.
Blockchain platforms enable the tokenization of assets by breaking them into digital shares that represent ownership. These tokens allow users to transfer ownership without the need for physical asset exchange, as they are tradable. Also, automated smart contract payments ensure accurate licensing of software, services & products.
Furthermore, blockchain establishes consensus, ensuring unanimous agreement on transactions within the chain. This exceptional capability of the chain to monitor ownership details for both tangible assets such as real estate & intangible assets is enabled by all entities utilizing an identical ledger version.
Companies might opt for asset tokenization over direct fiat payment for several reasons. One potential advantage is the facilitation of peer-to-peer payments through smart contracts, expediting fund transfers & reducing the reimbursement time for provided goods or services.
Moreover, utilizing token payments serves as a deterrent against fraudsters exploiting chargeback scenarios to defraud businesses. After a payment is initiated, it’s directed to the business’s blockchain wallet account, preventing unauthorized withdrawals from occurring.
Future of Blockchain-based Supply Chain
The application of blockchain technology in supply chain management offers solutions to traditional challenges, such as eliminating cumbersome paperwork. By creating a decentralized, unchangeable record of transactions & digitalizing physical assets, it becomes feasible to trace products from production to delivery, enhancing transparency.
Yet, the widespread adoption of blockchain in supply chains is hindered by the need for specialized expertise to fully utilize its advantages.
Moreover, the technology’s early stage means it’s subject to diverse regulations across countries, impacting supply networks. Despite these obstacles, blockchain-based solutions are poised to gradually replace conventional processes, though this shift won’t happen overnight.
Also, you can contact HashStudioz Technologies, a prominent blockchain app development company in the USA and India that provides effective & engaging blockchain consultation services. We assist in planning the development of your business solutions.
Frequently Asked Questions
1. In what ways can Blockchain be applied to Supply Chain?
Blockchain’s impact on supply chain operations encompasses various aspects such as real-time tracking of goods, facilitating seamless payments & streamlining information gathering and sharing processes, leading to reduced time and costs.
2. Which Blockchain tool is most suitable for Supply Chain?
Determining the ideal blockchain tool for supply chain management depends on specific use cases and the unique needs of each company. Considering the array of blockchain-based platforms available, it’s advisable to consult your chosen blockchain development company to make an informed decision tailored to your requirements.