How Blockchain Can Be Used in the Supply Chain and Logistics Industry

How Blockchain Can Be Used in the Supply Chain and Logistics Industry

The development of technological progress in today’s world has fostered a significant increase in consumer expectations, as well as the need for more efficient supply chains and logistics. The relatively new technology of blockchain could improve efficiency and be a game changer for supply chain management. Here are some possible ways in which blockchain technology could have the answer to problems that have plagued the industry for years.

TRACEABILITY AND TRANSPARENCY

Due to globalization, supply chains today have become extremely complex. They often involve hundreds of stages covering numerous geographical locations, and multiple payments between several parties. Processes may even be extended over time and come with extra costs from manufacturer to end users. According to Statista, the 2018 survey on biggest supply chain challenges worldwide reported that the the biggest challenge in 2018 is visibility, an 9.1 percent increase as compared in 2017. Thus, it is difficult to trace the products from its origin and its value becomes questionable.

A blockchain database would contain all transaction details and records which are immutable, enabling transparency and traceability. Imagine the potentially improved service across the supply chain system! These transactions will be accessible from anywhere in the world from suppliers to end users, and will ensure accuracy for end-to-end tracking and visibility to both businesses and consumers.

RELIABILITY AND INTEGRITY

Supply chain security has been a widespread issue and there has been an increased focus on this within the industry. Both public and private sectors have applied various efforts to effectively incorporate systems through the utilization of people and processes, but vulnerabilities in supply chain still remain prevalent. It is difficult to investigate in detail all levels of theft, fraud, smuggling, sabotage or related illegal and unethical practices associated with global logistics.

A distributed ledger will go a long way to eliminate this, providing credibility, reliability and integrity. There is no need for central authority over the blockchain, eliminating audit requirements by internal systems and processes. It could dramatically reduce data forgery, human error and trade disputes. Blockchain records are irreversible, meaning ownership and possession of data or goods are protected from attackers and criminals.

PRODUCTIVITY AND EFFICIENCY

One of the most challenging aspects of the supply chain system is the inefficiency of getting goods processed from payment to warehousing to delivery. According to the 2018 survey as mentioned above, the third biggest challenge in 2018 is inventory management. As all involved parties on the chain have the same version of the ledger, a blockchain database can improve efficiency of supply chains significantly. Every change is documented and saved permanently, from manufacturing to distribution. Such a system would potentially reduce transport costs and hassle, and reduce miscommunication. Not only will this quicken the process to authenticate data, but it could also speed up transit of goods.

In addition, the usage of smart contracts could also lead to automatic processing of purchases. Automated purchasing will accelerate the cycle time, allowing for inventory control, eliminating timely internal processes and sequentially leading to cost savings.

As blockchain gains momentum, companies and governments may observe different players in the industry who have begun to use blockchain to drive supply chain transparency. According to Forbes, there are a few international companies that have adopted blockchain technology to track their supply chain more efficiently.

For example, Walmart uses blockchain to keep track of its supply of meat shipments from China with the blockchain storing records such as sell-by-dates, place of origin and process. As for De Beers, blockchain is utilized to track diamonds from the point of mining right up to when customers purchase the finished product, providing industry professionals and end customers with the ability to both verify authentication and certification of the diamonds as well as providing peace of mind that the diamonds have been sourced from conflict free zones.

While it is clear that the supply chain industry is increasingly relying on this technology to improve processes and communication, the widespread implications of how it could be successfully implemented is still yet to be explored. As time goes on, more organizations will definitely begin to leverage this technology as they become familiar with it; this transformation could herald a new dawn for efficiency, transparency and trust in global supply chain and logistics.

You can also read up on how blockchain could be used in the healthcare industry for the better.

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