Blockchain Use Cases: Supply Chain Management

The Supply Chain is a network of interconnected entities, organizations, technologies, materials, and human resources involved in the supply, production, and distribution of goods to the end users, in other words, it involves a network of suppliers, manufacturers, distributors, retailers, and consumers.

Usually, this network is vast, thus, tracking the activities that go on across the chain can be very tedious and time-consuming, leading to inefficiency, loss of revenues, and resources. In some cases, the process of a product recall can be an uphill task for producers as there is poor monitoring of finished products.

Also, in the current supply chain, there’s a heavy emphasis on the use of paperwork and human labor, requiring the services of third parties in recording, tracking, and delivery of products.

The myriad of challenges faced in this sector can be squarely addressed by the adoption and use of blockchain technology. It can substantially streamline the activities in the global supply chain, deal with complicated record-keeping, and ensure product accountability, traceability, transparency, and tradability.

Blockchain technology as a decentralized system brings decentralization to supply chain management, thus, eliminating the need for a centralized database administration and a single entity or the third party tracking the movement of products from the source point to end-user consumption.

Furthermore, blockchain technology enables the investigation of supply chains, unraveling incidences of foul plays and illegal practices, thus, guaranteeing consumer confidence.

The deployment of blockchain technology in global supply chain management seeks to guarantee an optimal, stress-free, and cost-effective outcome. Thus, our focus in this article will be to unravel the numerous use cases of this burgeoning technology, with a special focus on Supply Chain Management.

Overview of Blockchain Technology

Blockchain is an enhanced and unalterable ledger that is used in storing information in a way that makes it formidable or impossible to cheat, hack or alter the system. It can also be referred to as a distributed digital ledger that is used in recording transactions; deployed in the distribution and tracking of assets across several business networks.

In essence, it is a system invented to cater to the record-keeping, tracking, and trading of assets either tangible or intangible, reducing risks and vulnerability from external attack.

Moreover, blockchain technology has made it impossible for traditional business networks to duplicate transactions, or tamper with records stored on chains. Also, it is best known for its indispensable role in digital currency (cryptocurrency) systems, such as Bitcoin, Ethereum, and other Altcoins for facilitating a secure and decentralized record of transactions.

Furthermore, keeping records and transaction history on blockchain guarantees the security, immutability, traceability, and transparency of the data and yields trust without third-party interference.

Blockchain Use Cases

Blockchain technology features some unique characteristics such as transparency, immutability, decentralization, and automation. These core elements are what is applied in the creation of its use cases. Thanks to Bitcoin that has made blockchain gain massive recognition and patronage in the world.

Currently, blockchain use cases have extended beyond the crypto space and are now used in several enterprises, such as health care, agriculture, real estate, security, supply chain, logistics, education, and others.

What Is Supply Chain Management?

Supply Chain Management can simply be described as the effective delivery of goods to the end-users or consumers, through the collective efforts of organizations, entities, technologies, and human resources.

In blockchain technology, supply chain management is the close supervision of various key components involved in the acquisition (of raw materials), manufacture, distribution, and consumption of products using blockchain.

How Does Blockchain Aid Supply Chain?

Blockchain helps to enhance the easy facilitation of the global supply chain by allowing companies to directly initiate transactions without a trusted third party or intermediary. It also improves the integration of financial and technical services, facilitating efficient data collaboration between stakeholders.

Also, blockchain as a distributed ledger keeps records of data and transactions in a secure condition, thus, facilitating the transfer of data (information), and assets (products) via the cumulative efforts of the stakeholders together with other parties without the need for an intermediary.

Moreover, the record stored on the blockchain is transparent that’s public for all to see and evaluate, this means that records of the products, and transactions are visible on the blockchain and can be readily accessed by anyone.

What Are Blockchain Use Cases in Supply Chain Management?

There are three notable use cases in blockchain technology. These are:

• Traceability: Blockchain does not only provide verified, secured, and factual data about products but also helps organizations track the movement of products in the supply chain.
  Prior to the advent of blockchain technology, global supply chains struggled to access the real data of packaged products consumed by consumers. Some of these products are injurious to consumers around the world and the recall of affected goods can be difficult.
  With blockchain technology, quick product assessment and traceability can be executed and enhances the fast and efficient recall of poor products.
  For example, Brilliant Earth integrated blockchain technology into its supply chain to help track the origins of its diamonds, and their destination.

• Efficiency: The efficiency of blockchain can not be compared to the traditional methods of finance and transaction. When it comes to efficiency in the supply chain, blockchain makes it easy and simple for companies to enable transaction flow without third-party consent.
  Moreover, it improves the integration of services in terms of payment solutions, and payment processing and prevents counterfeiting and fraud.
  Basically, blockchain technology helps companies in the compilation of product-related data and facilitates data sharing between stakeholders.

• Immutability: An important feature of blockchain technology. It eliminates incidences of loss or alteration of data stored on the blockchain, inevitably increasing the safety, comprehensive verification, and audit of data.
  Immutability ensures accountability, consumer confidence, and reduced illegal activity on the supply chain; securing key data such as product certification and documentation.

Features of Blockchain in the Supply Chain

Blockchain goes beyond cryptocurrency-based utility. It also deals with different phases of the supply chain like distribution of records, initiation, and monitoring of transactions. Other basic features include:

Consensus

Both parties must agree for a transaction to be executed. On the Blockchain, all blocks are created or changed with this consensus, that is, changes can only occur when all parties have agreed. All the entities in the chain must acknowledge that each transaction executed is valid.

For the supply chain, blockchain technology can be used to bring consensus to various transactions such as payment for medical services, transportation, and delivery.

Immutability

Falsifying a payment or tampering with an entry in the distributed ledger is virtually impossible because there are multiple copies of each entry and they all have to be switched concurrently. Only a new blockchain transaction can dilute the effect of a former one.

Provenance

Provenance is a key feature in the supply chain because it enables the tracking of raw materials and finished products from the production site to the market. With provenance, supply chain specialists will easily see who owned the assets or properties and at what time.

Continuity

In the supply chain, blockchain technology facilitates a level of trust that eliminates rivalries and builds stronger relationships between all partners. On the blockchain, the shared ledger’s copies have the same version of the facts, because both parties have access to transaction records; thus, trust is built!

Challenges of Supply Chain Management

Before the inclusion of blockchain technology in supply chain management, companies found it difficult to gain consumers’ trust due to a lack of transparency and accountability. This lack of trust is a result of the following:

Lack of Visibility

Consumers find it difficult to accurately collect verified data from all links in the supply chain. Due to lack of visibility, a product recall is usually very expensive with companies expected to trace products and suppliers back to their origin to address the issue.

Outright Tracking

Large organizations are vested with numerous networks in their supply chain, therefore, tracking records with accuracy is almost impossible and difficult. In addition, keeping historical records that have to do with the production, and current state of the products is difficult to accomplish. Also, detecting any kind of fraud or illegal activities in any part of the supply chain is arduous.

Initiation of Trust

To execute seamless operations in the supply chain, companies need to build a high level of trust. Albeit, without blockchain technology in the supply chain, entrenching constructive trust in the case of regulatory compliances between production and distribution is difficult.

Overall Cost Curtailment

One of the challenges of the supply chain is the acceleration of the administrative process. This is costly due to the high maintenance of middlemen and intermediaries.

Generally, inadequate monitoring of products in the supply chain has resulted in the delivery of counterfeit products, loss of products, and expected revenue.

Benefits of Blockchain Technology in Supply Chain Management

In the current trend of technology, blockchain innovation has greatly helped in the programming of business logic with the aid of smart contracts. As a result, audible tracking, limited exploitative tendency, and improved efficiency in the supply chain have been effectively implemented. Here are three ways in which blockchain has provided solutions to the supply chain:

Increased Efficiency and Processing Speed

Until the advent of blockchain technology, the traditional method of processing data in the supply chain was slow, meandering, and relied mainly on paperwork. Blockchain has made it easy for companies to enable an end-to-end digital process that delivers new levels of transparency and visibility.

Moreover, little or no verification errors are recorded during transactions on the blockchain because they are approved by a network of thousands of computers.

Improved Traceability

Primarily, one of the benefits of blockchain technology is that it provides a trusted and tamperproof audit trail of the flow of information, inventory, and transactions within a supply chain.

It improves regulatory and consumer demand for product information. Since blockchains are open-source software, viewing the code by anyone is highly possible.

Reduction of Transaction Costs

For consumers to initiate a transaction, sign a document, or order goods and services, they need to pay the bank for verification of the transaction.

The ability of blockchain to enable cross-border funds transfer without approval or verification from banks means its use in the supply chain can accelerate payment while reducing the charges.

For example, the use of blockchain technology can be automatically triggered on consumer goods through smart contracts. Here, a smart contract can set out the agreed delivery product and also what will be of that product if delivered late or missed. In this situation, the contract monitors the delivery and immediately triggers action where the terms are violated.

This consequently reduces costs, especially where third parties had been previously used to handle part of the process.

Acceleration of Supply Chain Processes

One of the benefits of blockchain technology in the supply chain is that it safeguards users’ information and transactions.

It prevents the occurrence of errors and ensures a speedy process since the need for product recall or reprocessing of missed orders isn’t necessary. The fact that there is no need for third-party approval makes the acceleration of the supply chain in blockchain technology fast and easy.

Conclusion

Blockchain technology is increasingly becoming recognized in the global market, especially in large organizations and enterprises; needed to efficiently manage product development and distribution.

Also, the continuous surge in the adoption of internet utilization and digitalization across the globe has made it easier for consumers to demand product recall and order assets at their convenience.

Consumers have the means to verify the value of products due to immutability, transparency, and traceability. They can trace the origins of products as well as know the quality of the product and the channel of delivery. In a nutshell, the integration of blockchain utility has aided supply chain management growth.