Blockchain is an emerging technology, which has been popularized by its use behind cryptocurrencies like Bitcoin. It has proven to be a potential gamechanger in the financial domain, but the underlying technology also quite promising in supply chain management. Blockchain is claimed to make supply chains faster, more cost efficient, improve tracking or traceability of the products and to improve communication and coordination among supply chain partners. Before, we dig deeper into the impact of Blockchain on supply chain management, we first need to understand, what Blockchain really is.
What is Blockchain?
No, Blockchain is not another buzzword for a technology that is wrapped into new marketing campaigns. It is actually a new technology, which was initially developed for create encrypted currencies, or cryptocurrency. While exploring the topic further, when I was writing my paper for me on Blockchain, I found that it is well-known for its ability to “publicly validate, record and distribute transactions in immutable and encrypted ledgers”.
Every transaction in the ledger is encrypted, which makes Blockchain more secure than the traditional models. The term Blockchain is derived from the “blocks” of transactions, which are validated and immutable, which are linked together chronologically in a “chain”. Some of the key characteristics of Blockchain are:
- Immutability of Records
- Distributed Ledger
- Smart Contracts
These three key characteristics, make the Blockchain technology suitable for creating more secured and efficient Blockchain. Let us look at it more closely.
Blockchain Supply Chain Management
Traditional supply chains, driven by ERP systems, face significant problem, especially for big companies. In case of large-scale supply chains, which spans across different nations, it becomes quite challenging to maintain visibility of the entire network, especially monitoring complex transactions. Execution errors including missing packages/shipments, mistake in inventory database and repeated payments are some of the common issues, which are nearly impossible to detect in real-time. A separate auditing is necessary to check for these errors and fix them, which consumes both time and resource.
However, using Blockchain instead of the traditional systems, solves all of these issues instantly. When Blockchain is implemented in a supply chain, the involves assets like the inventories, orders, payments, etc. are allocated with a unique identifier, which acts as a digital token. Moreover, the participants, or the supply chain partners are also given unique identifiers or digital signatures, which is used to sign the blocks which are added to the chain. A transaction in the supply chain is thoroughly recorded as the token transfers from one participant to another.
A simple example from my paper writing help should make it easier to understand. An apparel manufacturing company, sends an order to its supplier (a digital token is recorded for the order). The supplier receives the order and confirms the retailer for the same (another digital token is recorded). The supplier then asks for a loan from a bank to fulfil the supply, which the bank verifies on the shared Blockchain and approves the same (creating another digital token). In contrast, in a traditional system, a record is logged into a ledger only when a financial transaction is made.
Advantages of Blockchain In Supply Chain
The implementation of Blockchain in supply chain bears the potential to deliver great value to organizations and supply chain partners. Blockchain can increase transparency in the supply chain, eliminate potential risks of errors and increasing efficiency of the supply chain as whole. According to an expert essay writer service, some of the key advantages of Blockchain are as follows:
Increased traceability of supply chain materials, to avoid missing shipments and to also ensure that the desired standards of materials handling are followed.
- Lower risk of counterfeiting materials
- Close monitoring of outsourced contract manufacturing
- Reduced complication of book-keeping and administrative costs
- Strengthen corporate image by offering higher transparency of the supply chain network.
- Reduce potential risk of supply chain malpractices
- Effective engagement of the stakeholders.
Owing to the characteristics like distributed ledger and immutability, Blockchain can facilitate more efficient end-to-end tracking of supply chain activities. The physical assets in the supply chain can be digitized to create a decentralized record of all transactions, which is completely immutable. This record makes it possible for companies to track assets all the way from procurement to production of finished goods and its distribution to the stores and customers. It provides more visibility and trust among stakeholders, thereby making Blockchain a revolutionary technology for supply chain.
A number of companies are already exploring the potential of Blockchain in supply chain, specifically in the areas of smart contracts, which improves the efficiency of their global supply chain. Moreover, it is also being used for more efficient coordination between supply chain partners. Faster information delivery can help firms to react faster to market changes and customer demands, thereby improving their competitive advantage.