How Blockchain Can Enhance Responsiveness and Efficiency in Global Value Chains

The Next Frontier Of Supply Chain Management

Supply chain management involves planning, implementing and controlling supply chain operations, which typically include the movement and storage of raw materials, work-in-process inventory and finished goods from the point-of-origin to the point-of-consumption. The difficulty, however, comes with trying to find the best supply chain configuration that enables operations to be run efficiently and responsively.

Supply chains continue to increase in complexity due to greater product and service sophistication, outsourcing, regulatory and compliance requirements, supplier and customer networks or markets that are geographically spread, and risk/security issues, to name a few. As a result, maintaining visibility and data quality from various stakeholders become crucial factors in maintaining efficient supply chains.

Blockchain technology has already begun to impact several aspects of businesses because it provides a complete chain of custody for items that are stored on these distributed ledgers from their origin to point of sale. In addition, users are able to trust the data on the chain due to its immutability. Blockchain’s tracking capabilities also enable full audit trails, which give companies confidence in the authenticity and quality of goods. The distributed nature of the decentralized platforms allow for better oversight and control of products, while real-time tracking via smart contracts offers supply chain participants the flexibility to make faster decisions and keep more accurate track of inventory levels, ultimately reducing working capital inactivity.

Ethical Efficiency

Efficiency is important in supply chains for businesses to succeed and survive in dynamic global markets. Furthermore, the value of efficient and responsive supply chain management has never been greater, considering the economic and competitive challenges facing most businesses today. Given the complex and dynamic nature of supply chains, information and its real-time management is seen as a real driver of value throughout global value chains.

There are many issues that arise in managing today’s supply chains. Some of these include lack of trust and confidentiality in information sharing, limitations of IT systems, inability to share information between supply chain partners, and lack of data standards. Information sharing among supply chain partners is crucial for supply chain integration since it drastically augments supply chain operations.

Case study: increasing efficiency and responsiveness

Imagine a purchasing platform representing the transfer of value and interaction among all tier level suppliers and original product manufacturers along a value chain, facilitating the buying, selling, and reselling of all types of raw materials. Stakeholders using the platform could:

• Access information on raw materials;
• Buy and sell raw materials at their disposal; and
• Be held accountable for activities and checks.

All this can be made possible by the real-time capability, smart contracts functionality, and distributed features associated with blockchain-based platforms. To understand this how this would work in practice, think of a marketplace for selling, reselling, and buying raw materials which could be built leveraging smart contracts. With these self-executing blocks of code it is possible to:

• Store information about supply and demand;
• Have oversight over sourcing decisions; and
• Create requests for materials from buyers, where suppliers could bid on a shared open market platform.

Hercules Supply Chain Optimization Solution

To help solve some aspects of the above mentioned solution, Hercules is a blockchain-based supply chain management platform that enables the tracking and tracing of finished goods and materials, providing users with a high level of trust. Hercules supply chain management software also, in near real-time, provides valuable data and deeper insights into production processes that to date are predominantly paper-based and still very much done in manual ways instead of being automated. This blockchain based automation creates extraordinary efficiency which, consequently, reduces counterfeits and increases trust among consumers and supply chain partners.