How to Apply Blockchain to Supply-Chain Management
What is the Supply Chain?
Supply-chain management, also referred to as supply network or logistics network, is a data system of things, goods, and people involved in the process of trading. It is the record of the process involved when the product travels from the place it was made to the person who actually receives it.
Nowadays, consumers are highly interested in full information about the products they are purchasing:
- origin
- compounds
- information about suppliers and producers
- facts about consumption and/or product storage
All of the factors mentioned above can be securely recorded, stored, and processed within the blockchain transaction system in any given supply chain.
Therefore, transparency of product realization represents an important foundation of logistics. Today, supply chains are inherently complex, as they involve numerous participants from all over the world. They sometimes face difficulties in terms of cost, speed, or quality. Still, the benefits of the supply-chain system are obvious, and there are certain ways to improve its efficiency. The ability to manage it transparently and openly is vital. In order to streamline processes for better efficiency, blockchain offers great benefits.
The Benefits of Blockchain Implementation Within a Supply Chain
Blockchain itself is an optimized system of a shared database that includes digital information on the products, people, or events that can be accessed or inspected by many users.
Blockchain technology is a great way to improve supply-chain management, as it uses the distributed public general ledger. With blockchain’s help, it is possible to:
- reduce errors
- avoid product delays
- eliminate fraudulent activities
- improve management
- increase consumer/supplier trust
When facing a lack of transparency, blockchain reveals a variety of transactions in goods and/or services, which are all recorded and tracked in real time. What’s more, the information can be changed, edited, or added, but not deleted, thereby displaying the real facts and clarifying the retail process.
Let’s consider the dry aged beef supply chain as an example.
One can track how the product gets from the supplier to the producer, and how it is distributed. It is possible to get information about the origin and destination of the product. Furthermore, it can be seen how a retailer adds potential information about its usage, and provides an additional application for customers. Lastly, the buyer gets full knowledge about the origin of the product, its delivery time, and additional facts about its consumption.
Monitoring such transactions makes it easier for consumers to remain informed. The public distributed ledger allows them to get the latest updates, and, therefore, see the whole picture of the supply chain.
As the backbone of supply-chain digitization, blockchain technology enables bilateral settlement by eliminating midpoint failures, delays, and collateral costs while minimizing credit risks during exchange spreads. It has the following advantages:
Scalability. Blockchain is scalable due to the fact that many participants are integrated into the system and receive up-to-date information.
Independence of legacy systems. This makes implementation quick and hack-resistant.
The indelible ledger of shared data with codified rules eliminates the audits used by internal systems, providing better security.
Transparency. Because the data is shared, edited, and unchangeable, it requires less administrative work and lowers charges for transactions.
All of the features above improve the efficiency of the decentralized system, are extremely innovative, and open new opportunities for forward-looking businesses.
How to Apply Blockchain to Supply Chain Management?
In order to integrate blockchain technology into the supply chain successfully, companies must understand and evaluate all risks and weaknesses with which they are likely to be faced. It is essential to review the nature of these risks, and work out a map of weak points. Further, the company has to work out a plan of eliminating these points with the help of blockchain technology.
In the beginning, it is wise to start small: the company should try implementing blockchain solutions just to several weak points at first. When progress is seen and everything is working well, it is time to move forward until all the issues are resolved and solutions are found. Collaboration and scalability progress are essential in applying blockchain to supply-chain management.
Three steps should be followed to achieve the final goal:
- First, the business sets up an internal company blockchain. In the beginning, it may take some time to get accustomed to the new technology, but it certainly pays back in the end.
- Next, it is necessary to extend blockchain to adjoining members, such as direct suppliers and third-party logistics. It is important to collaborate with customers, suppliers, and technologists. It takes a certain effort to set everything up. That is why companies often partner with forward-thinking service providers who value innovation and transparency for their customers.
- Finally, as data availability is insured and its exchange is fostered, all the players of the supply chain can be integrated, including end customers.
As supply chains are complex nowadays, they involve numerous participants in relationships. The most common issues have to do with a lack of transparency and traceability, and blockchain technology provides the best solutions. Its implementation in supply chains gives companies numerous advantages. It reduces the time delays, additional costs, and human error factors that are so common today. In order to increase profits and strengthen your position in the global market, it is crucial to be innovative and use blockchain’s potential.
Interested in blockchain implementation? Our Applicature team experts are willing to help you, and answer any questions. Feel free to contact us!
