How Blockchain Technology Can Enable a Transparent Supply Chain in the Future
Blockchain technology can be a perfect solution for all supply chain management issues regarding transparency. However, there is a lack of highly trained and skilled individuals that we need for the applications of blockchain in the supply chain management framework to work. This is why SCM-based industries are actively seeking individuals with extensive blockchain education. Although the current framework of the SCM industry might not be compatible with advanced blockchain technology, it is crucial for us to understand what improvements blockchain can possibly bring to this industry.
So let us explore how blockchain can enable transparent proceedings in the supply chain industry as well as other improvements.
Understanding the present issues within the supply chain networks
- Absence of quality control standards for SKUs of certain products.
- Lack of accuracy in lead timings for manufacture and shipment.
- Risk of duplicate SKUs during shipping.
- Lack of timely product traceability from one destination to another.
- Risk of fake products supply.
- Time-consuming financial audits with current legacy ERP systems.
- Improper allocation of inventory, resulting in misunderstood purchase agreements.
Despite the fact that all these issues are our basic database problems, they heavily cost manufacturers, third-party logistics, consumer businesses, wholesalers, and individual customers huge money losses every year.
Use of blockchain technology for creating a transparent SCM value
Years of blockchain development have brought robust mechanisms to work, including Proof Of Stake or Proof Of Work, that can address the majority of SCM issues. So let’s see how it will help in bringing transparency in the industry:
Benefit of traceability
The use of blockchain ledger to perform supplies and transactions helps users to track the original manufacturer and present the owner of any product they want. Hence, it will be possible to layout fraud detection systems to track fake items traveling in domestic as well as international SCM networks.
Furthermore, it will also help in identifying faulty items in the initial supply chain stage. In addition to this, ERP system integration within the blockchain networks helps in maintaining a sole source of truth and removes risks of human error.
With the integration of a transparent ledger, distributors or manufacturers won’t be able to keep inventory information from consumers due to any inconvenience without providing a disclosure beforehand.
Moreover, transparent supply chains accurately forecast product demands as there will be less difference for lead timings.
Improved financial auditing for business contracts
Blockchain utilizes smart contracts to close the deal between two parties which uses programming languages like Solidity. Furthermore, Solidity benefits by automating the terms of a business contract, where if it finds any issue, it terminates the contract right away.
Hence it will eliminate any confusion over the number of purchased inventory Vs. consigned inventory. Furthermore, it will simplify the process of financial auditing and maintaining a bill of lading with no discrepancy. Additionally, it can efficiently hold general financial records to audit numerous transportation, holding, upcoming SKU revenue, and labor costs.
This functionality of blockchain is incredibly beneficial for supply chain industries, especially in the era of an epidemic where we are seeing a shortage of essential items in the majority of local markets.
However, you can learn applications of blockchain technology in the supply chain industry in a much more detailed manner by taking a robust blockchain course available on the web.
Is it possible to employ blockchain-based frameworks in existing supply chain management systems?
Even though the idea of transparency in the supply chain system seems to be great on the surface, the existing business framework among the supply chain industry focuses on maintaining secrecy.
For example, if Apple plans to launch a product at their upcoming conference, they would not like analysts to learn about the new product’s SKUs before its official launch. And the same goes for every company across the world.
Hence without employing defined government regulations or public pleasure regarding more transparency in supply chain processing, companies will not want to bring such changes in their operations. However, these changes can provide them with a strategic edge over their rivals.
Hence in upcoming decades due to the increase in digitization within the supply chain networks, transparency and decentralization might be a new operational model in the supply chain industry for cross-border trade.
Though there are many issues in implementing blockchain technology-based applications in the supply chain sector currently, the future looks brighter due to the advantages blockchain can bring to the industry.
Check out the BLOCKCHAIN COUNCIL to gain more insights on the subject.