Supply Chain Reimagined: The Role of IoT and Blockchain

The modern companies are actively seeking technological solutions to implement in their day-to-day operations. Such a tendency stems from inefficiencies within the core operations that have a direct negative impact on the bottom lines of these firms. The complexity, related to the supply chain management, may be a major source of such inefficiencies.

The two technological solutions allowing to overcome the complexity while also introducing transparency, are the Internet of Things (IoT) and the immune distributed ledger (blockchain). However, the degree of success from implementation of these tools depends on the ability of a company to ensure their natural assimilation and comprehensiveness.

Challenges in the Supply Chain Management

Supply Chain Management (SCM) commonly exhibits various types of issues, depending on a specific firm, industry, or even geographic location. The most common inefficiencies in SCM include:

• Sudden changes in demand and erosion of margins: The issue stems from the generally higher pacing of the markets, as well as the higher levels of competition.
• Extended value chains: The companies have to work with several layers of stakeholders, including customers, suppliers, and distributors, contributing to the variability risks.
• Ineffective risk management: Risk monitoring and minimization became harder at the largest scale.
• Lack of transparency: The firms are commonly lacking internal and external oversight over their supply chains, potentially contributing to violations and fraud risks.
• Obsolete technology: Technological weaknesses result in weaker communication, manual work, and redundancy of the processes.

IoT and blockchain technology have proven their effectiveness in addressing the mentioned issues and risks.

Internet of Things (IoT)

The IoT is a broad term that commonly implies a collection of interconnected physical devices allowing monitoring, reporting, and exchanging data. These devices connect to computer systems via Wi-Fi and data networks, creating a new form of the conceptual model. The devices commonly use sensors to measure geographic location, temperature, speed, humidity, light levels, and others. Smart devices, RFID chips, and mobile sensors are the common forms of IoT devices.

When applied to the SCM, IoT resolves many core problems while enhancing a multitude of processes through its capabilities. The devices measure the geographic location of goods, preventing loss or theft. The measurement of speed allows forecasting a delivery more precisely while also limiting the safety-related risks. It is also possible to evaluate the storage conditions of goods that are particularly sensitive to them. The general streamlining of the processes enhances their administration while increasing flexibility of the firm.

Distributed Ledger (Blockchain)

Blockchain represents a distributed ledger stored on multiple systems of various parties. The technology provides access to the data while supporting its storage and maintenance. Furthermore, blockchain technology supports data validation, allowing only authorized parties to append data blocks after confirmation from the other blockchain participants. The novel conceptual model prevents editing or deleting of data and demands the consensus among other parties.

The strength of blockchain technology alone for SCM is already substantial. It addresses the concern of the extended value chains with large number of stakeholders. Commonly, the exchange of data between these parties is a complex and timely process because of mismatches in their individual ledgers. However, the implementation of blockchain technology on the internal and external levels would allow a company to streamline its business flows. Furthermore, it would enhance the speed and security by allowing different levels of access.

Benefits of Implementing IoT and Blockchain

The combined implementation of the IoT and blockchain significantly expands their benefits for the SCM. The possibilities are particularly significant for the automation of the main processes.

In this scenario, the vendor would embrace full responsibility, as they would have access to the same data as the retail company. At the same time, both parties would be certain of data validity and authenticity. Furthermore, in case the indicators provided via the IoT device are in line with the smart contract specifications, the vendor would receive the payment in accordance with the predetermined terms.

The simplicity and speed of the SCM process under the IoT and blockchain are significant benefits the firms utilizing them would gain in the short and long term. These benefits would form the conceptual model ensuring accessibility to information, automation of the core processes, connections between the physical and information flows, fraud detection and prevention.

Future Development Prospects

The strategic nature of the novel technologies, such as IoT and blockchain, combined with their immediate advantages following implementation, reflects their strong potential. These advantages are disruptive for the main stakeholders within the SCM process, namely the producer, freight forwarder, broker, and consumer. Blockchain is able to complement IoT in terms of security and audit procedures.

The products developed on the basis of blockchain technology also ensure automation of the main processes. The automation reduces costs and time for the parties involved. In addition, the IoT and blockchain are able to remove ambiguity related to certain terms and conditions set within the agreement. In the end, the combination of the mentioned positive effects would grant any company an edge over its competitors failing to ensure technological development.

Originally published at https://www.dewsolutions.in on August 16, 2019.