The Supply Chain and Blockchain: A Match Made In Heaven
Imagine if the sleek and intuitive shopping experience on Amazon wasn’t matched by a timely and effective shipping process. It seems ludicrous because we’ve become so accustomed to the point, click, order, and delivery cycle. Amazon’s streamlined supply chain is one reason they became the E-commerce behemoth we know today. Unfortunately, many manufacturers and vendors in the world lack the resources and expertise of Amazon.
Building a truly global E-commerce system is expensive and exclusive. Most manufacturers can’t build or join one and supply chain inefficiencies have a direct impact on e-commerce platforms.
So, how can the rest of the E-commerce world compete? Through the adoption of new technology. As FedEx CEO Fred Smith said during Consensus 2018, “If you are not operating at the edge of new technologies, you will surely be disrupted.”
Before we look at how blockchain will solve the supply chain industries biggest issues, let’s look at what these issues are:
1. Supply chain visibility and transparency
This is challenging in today’s supply chain as source and origin information is often hidden in data silos, often in incompatible or inappropriate formats. Major pain points would be relieved if at any point in the supply chain process all participants, from part suppliers to manufacturers to consumers, could inspect and access real time information about the status of their product or service.
2. Too many middlemen
This is one of the double-edged swords of supply chains. On one hand, there needs to be practical ways to cope with complex supply chains with many participants at different steps of a product lifecycle. On the other hand, there also needs to be a way to reconcile disputes, make the flow of products or services as trustworthy as possible, and reduce counterparty risk. Intermediaries, or in simple terms middleman, play that role. They are the custodians of trust on the supply chain, facilitating the flow and ensuring that everybody plays by the rules. They can play different roles, from custody banks and clearance agents, to brokers and dealers — and none of them work for free.
For long and complex supply chains, these fees add up quickly. Who pays these fees? The consumer does by buying products that are marked up by huge margins.
3. Inefficient tracking and tracing
This is a widespread issue that affects producers, wholesalers, and retailers. During a product recall, the track and trace mechanism needs to be fast, reliable, and transparent. The problem is, each member of the supply chain has different priorities, costs, and timelines.
For example, the manufacturer is keen to reduce recall cost while keeping their market status and reputation intact. Meanwhile, the wholesaler needs to reduce unsold products and reimburse recall cost to their networks to maintain their position. Near the end of the supply chain is the retailer, who wants to address recalls quickly to keep their customers satisfied. And finally, the end consumer may want their defective product replaced at no cost and as fast as possible.
As you can see, in the current supply chain ecosystem it’s very hard to keep all parties happy while keeping recall costs to a manageable level.
4. Static or non-existent inventory management
Real-time inventory management is difficult to achieve. It’s especially challenging and expensive for large, global supply chains. It requires a complete redesign of existing IT systems and expensive retrofit solutions, which are not available or affordable by participants in the chain.
For example, large manufacturers have the means to implement real-time inventory management systems. However, in a complex supply chain, just one node using legacy technology is enough to break the flow of information and negate the benefits of implementation.
Enter Vanig
As a blockchain-powered open ecosystem, Vanig allows manufacturers, wholesalers, retails and consumers real-time product tracking. Thanks to Vanig APIs, external data feeds from sensors, data oracles, and other popular trackers are easy to connect and access. The journey of a product becomes open and visible in real time, which provides greater assurances about the security of a transaction and the status of a product.
We’re also disrupting intermediaries. Every key stakeholder in the supply chain — from the manufacturer to the end consumer — will have a direct, peer-to-peer communication. This allows producers to cut down costs on brokering fees and the end consumer gets a better deal. Price is driven by market demand and production cost rather than mark up to go above a break-even point.
Additionally, when a recall needs to be initiated the whole experience is sleeker, faster, and cheaper. Information about the recalled product quickly propagates through the blockchain nodes and registers the data in the immutable ledger to track and trace. This alleviates the situation with information asymmetry, which typically happens when the recall process information is distributed unequally or on time to supply chain members. By improving this communication and transparency, Vanig is reducing case backlogs as well as the cost of storage, re-shipping and clearance, and ultimately helping businesses retain dissatisfied customers.
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