Blockchain technology has been one of the most successful technologies of this decade. Blockchain has proved its efficacy and application not only in the cryptocurrency and finance sector but every major sector functioning around the world today.
Healthcare, manufacturing, media and advertising, retail, government, travel, transportation, you name it, blockchain technology has impacted these sectors significantly. One such use case of blockchain technology that is helping industries save millions of dollars is supply chain.
Supply chain management is an important market globally, and according to Statista, its valuation, which was $15.85 billion in 2020, is anticipated to reach $31 billion by 2026. But supply chains are prone to disruption, and supply chain disruptions causes an average loss of $184 million around the world every year.
Blockchain technology has proven to be the best way to manage and streamline the global supply chain efficiently. In this post, we’ll discuss how blockchain technology is helping supply chain management around the world.
Blockchain technology for supply chain management
Blockchain technology is being highly adopted by various organizations as an efficient solution to streamlining operations and combating severe problems related to transparency and security. The supply chain is a complex field, and its management is even more problematic and prone to error.
Supply chain management poses many challenges to organizations, and a little mismanagement or mishandling often leads to considerable losses. Quality issues such as expired items, broken products, insufficient inventory, overflowing inventories, and similar problems arise when supply chains are mismanaged.
Blockchain technology’s introduction in supply chain management has helped a great deal in minimizing losses. Based on a research, blockchain technology in the supply chain management market will reach around 3153.7 U.S.dollars by 2028, up from 262.9 U.S. dollars reported in 2021 with a CAGR of 51.3%. This denotes the rising interest, efficacy, and acceptance of blockchain in global supply chain management.
Let’s check out some ways in which blockchain technology is contributing to streamlining the global supply chain.
1. Blockchain technology boosts transparency in the supply chain
Transparency is a crucial attribute for well-functioning of any organization. More transparent an organization’s functioning better will be the synchronization among various departments, ultimately resulting in better profits. Blockchain technology is transparent, and this remains the key reason behind its adoption. Its immutable, distributed, and decentralized nature makes it the best tool for improving visibility.
Any supply chain comprises seven key departments: demand planning, inventory management, purchasing, manufacturing, storage, transportation, and customer service. For best results and to improve customer and client satisfaction, it’s essential that these departments work in synchronization. Most of the losses concurred in supply chains happen due to a lack of communication and knowledge sharing between these departments.
Blockchain solves this problem efficiently by putting all the information about the different parts of the supply chain in a decentralized ledger. Anyone with access to these ledgers can check and monitor the immutable data stored in the form of blocks.
2. Streamlines and regulates the operations globally
Managing a supply chain on a local level or for a smaller organization is a piece of cake compared to the complexities and challenges faced by larger organizations whose supply chain extends globally. The challenge of maintaining coordination between various branches and checkpoints of the supply chain spread in different parts of the world can be overcome by using blockchain technology.
Assume that a company manufactures a product in Thailand using two components, X and Y. Consider that the same product is manufactured by this company in India, too, using the same two components. Now imagine a scenario where the manufacturing unit of Thailand has an excess quantity of Y but lacks X. Simultaneously, the manufacturing division in India has an extra stock of X but lacks a sufficient amount of Y.
In a blockchain-powered supply chain, inventory managers of any region of an organization can look into inventory situations in other areas. Hence by analyzing the data and conditions, the management can ensure that production is not halted for any of the products by exchanging excess inventories of both regions.
This move will ensure that India has ample material Y to produce the product. At the same time, Thailand also gets a sufficient amount of material X to continue its operation. This way, blockchain allows monitoring of the supply chain spread throughout the world so that the working of an organization doesn’t get affected by temporary disturbances.
3. Minimizes losses due to mishandling and theft
Counterfeiting of products, sale of expired products, dispatch of less number of items than ordered, and theft are some situations that are very common challenges of the supply chain. These are the crucial factors that can badly affect an organization’s credibility.
Many organizations have been using RFID and ERP systems to eliminate the possibility of these situations. But they don’t provide optimal results and are very expensive to operate. Blockchain technology-powered systems are the best way to mitigate these challenges. Blockchain-powered systems generate digital tokens for every item of the chain and store these tokens in the immutable blocks secured by cryptography.
Whenever a product leaves the checkpoint in the chain, its movement will be recorded in real-time. Even if some products are missing from the chain, it’ll be effortless to track them by looking at the history of their movement. As data in the blockchain is immutable, no changes can be made in the records, and thus any mishandling can be easily pointed out. Real-time quality can be monitored by keeping track of the expiry dates of products in the supply chain. This way, it can be ensured that the right amount and quality is delivered.
4. Easier and secure payments across the supply chain
Cryptocurrencies. It is impossible to discuss blockchain technology without a mention of cryptocurrency. Blockchain-based digital currencies, such as Bitcoin, Ethereum, tether, etc., do not have a central issuing or a governing unit such as a bank. The payments made using these digital currencies involve only the two participating parties and do not involve any third party, such as a bank.
Payments in cash or any method involving centralized systems such as banks usually need extra transaction fees to be paid. When it comes to large organizations and cross-border payments, these levied charges are too much. Moreover, different countries impose different kinds of charges on transactions, due to which purchasing and selling in a supply chain can become a little costly.
Using blockchain-based cryptocurrencies to make payments can save time and a lot of money that is usually paid to banks as transaction fees. As there is no third party involved in transactions made by digital currency, a lot of money can be saved in the supply chain consisting of hundreds of buyers and sellers. Moreover, thanks to the impeccable security feature of these cryptocurrencies, safe transactions can be ensured.
5. Better client experience
From the points discussed above, it can be concluded that transparency is the crucial feature that helps boost coordination among various departments of a supply chain to reduce errors. In the same way, blockchain can be used to improve the client experience and build a better reputation and credibility.
The organization can develop a special blockchain ledger that provides real-time data regarding the movement of items ordered by the client. This ledger should contain all data that a client must know, such as the final tally of the items dispatched, their route, various checkpoints, the surrounding environment of the shipment, etc. A unique id should be provided to the clients using which they can access this ledger.
Using this ledger, the clients should be able to locate the current position of their shipment in the supply chain to get an idea if they are on time. Moreover, with the data such as the expiry of products, their storage requirements, and the condition of the environment they are being shipped in, the clients can ensure that they get the right product delivered in the proper shape.
Several medicines and vaccines are supposed to be kept in a specific temperature range for better efficacy. In such cases, it can be beneficial for the clients to use the ledger to ensure that the medicines are kept in optimal storage conditions. If the storage requirements are not met at any point in the supply chain based on the proof, the client can cancel the entire shipment. This practice not only builds better transparency for clients but also strengthens trust in the organization.
Concluding Remarks
Blockchain technology is emerging as one of the most successful technologies of the 21st century. Its robust features, such as the decentralized and distributed structure, immutable nature, etc., play a significant role in boosting the security and visibility of any system where blockchain technology is implemented.
In this post, we discussed blockchain technology’s implementation in supply chains and how it’s regulating and streamlining it. Blockchain technology can boost transparency and improve the visibility of an organization’s supply chain spread worldwide.
Blockchain-based payments can also help organizations save a considerable amount of money. This way blockchain helps streamline various processes inside a supply chain for better synchronization amongst its various departments and checkpoints.
Read Also: Blockchain Technology to Improve Efficiency and Transparency in the Global Mobility Supply Chain
Written by: Eric Watson | Edited by Arun Shakyawar
Aboout the Author
Eric Watson, a content writer with Goodfirms, a research platform for Cloud Computing, Ecommerce companies, Translation services companies, among many others. I enjoy communicating ideas and knowledge creatively and also ensure that the readers never suffer from boredom while reading my posts.
