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Discover the game-changing impact of blockchain on supply chains - transparency, security, and efficiency redefined.
Deb Mukhuty
Traditional systems face many challenges in the supply chain landscape, from inefficiencies to information asymmetry. As the demand for transparency, security, and efficiency rises, the industry is turning to blockchain as a disruptive force that promises transformative changes. This article delves into the profound impact of blockchain on the supply chain, addressing current challenges, exploring real-world applications, and envisioning the opportunities and trends that lie ahead.
Traditional supply chain systems often operate on outdated frameworks, leading to inefficiencies and bottlenecks. Manual processes, paper-based documentation, and a lack of real-time visibility contribute to delays, errors, and increased operational costs. These challenges highlight the pressing need for a more innovative and streamlined approach to supply chain management.
Blockchain can significantly benefit businesses by reducing supply chain risk, increasing visibility, and building trust across a complicated ecosystem. Furthermore, because blockchain does not replace a company's legacy systems, blockchain technology can be used as an add-on corporate solution to boost value while retaining existing enterprise resource planning (ERP) software systems or other current systems. According to research findings, the expected value of blockchain technology in supply chain management is approximately USD 3153.7 million by 2028. The blockchain supply chain industry is estimated to develop at a CAGR of nearly 51.3% by 2028.
Here are the three benefits of implementing blockchain in the supply chain
Most supply chain risks fall into one of four categories: sourcing, transportation, facility, or distribution. Each potential risk occurs at a distinct point in the typical source, make, and deliver process.
All of these risks can be mitigated with access to reliable data, which allows for the quick identification of concerns and possible solutions. However, accessible, complete, and reliable data is not always straightforward in a supply chain. Many companies, including suppliers, manufacturers, distributors, retailers, and logistics providers, complicate things. Furthermore, because parties in a supply chain often store data in silos, there is little data sharing between them, and the accuracy of that data varies considerably. Blockchain addresses all of these challenges by establishing a trustworthy, shared, and decentralized ledger that eliminates silos and ensures all stakeholders have access to that ledger through tamper-proof records that assist assure the data's reliability.
Many businesses have a lack of end-to-end visibility and transparency in their supply networks. Despite rising ESG demands among customers and governments, many firms cannot provide clear proof of provenance and chain of ownership. This is especially true for big enterprises with complex, multi-tiered supply chains. It can be especially challenging for anchor organizations (big global enterprises with significant market power and a well-known brand) at the downstream end of a supply chain to ensure that small businesses (those more than ten levels upstream) are treated fairly and ethically.
By implementing a blockchain-based supply chain, businesses can efficiently digitize physical assets and provide a decentralized, unchangeable record of all transactions across the end-to-end value stream. Participants can track the movements and conditions of perishable goods (like agricultural products and vaccines) and non-perishable goods (like gold and diamonds) in real-time on the blockchain by pairing IoT devices with radio-frequency identification (RFID) tags. This allows tracking a product from the point of origin to the point of delivery and ultimately to the point of consumption. The blockchain produces an unquestionable product history, which anchor businesses may utilize to enforce moral and environmentally friendly business practices upstream more successfully.
According to Deloitte, core companies may find it challenging to trust their upstream counterparts in a big, global supply chain with many stakeholders. For most companies, visibility and trust fade quickly, even beyond the second tier of partnerships. In the past, this lack of confidence has been justified by the trade in counterfeit and gray market goods, labor abuses, and inconsistent sustainable practices across supply chain partners.
Blockchain offers a level of trust previously unattainable by logging every supply chain transaction on an open, unchangeable ledger. Crucially, it extends this confidence to every network member, regardless of size. This is achieved by enabling companies to keep an eye on contracts for outsourced manufacturing, by potentially minimizing communication or data transfer errors, by providing them with access to the same information that is transferred throughout the supply chain (thereby reducing fraud), and in the end, by saving time that would have been spent validating data.
Multiple industries have already successfully adopted blockchain technology. This technology is used in various sectors, including e-commerce, real estate, healthcare, supply chain and manufacturing, and finance. By 2026, blockchain alone in the food and agriculture sector, for instance, will bring in $1.48 billion.
Because of the increased demand for blockchain technology, many more platforms are accessible. There are currently about 12,000 distinct virtual currencies and at least 1,000 blockchain networks in existence.
Source: Crustlab
Implementing blockchain in the supply chain requires thorough planning. Here are a few points to take into consideration
Finding use cases: It's critical to pinpoint specific use cases where blockchain technology can make the most difference before implementing it. This entails a comprehensive supply chain evaluation to identify any weak points, places with a high fraud risk, or inefficiencies.
Choosing the appropriate platform: A crucial choice in the implementation process is selecting the proper blockchain platform. Different features, scalability choices, and security measures are available on other blockchain platforms. It is crucial to assess various platforms and choose the best one for the particular requirements of the supply chain.
Integration with existing systems: A seamless blockchain transition depends on seamless interoperability with current systems. To prevent business interruptions, companies must ensure that the selected blockchain solution is compatible with their present systems. One of the most essential factors in this phase is compatibility and interoperability.
Employee training: The successful adoption of blockchain technology relies on the proficiency of the staff using it. Employee training programs should be implemented to familiarize the team with blockchain technology, its functionalities, and its impact on daily operations. A well-trained workforce is crucial for maximizing the benefits of blockchain adoption.
Several companies have successfully implemented blockchain in their supply chain operations, showcasing tangible benefits:
Mitsubishi Group
Several Mitsubishi Group companies have decided to investigate the potential of blockchain technology at different phases of their supply chain. Mitsubishi Chemical Group, the world's largest producer of methacrylates—a building block for the polymers used in producing a variety of medical devices, including heart valves and intravenous tubes—conducted a pilot trial. Its objective is to improve sourcing capacities and give businesses and customers reliable information about the real sources of all its products.4 Using colored tokens (red versus green), the pilot allowed the group to track the entire chain of custody and discern between the material's origins (recycled versus conventional materials).
Walmart
Walmart digitalized the food supply chain process and used blockchain technology to give transparency to the decentralized food supply ecosystem. They developed a food tracking system using Hyperledger Fabric, an open-source ledger technology. The process can be made more visible and traceable by putting a supply chain on the blockchain. Finding out whether one of the farms has sold an infected batch to a particular location is more straightforward and faster by the Blockchain, which portrays each node as an entity that handled the food on its trip to the store.
Blockchain technology in the supply chain provides exciting new trends and multiple opportunities in the future. With sectors realizing blockchain's disruptive power, cross-sector cooperation will change the global supply chain landscape. Blockchain technology gives up new possibilities for improved capabilities and efficiency when combined with other cutting-edge technologies like artificial intelligence (AI) and the Internet of Things (IoT). Furthermore, the technology's potential influence on environmentally friendly supply chains and sustainability is consistent with the growing demand for eco-friendly behaviors. Businesses embracing blockchain are not just implementing new technology but are paving the way for a day when efficiency, innovation, and trust will come together to change the way supply chains operate today.
In conclusion, blockchain technology is reshaping the supply chain and logistics industry by addressing longstanding challenges and introducing unprecedented transparency, security, and efficiency. As companies continue to explore and implement blockchain solutions, the industry is poised for a transformation that will not only streamline processes but also pave the way for a more interconnected, sustainable, and resilient supply chain ecosystem. Embracing the potential of blockchain is not just a technological upgrade but a strategic move toward a future where trust, efficiency, and innovation drive the success of the modern supply chain.
How can blockchain redefine your supply chain? Let us know on LinkedIn or X.
Q1: What is blockchain?
A1: Blockchain is a decentralized and distributed digital ledger that records transactions across a network of computers. It ensures transparency, security, and immutability of data.
Q2: How can blockchain benefit the supply chain industry?
A2: Blockchain can enhance the supply chain by providing transparency, traceability, and efficiency. It enables secure and tamper-proof recording of transactions, reducing fraud, errors, and delays.
Q3: What is supply chain transparency, and how does blockchain contribute to it?
A3: Supply chain transparency refers to the ability to track and trace products throughout the entire supply chain. Blockchain ensures transparency by recording every transaction in a secure and unchangeable manner, allowing stakeholders to access real-time information.
Q4: How does blockchain improve traceability in the supply chain?
A4: Blockchain creates an immutable record of each transaction, making it easy to trace the journey of products from manufacturing to delivery. This helps in identifying the source of any issues, such as contamination or counterfeiting.
Q5: Can blockchain prevent counterfeit products in the supply chain?
A5: Yes, blockchain can significantly reduce counterfeit products by providing an unalterable record of the product's origin, manufacturing, and distribution. This transparency helps consumers and businesses verify the authenticity of goods.
Q6: How does blockchain enhance supply chain security?
A6: Blockchain employs cryptographic techniques to secure transactions, making it extremely difficult for unauthorized parties to alter information. This enhances the security of the supply chain by reducing the risk of data breaches and fraud.
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