A decade ago nobody would have even thought of putting blockchain and supply chain management in the same sentence. Several years of technological development have passed, leading to the present when we can confidently speak about the benefits of using the innovative technology in this field.
How is it possible? For one, blockchain has proven a very reliable solution, and that was noticed by many industries, not just supply chain. It led to companies adopting the technology, which increased its popularity and helped it outgrow its initial field.
The second reason, likely more apparent for most people, is that all sectors are continuously evolving and seeking ways to improve their methods. Whether this is part of a conscious digital transformation, or companies just don't want to be left behind, the results are apparent.
These events have allowed us to be able to discuss blockchain in supply chain management today. If you’re curious about technological advancement, you can learn more about the connection between the two here.
Companies in supply chain who are seeking information to decide if they should implement this new technology in their workflow may also find the text beneficial.
Blockchain and Supply Chain Management in Simple Words
We'll cover everything important about blockchain in supply chain management shortly, but let's explain each of them in a little more detail.
Starting with blockchain, as it may be lesser known from the two, is a type of digital ledger that records information in blocks interconnected between each other. Each block contains records of the previous one, thus forming a chain, and the whole chain would be distorted if someone was to edit data in a single record. That's one of the reasons why this technology is described as a very secure way of storing information.
When blockchain was introduced as the network of the cryptocurrency Bitcoin back in 2009, its model was a public one. This means that processes on this type of blockchain are overseen by many people across the world. The technology received its name, decentralised, because of the lack of a figure with more rights among the rest.
Companies soon started noticing that blockchain has a lot more potential than just being a place for digital currency transactions. Instead, a new type of the technology evolved that is suitable for businesses to follow various processes with, improving their existing data storage.
That's how enterprise blockchain came into existence – a new variation of the technology that enhances the initial security by installing an authoritative figure on top of the network.
Public blockchains are literally that – everyone can access the information on them on the Internet. This isn't beneficial for enterprises or companies of any size, so the technology was shifted slightly to fit the needs of the business. Enterprise blockchain still allows the same benefits – security, speed, and transparency, but increases the safety of information.
Employees at a company that utilizes enterprise blockchain have various levels of access to the information, depending on their roles within the workplace. The person who has the final word for crucial decisions, though, is the administrator of the blockchain. This is the type of blockchain in supply chain management companies.
Supply chain management, on the other hand, refers to all the operations that deal with the flow of goods in the supply chain. Expanding the definition even further, supply chain is a logistics system composed of facilities that convert raw materials into finished products. These systems also take care of distributing the products to end customers.
How Can Blockchain and Supply Chain Management Intertwine
After explaining each individually, let's take a more detailed look into blockchain in supply chain management – how can the two connect and why is it possible?
Supply chain management has been greatly influenced by the Internet. Through the digitalisation of various processes, companies have managed to increase the quality of their services and become more competitive in their market niche. Since the 1980s, supply chain businesses have managed not only to move past paper documentation and lengthy administrative tasks but also incorporate many innovative practices.
Blockchain in supply chain management became possible through this rapid adoption of new technologies. Supply chain management has various issues with the effective handling of information. This includes the reliable collection of data from various sources and prompt access to it afterwards.
Thanks to blockchain, these issues can not only be solved but the whole work process can be improved for both companies and customers.
Effective supply chain management requires easily traceable information that is accessible at all times. Through blockchain technology, this is achievable, as it facilitates transactions with other companies and makes their details easy to access. The transparency of this technology is useful to track every step in the supply chain and make the data visible to employees based on their level of authority.
Uses and Proven Benefits of Blockchain in Supply Chain Management
In order to understand the involvement of blockchain in supply chain management, let's explore a few use cases in more depth.
1. Blockchain in Supply Chain Management From Start to Finish
One of the most obvious use cases of blockchain in supply chain management is as a system for tracking. This refers not only to the logistics part but the whole process. Through blockchain technology supply chain companies can follow every step of the way more easily, starting with the supplier, then the manufacturer, regulator, logistics, wholesaler, retailer, and finally, the customers.
A crucial feature an enterprise blockchain could have for companies in this field is the history of supplies. Nobody can easily modify it on this type of network, nor it will go missing if a single record copy gets damaged, since it's online and secure. This means that information not only from weeks ago but also from many years can be tracked and retrieved upon request.
Real-time tracking is also possible due to the blockchain in supply chain management. Companies can incorporate the technology to track goods and supplies in-house. It’s even possible to create a blockchain-based system for customers.
2. Implementation of Smart Contracts Through Blockchain in Supply Chain Management
Smart contracts are programs or protocols that are created to automate certain processes according to agreed terms and conditions. They can be carried on blockchains and thus possibly incorporated into supply chain management for companies.
The purpose of such action would be to facilitate work for employees, accelerate it, and save up time. Smart contracts can be utilized for data outsourcing or for initiating various transactions within the companies or between them and other businesses. If enterprises build their smart contracts on reliable blockchains or distributed ledgers, like Corda for example, they can benefit from very scalable ways to make their work processes more effective.
3. Blockchain in Supply Chain Management as a Payment Facilitator
The initial introduction of blockchain – as a network for financial transactions – can also be among the use cases in supply chain management. Most businesses that operate on international grounds have experienced the difficulties of bank transfers. The fees can grow to unacceptable amounts and the processing times may take days, as opposed to minutes or hours.
These inconveniences can be easily avoided by implementing blockchain in supply chain management companies.
Blockchain transactions aren't limited to geographical borders. Instead, they are a lot faster and easier to make than the traditional ones. Often times they can even be cheaper, as some blockchains require lower fees than many banks.
The majority of companies that deal with supply chain operate in several countries, some even on different continents. Utilizing blockchain for their financial transactions can potentially save up time and budget for businesses and help them pay and receive payments in a secure and transparent way.
Initiating transactions through this method can also be very easily traced for accounting purposes later. Every operation is recorded on the blockchain, including the sum, time of action, and the wallet addresses of the sender as well as of the receiver. This valuable data can be accessed at all times by accountants for references and preparation of different reports.
The several listed uses of blockchain in supply chain management clearly highlight the benefits of this connection. In short, we can summarise them as:
Paperwork can be considerably lowered and even eliminated for companies through this technology;
Supply chain management companies can enhance several work processes by untilising blockchain;
Blockchain technology can be used for tracking goods in a more effective way, especially allowing flexibility with large numbers of shipments to be tracked since the information is easily accessible online and doesn’t take up hardware storage;
Businesses can benefit from lower fees for financial transactions thanks to blockchain, modernising their payment systems and overcoming geographical barriers;
Companies using the technology can benefit from higher transparency of used materials and goods in the processes.
Is Blockchain Easy to Implement in Supply Chain Management Companies?
From the laid out information so far it's more than clear that blockchain in supply chain management has multiple uses and benefits from them. This may have some wondering, is it hard to incorporate blockchain into your company?
Building an enterprise blockchain is not a simple task, no matter what field your business is working in. If your specialists are unprepared, they may experience difficulties and drawbacks when it comes to creating a functional and secure network for you.
Every supply chain management company can rely on INDUSTRIA to receive effective blockchain, customized fully to comply with their needs. INDUSTRIA offers full-stack blockchain services, including consulting and advisory, rapid prototype development, and blockchain and DLT development.
Utilizing Corda, one of the top open-source blockchain platforms, the experienced team can offer any company enterprise blockchains that not only simplify their work processes, but also provide them with all of the benefits of the technology, including speed, scalability, and high security.
If you rely on services like INDUSTRIA's, then implementing blockchain in supply chain management companies would be easy, as trained experts will perform all the required work and assistance for you. Relying on specialised companies for such solutions is crucial, as the network will store valuable information that needs to be protected.
Is Supply Chain Management Shifting to Modernization Thanks to Blockchain?
Supply chain has been experiencing steady modernization throughout the last couple of decades, mainly due to its welcoming approach to emerging technologies. The trend is also continued with blockchain technology, as companies in the sector have started integrating it into their processes, having noticed its advantages.
Blockchain supply chain management can lead to many improvements for companies, including their inside processes and the results they deliver to customers. Businesses that decide to integrate this technology can benefit from its constant development. Many currently claim that blockchain is still in its very early stages. Considering that the technology has been out for a little over a decade, the statement seems more than correct.
This means that as it matures, blockchain will shape and become even more useful for businesses and users. In the not-so-distant future, blockchain in supply chain management will be even more widely utilised and bring more advantages than currently can even be predicted.
INDUSTRIA is a global technology consulting, development, and ventures company with expertise in the field of enterprise blockchain, confidential computing, process automation, and digital experience. As one of the official partners of R3, we are implementing cutting-edge blockchain technologies and reshaping the fintech world. At INDUSTRIA, we are focused on providing permissioned blockchain solutions, such as Central Bank Digital Currencies, Electronic Bill of Lading, and Smart Contracts. Our solutions apply to a wide range of industries and use cases to empower and modernise society.
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