- The network formed between suppliers, intermediaries and customers is regarded as supply chain
- The process involved production to distribution
- Involves people, information, resources and entities
- The steps involved in the supply chain should reduce company costs
- The entire production cycle should be fastened and optimized
In order to continue operating in the business landscape, companies are highly valuing the usage of blockchain technology across the supply chain. Various steps are involved in the supply chain management process, and the time by which a service or product reaches a buyer, it must undergo several activities. Blockchain can ensure the accuracy of the process.
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- To fasten the process of the supply chain, blockchain technology can be used
- Transactional records can be stored efficiently
- Records are stored in blocks
- The blocks are present in public databases called chains
- Alternatively, blockchains are referred as digital ledgers
- Blockchain technology can ensure product accuracy
Using smart contracts, it is now possible to produce consumer goods. The process is less time-consuming and far more accurate in comparison to traditional supply chain system. Blockchain technology enhances the possibility of storing transactional records accurately. Most importantly, the transparency of the entire process can be ensured.
Common issues in the supply chain
- Range of commodities including equipment, food products or digital products are dealt with within the supply chain
- Tackling payments can be cumbersome
- Issues might occur between suppliers, manufacturers, vendor and customer
- Contractual agreement issues are bound to occur as well
- Lengthy procedures might be involved even during simple transactions
Due to the usage of multiple varieties of commodities, the complexity levels increase in the supply chain. Payment tackling, product handling or product distribution involves multiple complexities. Blockchain technology reduces the issues that occur between intermediaries and therefore, issues encountered by suppliers and clients can be minimized.
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- Due to involvement of bankers, huge cost-related issues occur
- Friction within the supply chain is likely to occur as well
- Eliminating defects in the product can be challenging
- Tracing the origin of a product can be challenging as well
- Direct interaction must occur between suppliers, clients and providers
Within the supply chain, rising uncertainties occur commonly because creating a balance between clients, providers and suppliers might be challenging. Moreover, due to the involvement of a third-party, communication issues are likely to occur. As a result, simple transactions might take huge time and it increases the complexity within the supply chain.
Transformation in supply chain due to blockchain technology
- Supply chain industry can be transformed using blockchain because digital ledgers can record huge information
- Easy to produce and store multiple copies
- Copies can be distributed in multiple computers
- Linking transactions can be a possibility because blocks can be linked
- Tampering incidences reduces as well
Gradual transformations are observed in the supply chain due to the implementation of blockchain technology. This highly potential technology can make the production and consumption process easier. Moreover, economies are now safer, and customers can rely on the retailer after tracing the source of the final product.
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- Blockchain operates in a decentralized manner
- Decentralization allows independent functioning of an entity
- The technology is transforming the industry by ensuring high security
- Nodes in the blockchain network get updated easily
- Latest information is always available
- Multiple copies can be traced at once
Due to decentralization, entities can operate independently. Moreover, transformation in the supply chain is brought by the use of distributed digital ledger. The network is transparent as well as secure. In case of every transaction on the block, multiple copies are distributed over nodes within the network. Therefore, it ensures high security.
Reasons behind using blockchain
- The logistics or the supply chain industry is supposed to keep pace with the digital era
- Blockchain technology has potential to transform businesses as done by internet technology
- By implementing the technology, intermediaries can be removed from the chain
- Record verification along with coordination would be easier
Companies operating across multiple industries are now investing their financial resources to implement blockchain technology. New processes are now being embraced and coordination among parties within the supply chain has improved as well. It would be interesting to imagine a combination of IoT, robotics and artificial intelligence to enhance the operations of the supply chain.
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- There is no need for third-party involvement
- Complexities in the global supply chains can be reduced using blockchain technology
- Transparency and efficiency will be boosted
- Most of the operations shall be automated
- Facilitating and syncing information will be possible as well
- Effective flow of goods can be ensured
Again, blockchain technology would facilitate everything that occurs within the supply chain. From warehouse activities to delivery as well as payment, every component would be taken care of. Incidences such as human error or additional costs might not occur because the entire process would be automated.
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Benefits of blockchain technology has been enlisted below-
Drives automation
- The technology is beneficial in reducing paper work and therefore drives automation
- Disputes and inefficiencies can be easily reduced
- Storing information in digital format is possible due to automation
- Connectivity between business partners will increase as well
Automation mainly reduces paperwork, therefore, it can be stated that inefficiencies or inaccuracies that occurs due to paperwork will no longer take place. Using the digital format, information would be stored and everyone in the supply chain including the wholesaler, logistic service provider or the manufacturer will be aware of the changes occurring in the chain within seconds.
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- The technology is beneficial in services that requires the contribution of at least one intermediary
- Useful in brokerage services, delivery scheduling, fleet management and route planning
- The life cycle of a product can be tracked using blockchain
- It is possible to automate business transactions as well
Automation is one of the fast approaching technologies and it has the potential to revolutionize the supply chain industry. Automation can create a programmable economy and the rise of the smart economic system is on the horizon. Tracking the lifecycle of a product will no longer be an issue.
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Development of new business models
- Moreover, the technology is effective enough to establish new business models
- Examples of such models are micropayments and digital identities
- There is high demand for blockchain-based services across all industries
- The fragmented and uneven nature of this industry can be managed using this technology
Digital identities as well as micropayments can revolutionize the payment landscape and particularly within the supply chain, these models will be useful. Issues that occur while dealing with huge cash can be resolved using these models. Therefore, the demand for these models is rising in emerging economies.
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Enhances connectivity
- Due to the competitive nature of the industry, it is necessary to reduce manual processes
- Manual processes or paperwork demands huge time
- Therefore, blockchain technology is effective in saving time
- It will ensure higher transparency rate and low rate of data losses
- Stakeholder management will no longer be an issue
One of the essential features of blockchain ecosystem is its connectivity. Products should be delivered to the customers at a high speed, particularly, when the demand for the product is high. This in turn, saves time and enhances the satisfaction rate of customers.
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Enhances collaboration
- The technology increases connection and collaboration among stakeholders
- A collaborative culture enhances the operations of the enterprise
- Internal collaboration involving various partners occurs
- Trust levels between partners increases as well
- Partners mainly includes government agencies, industrial organizations, regulators and partners as well as competitors
The technology is effective across sectors as well as around the globe because it enhances collaboration between partners. Due to rising rate of collaboration, the rate of transparency also increases. Hence, the operational component of the supply chain can be improved using blockchain.
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Builds knowledge and capabilities
- Knowledge of staffs increases through training
- They learn effective usage of time, tools and resources
- The technology is transforming the logistics industry dramatically
- Contributors as well as individual partners are able to apply their knowledge in business processes
- Organizations are also learning to manage its expectations regarding this new technology as gradual integration is taking place
The technology will be effective only when the staffs will be trained appropriately and ways of doing business will change drastically. Although blockchain has gained enough acceptances across industries, it is necessary to manage expectations.
Blockchain application in supply chain
Automotive payments
- Traditional banking systems for fund transfers are getting outdated
- Blockchain has brought the automotive supplier payments in market
- The payee directly receives money from the payer within seconds
- Bitcoin, the digital currency, is now used instead of cash
- Huge fund transfer can be possible using Bitcoin
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- The usage of cash to pay suppliers involves risks
- The Australia-based vehicle manufacturer, Tomcar, uses Bitcoin for paying its suppliers
- Particularly, the Israel and Taiwan based partners are accepting Bitcoin
- The company also uses standard terms while creating agreements with suppliers
- By using Bitcoin to pay suppliers, Tomcar saves costs
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Product traceability
- The technology can be useful in recording the product status
- A single products undergoes multiple stages and therefore, error at one stage leads to error in the final product
- Blockchain can be effective in locating the source of the product
- This is possible because records are permanently stored
Walmart, one of the retail giants has collaborated with IBM in order to trace the origin or source of its products. The company has used the IBM Food Trust blockchain solution devised by IBM to trace its Chinese pork and American mangoes. It has been possible to trace the entire meat processing as well as storage processes within minutes. It has been possible to recall the affected batches of meat as well. Hence, the retail giant ensured the safety of its global food ecosystem by investing in blockchain-based solution.
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Cold chain monitoring
- Storage needs of food and pharmaceutical industry can be met using blockchain
- Specialized products require specialized storage needs
- Sensors installed in products can record the temperature, vibration and humidity
- The Hyperledger Sawtooth is an effective ledger framework used for storing relevant information
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Blockchain and IoT
- Information sharing with the amalgamation of IoT and blockchain is a new possibility
- However, IoT uses centralized system and it creates issues
- On the other hand, blockchain decentralizes computation and therefore, resolves IoT related issues
- Moreover, security issues related to management processes can be resolved as well
Apart from the mentioned applications of blockchain, it can be stated that, the technology is effective in reducing the number of frauds and unnecessary delays. For example, at the time of a single shipment, more than 30 documents should be exchanged. It is a highly time-consuming process. Multiple revisions should be done in order to reduce errors. Here, blockchain might be effective because a blockchain network would eliminate delays as well as duplication errors.
Another example in the pharmaceutical sector can be considered as well. When a customer buys a life-saving drug, he or she might notice that 20-degree Celsius should be the minimum criteria for storing the drug. However, the patient cannot be sure that the pharmacist has followed the exact criteria for storing the drug. At that instance, a solution could be the usage of microchip sensors. Information could be found in the updated ledger. Ultimately, the safety of the life-saving drug can be ensured using this technology.
Further research should be conducted in order to understand further beneficial outcomes of blockchain. Research also suggests that professionals in their respective fields are positive about the emerging technology as it ensures visibility and transparency.
- Blockchain technology offers cost-effective solutions
- It has the potential to revolutionize the logistics industry
- Adaptation to blockchain technology is a gradual process
- The invention is new, however, tested across multiple manufacturing and retail companies
- Transaction issues can be resolved and product traceability becomes faster