Blockchain has been designated as one of the top ten emerging technologies by the World Economic Forum , based on its potential to drastically change the way economies function. While the most prominent use of blockchain is in the cryptocurrency, it also has the potential to transform the procurement & supply chain functions.
Handling today’s supply chains is highly complex. Normally, the supply chain involves multiple processes, a number of geographical locations, invoices and payments while including several individuals and entities, and all the processes are likely to extend over months. Hence, due to the complexity and lack of transparency of the current supply chains, many organizations have begun to take into account in how blockchains might transform the supply chain and logistics industry.
What is Blockchain?
Basically, blockchain is a distributed database that maintains a shared list of records of digital data or events. It includes various applications and can be used for any exchange, contracts, tracking and payment. One of the main advantages of blockchain technology is that it is highly transparent since every transaction is recorded on a block and across multiple copies of the ledger that are distributed over many nodes (computers).
Therefore, while many users may access, inspect, or add to the data, they can’t change or delete it. The original information remains the same, leaving a permanent and public information trail, or chain, of transactions (Investopedia). In other words, blockchain is a record-keeping mechanism that makes it easier and safer for businesses to work together over the internet.
How Will Blockchain Technology Affect the Supply Chain?
The fact that blockchain technology allows us to more securely and transparently track all types of transactions, the possibilities it presents across the supply chain is huge. For instance: whenever a product is moved across the supply chain, the transaction could be documented, creating a permanent history of a product, from manufacture to sale. This leads to various benefits such as reduced time delays, added costs, and human error that greatly affect transactions today.
Blockchain offers consensus; it prevents dispute in the chain regarding transactions because all entities on the chain have the same version of the ledger. Hence, everyone on the blockchain can see the chain of ownership for an asset on the blockchain. Besides, records on the blockchain cannot be erased which is essential for a transparent supply chain. Thus, it can increase the efficiency and transparency of supply chains and positively impact everything from warehousing to delivery to payment.
Here is how this technology could improve the supply chain:
- Allow you to record the quantity and transfer of assets as they move between supply chain nodes (source: Talking Logistics)
- It makes tracking purchase orders easier, along with change orders, receipts, shipment notifications, or other trade-related documents
- It allows you to verify certifications or certain properties of physical products; for example determining if a food product is organic or fair trade (Source: Provenance)
- It becomes less complex to shareinformation about manufacturing process, assembly, delivery, and maintenance of products with suppliers and vendors
- Improves security – A shared, indelible ledger with codified rules could potentially eliminate the audits required by internal systems and processes.
Examples of blockchain being used in supply chains today
Experts suggest blockchain could become a universal “supply chain operating system” before long (Spend Matters). Some supply chains are already using the technology:
- Being in the food industry requires solid records to trace each product to its source. Hence, Walmart uses blockchain to keep track of its pork it sources from China and it records where each piece of meat came from, processed, stored and its sell-by-date. Unilever, Nestle, Tyson and Dole also use it for similar purposes.
- Another example is: Diamond-giant De Beers which uses blockchain technology to track stones from the point they are minded right up to the point when they are sold to consumers. This allows the company to avoid ‘conflict’ or ‘blood diamonds’ and assures the consumers that they are buying the genuine article.
- The world’s largest mining firm, BHP Billiton, proclaimed it will use blockchain to better track and record data throughout the mining process with its vendors. This will lead to increased efficiency internally and also allows the company to have more effective communication with its partners.
The blockchain technology is being seen by many as the most important invention since the Internet itself. From conducting payment and audits to tracking inventory and assets, this technology will enable greater supply chain efficiency than ever before. In fact, blockchain signals the beginning of a new era of the internet that will be defined by value rather than information.