How does Blockchain transform Supply Chain Management?
Supply Chain Management is a vast ecosystem characterized by the presence of complex links between suppliers, vendor, partners and clients, the global spread of supply chains, piles of invoices, and multi-stage activities. Moreover, the shorter product life cycle expect supply chains to act fast. It is critical to simplify the supply chains to increase their agility. Although, companies have adopted digital transformation in the business, they still need to update underlying technology that drives supply chains. With the need to tackle increasing complexity and instilling more transparency, Blockchain offers immense scope for improvement in supply chains.
“A lot of companies are interested in Blockchain for creating more efficient workflows, but supply chain management is one of the big killer apps.”- Vipul Goyal (2018), Associate Professor at Carnegie Mellon University.
What is Blockchain?
Blockchain is like a distributed ledger and an intricate chain of blocks. Blocks on the Blockchain contain digital information stored on a public network. Blockchain stores data in a decentralized way and is available multiple times in the network. Every new block of the transaction is linked to the previous block, thus making it impossible to tamper the information. Whenever an original transaction takes place, the entire Blockchain network gets updated.
Why should Blockchain be used for transforming the Supply Chain Management?
Primarily, the capabilities of Blockchain enable well-integrated and reliable supply chain management software. Blockchain doesn’t need mediators, and thus, businesses can share critical pieces of information directly without negotiations and interference of intermediaries. Blockchain synchronizes the data across the network, which is verified by all partners. The data is decentralized with no single point of storage. Moreover, Blockchain can handle a multitude of transactions in a fraction of seconds and doesn’t need to be synchronized every time.
Thus, security, accuracy, trust, integration, seamlessness, data integrity, and scalability are some of the characteristics of Blockchain that when applied to supply chains can bring radical transformation.
How is Blockchain-based solution beneficial for Supply Chain Management?
Inventory Management: Blockchain ensures that each piece of inventory moves smoothly across the value chain right from the warehouse to the final destination; recording every transaction, and updating the movement of that item everywhere. This enables the complete traceability of each product. Moreover, the capability of Blockchain to track transactions at the ecosystem level helps in forecasting the demand and maintaining an optimal level of inventory at any level across the supply chain.
Tracking Purchases: Blockchain gives a collective view of the total volume of purchase made by capturing data from all the vendors while keeping the privacy of each entity. This enables companies to crack deals based on the total amount.
Enabling Transparency: Blockchain ensures visibility across the network. It is easier to know the source of the item along with other details. Blockchain allows tracking frauds and nonconformity existing at any point across the value chain. Since every partner has a digital ledger with them, it is possible to remove fraudsters from the network on a single click.
Real-time Data Inputs: Blockchain derives actual-time ledger of digital transactions, thus giving contextual business insights helpful in making strategic decisions related to forecasting, planning, and scheduling.
Closing the Payment Gaps: Smart contracts powered by Blockchain are digital contracts that are synchronized across the network and integrate banks, vendors, partners, and clients seamlessly, thereby avoiding delays in payments. Smart contracts automatically generate digital invoices on getting a receipt and facilitate payment through banking intermediary.
Enhanced Communication: Blockchain ensures data validation at every point, thus bringing increased collaboration and trust among network entities. Besides the ability to store and access data with a built-in audit trail makes transactions smoother.
Improved Logistics: Blockchain allows critical information related to goods available easily. Smart contracts also utilize RFID tags that are used to store information about items. Using RFID tags, partners bid for a delivery contract. Smart contracts tracks as who gets the contract and process the delivery schedule. The physical assets are also linked by noting time and location in the digital ledger, thus simplifying logistics.
Blockchain in Practice
To combat against the ill-effect of food-borne disease, Walmart has adopted Blockchain technology to decentralize food supply chain. They track provenance of food material to confirm safety. By uploading certificates of authenticity to Blockchain, they can easily see through supply chain, thus building trust and at the same time ensuring that the safe food products are supplied. The Blockchain-enabled food traceability started with pork in China and mangoes in the US. They are now using it to trace the origin of 25 products and are planning to ask green leafy vegetables (spinach and salad) suppliers to trace their products back to the farm using Blockchain technology. Walmart is committed to improving farm-to-table transparency.
According to KarlBedwell, Senior Director at Walmart Technology, “Creating a (traceability) system for the entire food supply ecosystem has been a challenge for years, and no one had figured it out. We thought that Blockchain technology might be a good fit for this problem, because of its focus on trust, immutability, and transparency.”
Conclusion
Blockchain is a solution to solidify the fragmented supply chain and making it more accurate and visible. It brings efficiency internally as well as externally among partners. The Blockchain-enabled supply chain solutions are streamlining the supply chain and logistics industry by eliminating the value leakages and increasing cost savings.
The applicability of Blockchain in supply chain management is expanding.
Are you onboard yet?
By adding Blockchain capabilities to your existing supply chain infrastructure, you can stay ahead of the curve. You must contact experts today to make it simplified.
Katalyst Technologies is a leading tech solution provider that delivers effective and innovative supply chain strategies and solutions that enable profitable growth. We have a seasoned team of professionals who have an average of 10+years of experience in supply chain management.
Engage with our supply chain specialists and leverage the potential of Blockchain to reform your supply chain.
