You are probably aware that managing a supply chain and all the intrinsic links involved in the distribution of goods and services is an extremely complex process. Even using costly software that can track orders and shipments, there is still only limited visibility and insight on where a company’s stock is at any given time due to gaps that exist within the supply chain.
Blockchain is an emerging technology that has the potential to increase security, improve transparency, and upscale the entire length of the supply chain.
Blockchain is the technology behind bitcoin and other cryptocurrencies. It’s the incorruptible digital leader which can record all types of information including a business’ transactions, purchases, sales, contracts, money transfers, and so on. It stores information in a series of secure and permanent identifiable data files called blocks; now the name begins to make sense.
Each new block gets linked back to previous ones, creating a series of tamper-proof, chronological ledgers that can be hosted by a million computers simultaneously. As the blockchain’s database isn’t in one single location, rather, hosted globally, the records are both public and easily verifiable.
The unique difference between blockchain and other spreadsheet ledgers is that information can only be added, it cannot be amended or deleted.
Integrating Blockchain into Your Supply Chain
This all sounds interesting, but how do you implement blockchain into your supply chain?
It isn’t a piece of software that you can install onto your computers or servers. Instead, it is an integrative technology that directly plugs into existing supply chains and supplements the existing management software.
An advantage of this is that users can still access and see their existing user interface and business processes. The main difference being is when they check their inventory, businesses don’t just see their own stock but also everyone elses. This allows them to see every modification to stock in real time.
One of the development agencies working on blockchain and other projects in the cryptocurrency industries, Applicature, recommends how companies integrate the blockchain technology into their own supply chain. In order to successfully implement blockchain, they point out that, “companies must understand and evaluate all risks and weaknesses with which they are likely to be faced. It is essential to review the nature of these risks and work out a map of weak points. Further, the company has to work out a plan of eliminating these points with the help of blockchain technology.”
They suggest that it’s best to start small and companies should try to apply blockchain solutions to weak points in their systems first. Once they have everything working well and are starting to see some progress, they can then apply blockchain to more of the links in their supply chain and other issues can be worked out of the system until it is running smoothly.
It is the scalability progress that makes blockchain essential in a company’s supply chain. It allows weakness to be rooted out and agreeably resolved. Collaboration between different links and scalability are essential in applying blockchain to supply chain management.
Although the integration of blockchain in supply chains is still in its infancy, many professional services are jumping on board and investing in the development of the technology. This is improving blockchain’s capabilities and resources, allowing the developers to make it as seamless and streamlined as possible.
The Benefits of Blockchain
So that’s how to implement blockchain into your current supply chain but what are the major benefits of doing so?
Blockchain allows anyone involved to see the digital or physical products that are in their current supply chain, including the supply chain managers. Pricing and fluctuations in stock are monitored in real time and updated making it an incredibly effective management tool. Because managers at any and every stage of the chain can see this information at the same time, steps in the chain can be streamlined, speeding up purchasing, shipping, and delivery of goods and services.
By doing this, record keeping within the chain is improved, payments can be processed faster, and the people who need to get paid quicker can be. With total transaction transparency and unalterable records, the risk of fraud is greatly reduced and the track-and-trace capabilities improve significantly.
Another benefit of blockchain is that it will allow reconciliation of records between manufacturers, distributors, clients, and customers, allowing for all parties to agree that goods have been bought, shipped, and delivered promptly.
Bill Fearnley, Jr., research director for IDC’s Worldwide Blockchain Strategies, says “The sooner manufacturers and distributors can agree on shipments and receipts, the sooner manufacturers can be paid for their goods. Getting paid faster improves financial liquidity for members of the supply chain.”
The improvements blockchain can potentially make to logistics could eliminate the need for third parties at unnecessary stages in the chain and reduce risk to company goods and finances. Ultimately, making the management of supply chains less complex.
Challenges of Blockchain
It all sounds pretty good at the moment, but no technology is perfect and blockchain has its own challenges.
Blockchain’s biggest flaw is what makes it unique in the first place, and that is its lack of flexibility over data. Once data is recorded it is there for good; it cannot be deleted or altered later on. Yet, this is also one of the most important aspects of the technology.
Quality of data is a major problem for most logistics companies, and it must be addressed before they can employ blockchain to streamline their services. In addition, the larger the chain is and the more points of contact in it, the more likely the data is to be fragmented or incorrectly inputted. This can be made more difficult if all parties do not unify the measurements or currencies they store their stock in. The primary problem remains that data is often not correctly inputted in the first place. In order for blockchain to be implemented successfully, the input of information needs to be streamlined to ensure all data on file that is permanent is correct.
What are Your Thoughts?
As we move toward a future that is more and more controlled by technology, blockchain seems to be an inevitability. Whether or not it is welcomed by the logistics industry on a wider scale remains to be seen. What are your thoughts on blockchain? Is it a potential way to improve the management of the supply chain? Let us know your thoughts.