By Vanessa Bennett, Analyst at The London Financial
Around the world, blockchain is disrupting several industries — from retail to banking. True enough, Finextra predicts that blockchain’s global market size will expand to a massive £27.8 billion by 2025.
Despite its popularity, many people still have a limited understanding of what blockchain technology truly is. In the simplest sense, blockchain technology uses an immutable digital ledger of transactions that is duplicated and distributed across a network of computer systems. This allows it to facilitate secure and trustworthy technologies, such as cryptocurrencies and smart contracts.
In our post entitled ‘Digital Transformation: The New Normal for Financial Services’, we talked about how the blockchain has tons of benefits for various industries and organisations — especially when it comes to sharing, securing, and using data. One such industry where the blockchain revolution has already started is the supply chain. For those who are unfamiliar, supply chains deal with processes such as procurement, shipping, manufacturing between multiple parties. This makes it at risk for issues like inefficiency and lack of transparency. Because of this, supply chain entities will certainly benefit from facilitating transactions through blockchain’s immutable and transparent ledger.
So how exactly has blockchain transformed (and continued to transform) the supply chain industry?
Blockchain Has Improved Provenance Tracking and Record Keeping
Most supply chains are incredibly complex and encompass dozens of organisations and entities. For this reason, tracking each and every record can be overwhelming even for well-established, multinational corporations. As goods move through the supply chain, they gradually lose visibility. If you aren’t careful, it can result in cost and customer relation problems.
Thankfully, blockchain technology allows for easy provenance tracking and record keeping. Using IoT devices such as RFID tags and embedded sensors, supply chain entities can easily digitise information regarding their operations. This dramatically lessens the paperwork needed to track products as they go through the supply chain. As explained on Verizon Connect, this decreased reliance on paperwork also means that people can focus less on menial tasks, and more on revenue-generating activities. On top of this, digitisation of records allows supply chains to cut down on paper and ink costs. Indeed, this use of blockchain is both economical and can boost efficiency across companies.
Blockchain Has Bolstered the Trust Between Supply Chain Entities
Trust is vital throughout the supply chain, as emphasised by research on Emergent Publications. It nurtures successful collaboration, lowers transaction costs, and improves strategic flexibility. Without trust, bottlenecks will become more common as companies will have to take time just to examine the products and services received. By using blockchain technology, supply chain entities will find it easier to ensure the integrity of what they’re getting. For example, luxury handbag retailers can easily verify the authenticity of an item by checking blockchain-based records. Due to the immutable nature of blockchain, companies in the supply chain can work easier, knowing that what they have is genuine and tamper-proof.
Another application of blockchain that can significantly improve trust in the supply chain is smart contracts. A post on Supply Chain Channel defines smart contracts as digital agreements that self-execute once the programmed predetermined conditions are satisfied. To illustrate, supply chain companies can use smart contracts to automatically complete a payment to a vendor, once the blockchain verifies that the vendor has fulfilled their end of the deal. Since smart contracts run using data and information on the blockchain, it is virtually impossible for both parties to deceive the other.
The supply chain industry is reaping the benefits of blockchain technology. From helping supply chain members build trustworthy relationships with each other to improving documentation and visibility — blockchain technology will continue to change the supply chain industry for the better.
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