When the idea of the supply chain was born around 200 years ago, it was a revolutionary idea that improved visibility and control of goods as they moved from point A to point B. But the way it was done 200 years ago no longer support today’s production and supply cycles, which have become extremely fragmented, complicated and geographically dispersed. The blockchain has the potential to transform the supply chain and disrupt the way we produce, market, purchase and consume our goods. As a distributed ledger that ensures both transparency and security, the blockchain is showing promise to fix the current problems of the supply chain.
The first thing to do using the blockchain technology would be to register the transfer of goods on the ledger as transactions that would identify the parties involved, along with the price, date, location, quality, and state of the product and any other information that would be relevant to managing the supply chain.
With the blockchain, it would be possible to trace back every product to its origin. All the way back to the raw material used to create it. The decentralized structure of the ledger would make it impossible for anyone to hold ownership of the ledger and manipulate the data to their advantage. And the cryptography-based nature of the transactions would make it nearly impossible to compromise the ledger.
Here below are the major advantages of using blockchain technology in the supply chain listed one by one:
1. Transparency. The blockchain is a shared database that ensures honest transparency. All partners have the responsibility to upload their information and data about the product. A digital collection of accurate data improves accountability and trust between partners. Blockchain technology can show updates to the product in mere minutes. Everyone involved knows exactly where a product stands at all times. You can see exactly where a product is, how it’s being made, and when it will be delivered all in one place.
2. Security. The blockchain is built using extremely secure blocks. Each block is a copy of the document that is chronologically stored and linked to all of the previous blocks. Some experts already consider the blockchain “unhackable.” To hack it, a hacker would have to change hundreds of copies at the same time, which is basically impossible without the software picking up on it.
3. Streamlined. All of the logging involved with the blockchain is done digitally. This leads to less administrative work and more consistent and speedy data tracking. With the blockchain, you cut out the middleman and sign on to the blockchain to instantly download information. Everything is in one spot, making communication and operations highly streamlined. The blockchain is global and scalable. The technology can support worldwide partnerships and communications just as fast as regional partnerships. This makes it the ideal solution for an economy of globalization.
4. Enhanced Analytics. The blockchain offers complex solutions to analyze the data being uploaded. It can help create forecasts and predictions based on previous data, and it can allow users to pinpoint lags in the supply chain. These data analytics are proving invaluable to companies who want to minimize supply chain expenditures and grow their businesses.
5. Customer Satisfaction. The blockchain technology can also be used to boost customer satisfaction. Business owners can use the blockchain database to see where items are in production and shipment to build a delivery timeline for their customers. It also has a social advantage to it. A clothing brand with a dedication to fighting sweatshops may give their customers access to the blockchain, showing them a social consciousness approval form, and a labor union sheet.
Even though the advantages are overwhelming, there are still some disadvantages to using the blockchain. The technology is still very new, and it will take some time for it to be trusted on a mainstream level. And, companies are usually resistant to change at first, especially change of this magnitude.
The three biggest concerns today are:
1. Blockchain programming is complex and challenging. Companies have to host extensive blockchain training or outsource programming to a third party.
2. Since it’s international, it would eventually have to succumb to a variety of global laws. Moving forward, you can expect trade organizations to better standardize supply chain blockchain usage.
3. Blockchain relies on a network effect. The more people that use it, the more value it has. In order for it to truly succeed, all partners of the supply chain should use the platform consistently.
With all its pros and cons, blockchain is already revolutionizing the financial world, and it’s only a matter of time until it takes over every other industry.
A technology like this is a generational technology, something that will change the way the world works. For something like the supply chain, the blockchain technology will update a 200-year-old system and make it more reliable, secure, and transparent.