How Blockchain Will Transform The Supply Chain

There are several supply chain startups who see an opportunity to provide blockchain-enabled supply chain solutions to improve efficiencies and reduce costs for the massive supply chain industry. More will most certainly join in as they realise the potential and demand for blockchain-enabled solutions to transform the supply chain and logistics industry.

Today’s supply chains are extraordinarily complex — Depending on the product, the supply chain can span over hundreds of stages, multiple international locations, a multitude of invoices and payments, include many individuals and entities, and can extend over months of time. Due to the complexity and lack of transparency of our current supply chains, there is growing interest in how blockchains might transform the supply chain and logistics industry and offer new efficiencies.

If we look at what is broken we can see that there are unique attributes of blockchain that could help organisations yet to adopt blockchain technology, with examples of those who have already and how it is positively impacting supply chains.

So lets look at how supply chain might be broken?

A hundred years ago, supply chains were relatively simple because commerce was local, but they have grown incredibly complex and varied. Since manufacturing has been globalised, supply chains are heavy with their own complexity.

It’s incredibly difficult for customers or buyers to truly know the value of products because of a significant lack of transparency in current systems and it is extremely difficult to investigate when there is suspicion of illegal or unethical practices. They can also be highly inefficient as vendors and suppliers try to connect the dots on who needs what, when and how.

This is the cool bit… What is blockchain and how could it help supply chains?

While the most prominent use of blockchain is in the cryptocurrency, Bitcoin, the reality is that blockchain—essentially a distributed, digital ledger—has many applications and can be used for any exchange, agreements/contracts, tracking and, of course, payment. Since every transaction is recorded on a block and across multiple copies of the ledger that are distributed over many nodes (computers), it is highly transparent. It’s also highly secure since every block links to the one before it and after it. There is not one central authority over the blockchain, and it’s extremely efficient and scalable. Ultimately, blockchain can increase the efficiency and transparency of supply chains and positively impact everything from warehousing to delivery to payment. Chain of command is essential for many things, and blockchain has the chain of command built in.

Blockchain provides the very things that are necessary for reliability and integrity in a supply chain, primarily it provides consensus—there is no dispute in the chain regarding transactions because all entities on the chain have the same version of the ledger. Everyone on the blockchain can see the chain of ownership for an asset on the blockchain. Records on the blockchain cannot be erased which is important for a transparent supply chain as a whole.

Examples of blockchain being used in supply chains today

Supply chain that is globalised needs to allow for the transfer of funds anywhere in the world ideally without the use of a traditional bank, blockchain can provide this.

In the food industry, it’s imperative to have solid records to trace each product to its source. So, Walmart uses blockchain to keep track of its pork it sources from China and the blockchain records where each piece of meat came from, processed, stored and its sell-by-date. Unilever, Nestle, Tyson and Dole also use blockchain for similar purposes.

BHP Billiton, the world’s largest mining firm, announced it will use blockchain to better track and record data throughout the mining process with its vendors. Not only will it increase efficiency internally, but it allows the company to have more effective communication with its partners.

The transparency of blockchain is also crucial to allow consumers to know they are supporting companies who they share the same values of environmental stewardship and sustainable manufacturing.

Diamond-giant De Beers uses blockchain technology to track stones from the point they are mined right up to the point when they are sold to consumers. This ensures the company avoids ‘conflict’ or ‘blood diamonds’ and assures the consumers that they are buying the genuine article.

Although the benefits to indusry are obvious, considering horizon-changing technology, especially in a supply chain system that is embedded in the core of business operation, is met with resistence, especially when incorporating crypto currencies. However, adoption is growing, initially by those organisations with the vision and agility to take the opportunity to levels that will in turn encourage future adoption by industry peers.

The Ed.