By Mitesh Bulsara
Blockchain technology has the potential to completely transform the supply chain sector by delivering fast, secure, and immutable transaction records across stakeholders in the value chain.
Thanks to its application in the world of digital currency and financial technology, blockchain has risen to prominence in a rather quick fashion. Open ledger technology has proved a game changer for the financial sector and now its use cases are transforming the fortunes of the supply chain industry. Compared to conventional structures, blockchain-based supply chains can bring a lot more benefits to the participating stakeholders in the business ecosystem. From sourcing accuracy to cost-effective delivery and product traceability to better coordination, the application of blockchain can greatly enhance each and every facet of the supply chain, thereby creating a win-win situation for both firms and end consumers.
How Blockchain-based Supply Chain Works?’
The distinguishing characteristic of blockchain-based blockchains is the use of unique identifiers which can be considered equivalent to digital tokens. These identifiers are assigned to both assets and participating stakeholders and exchanged between transacting parties whenever goods move from one party to another. These transfers of tokens are recorded on the blockchain, thereby offering firms a complete chronological record of all financial, inventory, and information flows in the system. Further, blockchain records are safe, secure, and immutable which means these bring an added sense of authenticity and reliability among participating players in the supply chain ecosystems.
Benefits of using Blockchain in Supply Chains
1) Enhancing Product Traceability: By improving product traceability throughout the supply chain, blockchain ensures that brands deliver only authentic and genuine products to target customers. Blockchain allows product inventories to be tagged with unique codes and as they move from suppliers to partners, these codes are scanned and information is recorded on the open ledger, creating the entire history of product movements from the supplier to end consumers. No wonder, leading organisations across pharma, agro & food processing and FMCG are benefitting from the Product Traceability feature of the open ledger-based supply chains.
2) Increasing operational efficiency: Firms in the retail and automobile sectors often run very complex and convoluted supply chains. They source materials and components from multiple suppliers and often have to contend with long lead times, unexpected delays, and opaque reporting systems. As a result, their supply chains become vulnerable to disruption as even a slight delay from one supplier could severely imbalance the inventory levels and hence production schedules. The use of blockchain, however, can address this issue by offering enhanced visibility and decentralized access to the sourcing data across partners. By agreeing to share the data of their inventories on an open ledger, every participating stakeholder can proactively plan and manage disruptions with far greater effectiveness.
3) Enabling Global Operations: One of the significant benefits of integrating blockchain in supply chain operations is to realize the dream of going Global and efficiently handling operations overseas. Especially when it comes to Financing, Contracting, and Implementing supply chains internationally, the quick, easy, and secure way of exchanging information is of paramount importance. Blockchain can easily deliver on all these crucial aspects and can help firms to make informed and relevant decisions while expanding their operations globally. Even for other stakeholders such as banks and financial institutions, blockchain-based records can bring a lot of convenience to the table. For example, these lenders can easily assess the quality of the assets of the borrowing parties and check the credibility of the requests from potential borrowers. Similarly, processes to allot contracts, payables management, and cross-border trading can be significantly improved with the help of blockchain-based supply chains.
4) Inventory and Vendor Management: Blockchain can help firms automate the collection, analysis, and evaluation of inventory and vendor data for ensuring effective and efficient operations. While records of inventory on the blockchain paves the way for better sourcing management and material handling, the data of vendor performances can help companies to conduct vendor risk assessments for proactively plan for contingencies. Both these aspect are critical for enhancing the efficiency of supply chains and can help companies to perform to their full potential.
The transformative potential of blockchain-led supply chains has just begun to materialize in the real world. There is tremendous scope for blockchain applicability and by creating a win-win situation for all the stakeholders in the ecosystem, the open ledger is fast emerging as a preferred choice of top echelons in the supply chain domain. In sum, blockchain-based supply chains are the future and it’s just a matter of time before we start witnessing the widespread adoption of the open ledger in the segment.
The author is co-founder and CTO, CoffeeBeans