Managing a supply chain isn’t easy. If you start looking at it, very soon you will realize that the supply chain looks less like a chain and more like a web, full of interconnectivity and riddled with inefficiency. Before we move further, let’s try to understand what a supply chain is. A supply chain is a system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer. Supply chain activities involve the transformation of natural resources, raw materials, and components into a finished product that is delivered to the end customer.
The supply chains – all the links to creating and distributing goods – is extraordinarily complex. The supply chains that carry goods from producers to consumers weave across and around each other, stretching over borders and oceans. Depending on the product, the supply chain can span over hundreds of stages, multiple geographical locations, a multitude of invoices and payments, have several individuals and entities involved, and extend over months of time.
Globalization is a blessing to developing economies and international peace, but a consequence of global trade is that consumers often have little insight into where the goods they buy come from, or how they are manufactured. Supply chain management is such big business now that specialists are working hard to iron out these inefficiencies and to save companies’ money.
Many new digital technologies at various stages of development hold promise for manufacturers and the supply chain. The challenge for management teams is identifying which technologies to invest in and when. Artificial intelligence, machine learning and other new technologies are already being applied to the challenge of optimizing the supply chain, but there’s a new technology on board that’s going to act as the game changer for supply chain management transparency – blockchain.
Introduced to the mainstream as part of the cryptocurrency Bitcoin, blockchain has become synonymous with cryptocurrencies. It’s true that blockchain was initially designed purely for financial transactions, but it’s also true that this technology is highly versatile and has the potential of doing wonders in every field. Once seemingly at the far end of the horizon, why blockchains are suddenly poised for rapid growth? Because, they offer a solution to the growing problem of how to manage increasingly complicated networks of manufacturers and suppliers at a time when transparency, speed, and agility are critical.
Blockchain is a transparent and secure technology for storing and transmitting information, which records all transactions between users starting from the time it was created. If blockchain technology allows us to more securely and transparently track all types of transactions, imagine the possibilities it presents across the supply chain. Every time a product changes hands, the transaction could be documented, creating a permanent history of a product, from manufacture to sale. This could dramatically reduce time delays, added costs, and human error that plague transactions today. Documenting a product’s journey across the supply chain reveals its true origin and touchpoints, which increases trust and helps eliminate the bias found in today’s opaque supply chains.
Blockchain – essentially a distributed, digital ledger – 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 consensus – there is no dispute in the chain regarding transactions because all entities on the chain have the same version of the ledger. As blockchain is effectively an incorruptible ledger, it makes it much easier to track your compliance efforts by recording every single step of the way. Simultaneously, blockchain data can be made readily available to auditors and compliance officers.
Looking forward, blockchain technology’s potential impact across industries is even greater when examined in a larger context. Today, we are approaching that more decentralized era – one of rapid production responsiveness in which a global array of potential actors will need to move in and out of supply chain relationships at short notice. Shifting to a “permissionless” system would create a much more open, dynamic model with fewer gatekeepers, advancing innovation and more rapidly leading to greater network efficiencies. Many industries have already shifted towards blockchain and more will very soon join them as they realize the potential and demand for blockchain-enabled solutions to transform the supply chain and logistics industry.
Blockchain technology is coming to change all sorts of industries, and supply chain management is only one of them. From conducting payment and audits to tracking inventory and assets, blockchain technology will enable greater supply chain efficiency than ever before. If you are in search of a customized blockchain strategy for your supply chain industry, reach out to our team at OneNet Blockchain