How Can Blockchain Improve Supply Chains

The majority of people understand the blockchain to be platforms used for processing and storing cryptocurrency transactions. However, outside of finance, other professionals are also excited about the prospect of introducing blockchain technology to their processes.

As manufacturing continues to boom, and we live in a truly global market, blockchain and supply chain management are beginning to cross paths. As it stands, businesses across the globe are reliant on a myriad of systems, companies, processes, and ledgers to ensure a smooth supply chain. However, introducing blockchain for supply chain management has the potential to completely transform operations, giving businesses and consumers a more accurate and reliable system.

So, how can blockchain improve supply chains? Keep reading to discover why being an early adopter of this ground-breaking technology can put you ahead of your competitors, giving you a supply chain that is the envy of other businesses.

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What Is The Blockchain?

Blockchain is a single source of truth for all transactions completed on the network. This distributed ledger technology relies on nodes (computers or users) to verify transactions rather than using intermediaries such as banks, financial institutions, and other large corporate tech companies.

Essentially, when a transaction takes place on the blockchain, it must be verified by multiple users before being processed. Once processed, it can never be tampered with or revoked, as the ledger updates for every node in the network.

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The Benefits of Using Blockchain In The Supply Chain

A supply chain involves both physical and information flows. For a supply chain to run efficiently, it needs to ensure data, products, and money are exchanged quickly, accurately, and with accountability. Many businesses rely on partners across the globe to fulfill their supply chain. Currently, they’re using different currencies, systems, and intermediaries. This creates a host of problems with visibility, data protection, and transparency.

Using blockchain for supply chain management tackles many of the major challenges currently being faced.

Accountability & Tracking

As mentioned, blockchain technology is a single source of truth that cannot be tampered with. Often, when issues arise with the supply chain, the finger-pointing begins. Each cog in the system looks to blame one another, and with little visibility, it’s easy to avoid accountability.

However, as the blockchain requires everyone to work from the same tamper proof network, tracking progress and maintaining accountability become easier.

Furthermore, blockchain technology uses smart contracts. This creates an added level of accountability because transactions cannot be processed until each party has completed what the contract obligates them to.

Now, businesses operating with global supply chains will be able to pinpoint areas of concern, drop-off points and easily find solutions to previously hidden problems.

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Transparency

One of the main reasons blockchain and supply chain management go hand in hand is transparency. Every step in the supply chain process is logged for all to see, creating a transparent and trustworthy process for every product or bit of information.

For example, retailers purchasing products from wholesalers can be 100% certain of the origin of the products they’re buying. Currently, illegal activity, particularly counterfeiting, is a tremendous issue. Using blockchain for supply chain management gives businesses and consumers confidence in the goods they’re acquiring.

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Sustainability

Nowadays, customers want assurances from companies that their processes and products are sustainable. In an era where greenwashing is rife (companies claiming to be sustainable when they actually aren’t), blockchain provides the accuracy needed to confirm sustainability.

The perfect example of this is the clothing and fashion industry. With very little accountability and audit trails being untrackable, brands are claiming they use sustainable materials when they aren’t. By introducing blockchain in supply chain management, businesses can easily show customers the source of the raw materials used to make their clothes.

Having this level of traceability will drastically improve sustainability in many industries because greenwashing will become a thing of the past. Going forward, blockchain will be the method used for businesses to legitimately prove their sustainable practices. In turn, as more brands adopt blockchain, sustainability will improve globally.

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Efficiency & Streamlined Communications

One of the major challenges faced by businesses and supply chains is the time it takes to complete transactions. Even when completing transactions with a supplier in your own country, you have to go through a third party, which can take time. Add to this the time it takes to complete cross-border transactions, and those with global supply chains can see long hold-ups – not with the blockchain.

Blockchain brings peer-to-peer transactions, meaning businesses or a group of businesses can transact with one another without interference from third parties. As you’re not reliant on companies not directly involved with your supply chain, you are in complete control of the efficiency. Furthermore, with easy integration and the accountability we’ve already mentioned, communications are streamlined with all parties able to work from the same tamper proof systems.

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In Summary

Blockchain technology creates a single source of truth for businesses and suppliers. The accountability, traceability, efficiency, and sustainability improvements it brings are unquestionable. The best part? It tackles the most pressing challenges faced by supply chain management professionals.

So, now you know how blockchain can improve supply chains. Will you be a pioneer of the technology?