Could blockchain technology improve supply chain management and create more transparent systems?
Our economy is made up of supply chains. Anything that involves a producer and consumer involves a number of steps to get the product to the buyer.
However, supply chains can be complex and problematic. One of the major issues is a lack of transparency. If people involved in the chain cannot directly see and track where the product is, it can lead to confusion, delays, loss and production mistakes. Communication is critical at every stage.
Could blockchain technology be the solution to supply chain problems? With its open ledgers and impermeable records, it could create a more transparent, streamlined and operational system. Let’s explore how…. After all, blockchain is more than just cryptocurrency.
What is a supply chain?
A supply chain is a network between the producer of goods and the supplier who delivers them to the buyer. The steps within the supply chain vary. Sometimes the journey from production to consumer will be very direct. Other times the product will pass through many hands before reaching its final destination.
Supply chain management (SCM) is the governance and overseeing of the flow of goods and services. SCM covers every step of the process, from raw materials to final products and delivery. A more streamlined supply chain can get goods to the consumer more quickly and cut costs for all involved.
So, what do we mean by supply chain transparency?
Transparency within supply chains isn’t all about tracking lost parcels, however. As consumers, we’re increasingly aware of where our goods come from and the impact their manufacture may have on the environment, the people making the items, and our own health.
With evermore demand for ethically sourced goods, supply chain transparency is an important factor. Concerns over issues such as animal welfare, child labor, and ingredient origin come from are amongst the driving forces behind customers wishing to have more clarity around supply chains.
In fact, consumers are willing to pay more for products from companies that provide greater supply chain transparency. 2% to 10% more, according to a study from the MIT Sloan School of Management.
How does blockchain technology work?
Essentially, the blockchain is a digital ledger of transactions. Although people mostly associate blockchain technology with cryptocurrency, it’s actually capable of so much more — including improving the transparency and traceability of supply chain transactions.
Whenever a new transaction occurs on the blockchain, it gets recorded in a ‘block,’ and a record of that transaction is added to every participant’s ledger. (Distributed Ledger Technology or DLT). Multiple blocks link together to form a ‘chain’.
The blockchain is a decentralized system, meaning there is no third party to oversee the peer-to-peer transactions.
You can learn more about blockchain technology in our previous guide: What is blockchain technology, and how does it work?
How can blockchain help supply chain management?
Because every participant in the blockchain can see each time-stamped transaction, it’s very difficult for information to be altered or tampered with. All transactions are searchable and traceable/. And because the blockchain is open for the public to view, those involved in the supply chain can verify and account for any transactions in the process.
But how can businesses apply this to real-world situations?
Well, take food safety concerns for one. Blockchain could provide enhanced tracking and traceability, allowing for granular recalls in cases of product safety concerns or food-borne bacteria outbreaks.
Utilizing blockchain technology also allows consumers to choose more sustainable and ethically-made goods. With more transparency, they can access information about a product’s origin or manufacturing process.
Which companies are using blockchain in their supply chains?
Some big names in retail are already utilizing blockchain technology to improve their supply chains.
Walmart, for example, is using blockchain to better trace its grocery products and monitor food safety. They have created a food traceability system based on open-source ledger technology. Every blockchain node represents a unit that has handled the food on its journey from farm to store.
The use of blockchain makes tracking any potential issues far quicker and easier than ever before. For example, they would be able to identify whether a partner farm has sold any infected batches of produce to a specific location.
A few years ago, it took experts two months to trace the source of a salmonella outbreak in Mexican papayas. With blockchain technology, they would have been able to find the source in minutes, preventing further issues.
Unilever, Nestlé, and Dole have also explored similar blockchain solutions in their supply chains.
Blockchain for supply chains and beyond
Blockchain technology holds huge potential to disrupt all sorts of industries for the better. From medical records to fresh food supply chains, its inherent transparency makes it quick and easy to trace any potential issues. What else do you think blockchain could support?
And of course, we can’t forget blockchain’s role in cryptocurrency! It’s the foundation of crypto and has built an incredible universe. If you need a secure, intuitive platform on which to store your cryptocurrency and digital assets, don’t forget to check out Gridlock!