The Role of Blockchain in Supply Chain Management and Traceability
The Evolution of Technology:
Technology is the facilitator and separator in the fast-paced VUCA era. Today’s breakneck world has been filled up with many disruptive technologies, such as Blockchain, AI, ML, AR, and more. Due to their widespread adoption and uses, these technologies have emerged as promising and innovative.
“Blockchain Technology” is one such that has changed the way people think about the tech world. Blockchain is an element that has an exponential impact on every sphere of business, industry, and economy. This technology is expected to have the same disruptive effects on society as the internet did in the previous two decades.
Also, the digital record-keeping system known as Blockchain Technology, which powers Bitcoin and other cryptocurrency networks, has the ability to revolutionize the financial sector. Moreover, “Supply Chain Management” is another area where it shows enormous promise. Blockchain can significantly enhance supply chains by providing quicker and more cost-effective product delivery, strengthening product traceability, enhancing partner coordination, and facilitating access to funding.
Let’s have look at how the blockchain is being used in supply chains among the various business applications.
What is Supply Chain Management?
Supply chain management (SCM) is the process, that involves managing the complete production process, from the procurement of raw materials to the delivery of the finished good or service to the customer. Also, it manages the transfer of resources, data, and money related to an item or service.
What is Blockchain Technology?
Blockchain technology keeps track of transactions securely and openly. “Decentralization is one of the fundamental characteristics of blockchain technology.” It was initially presented in 2008 as the foundation of Bitcoin, but it has since grown to encompass a wide variety of uses.
The blockchain is made up of blocks that are connected to one another in a chain using chronological order. A group of transactions are contained in each block and have been verified by nodes, the participants in the network. Also, a block cannot be changed or removed after it has been added to the chain.
Security is another crucial aspect of blockchain technology. Due to the use of cryptography, data cannot be changed without the network participants’ consent once it has been recorded on the blockchain. As a result, altering data on the blockchain is practically impossible for hackers or other bad actors.
Key Notes of SCM Drawbacks
- Poor Visibility
- Lack of Actual data updates.
- Anticipated delays.
- Unable to adapt to shifting market conditions.
- An expanded inventory raised COGS.
Traditional Supply Chain Management Challenges:
Supply chain management has grown more difficult in recent years, while companies operate internationally and cooperate with partners and suppliers from all over the world because of globalization and technological advancements. This has enhanced productivity and reduced expenses, but it has also presented new difficulties.
Keeping visibility over the entire network is one of the largest issues facing supply chain management today. It is quite challenging to correctly track commodities as they move from one place to another. This lack of openness can result in mistakes, delays, and even fraud. Blockchain is thus useful in this situation.
Key Benefits in Blockchain-Based SCM
- Enhanced Trust, Transparency, and Traceability
- Efficiency gains result in speed.
- Lower Costs
- Improved Security through Impermanence
- Increased customer satisfaction
- Sustainability in terms of the Environment and Ethics
- Quality Control
- Prevention of Counterfeit goods
- Processing payments more quickly
Benefits of Implementing Blockchain in Supply Chain Management
Traditional supply chains typically use paper-based, asynchronous data systems that produce data units and time-consuming product tracking. An issue that affects the entire sector, lack of transparency and traceability causes delays, mistakes, and higher prices. Participants in today’s supply chains need a consistent view of the data while also having the freedom to independently and privately confirm transactions like production and transport updates.
Blockchain technology can assist in addressing many of these issues by building a safe and open network that enables real-time tracking of commodities at every step of the supply chain. All participants on the network can access data in real time while having a tamper-proof ledger that guarantees data integrity. Global networks of manufacturers, suppliers, logistics providers, and retailers often make up today’s supply chains, which collaborate to deliver goods to customers.
Major Blockchain Use Cases in Supply Chain Management
- Transparency
- Traceability
- Tradability
Transparency
Transparency helps to foster confidence. By gathering important data, such as certificates, and making this information freely accessible to the public. For example, a third-party attestant can confirm the authenticity of a transaction after it has been registered on the Ethereum blockchain. Real-time updates and validation are possible for the data.
Traceability
Traceability increases operational efficiency with the mapping and visualization of enterprise supply chains. Consumers are becoming more and more interested in product-sourcing information. Blockchain enables businesses to comprehend their supply chain and interact with customers using authentic, verifiable, and unchangeable data.
Tradability
Tradability is a special blockchain solution that transforms the idea of the traditional marketplace. With blockchain, it is possible to “tokenize” an asset by dividing it into shares that digitally represent ownership. The trading of a company’s shares on a stock exchange is similar to how fractional ownership enables tokens to reflect the value of a shareholder’s stake in a particular item. Users can transfer ownership of these tokens without exchanging physical assets because they are tradeable.
The Future of Blockchain-Powered Supply Chain Management
A significant amount of time, money, and effort has been invested, and the industry is undoubtedly benefiting greatly from this. Yes, Blockchain greatly benefits from the network effect, and it is simpler for new participants to join and reap the benefits.
Further, this ‘distributed ledger technology’ can deal with issues with conventional supply networks by doing away with the requirement for onerous documentation. Also, the digitalization of physical assets and a decentralized, unchangeable record of all transactions can make it feasible to track products from the manufacturing facility to the delivery destination, which provides more transparency and visibility to the supply chain.
However, Blockchain implementation in the supply chain has yet to witness wider adoption. Although more and more firms are being attracted towards implementing blockchain technology major industry players have started experimenting with blockchain in regard to their supply chain.
Read more: https://thenewscrypto.com/the-role-of-blockchain-in-supply-chain-management-and-traceability/
Text source: TheNewsCrypto – Blockchain & Cryptocurrency News M
