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How Blockchain Will Transform Supply Chains In The Coming Decade

Ajay is an expert in Supply Chain Management and has written on Renewable energy as well as ethical sourcing in the Green supply chains


Throughout the history of ledgers there have been numerous frauds and misplacements that have resulted in an enormous amount of loss for all parties involved. With strategic procurement becoming a reality, there will be more number of factors involved in one supply chain than there were ever before. From suppliers to deliverymen to consumers, the amount of data generated at every level has continued to increase manifold and maintaining a single uniform record of the invoices and ledgers has turned out to be a feat demanding an immense amount of manual labour.

Even with most of the world’s leading firms using digital infrastructure to keep track of their products, from the moment of buying raw materials to the second they reach the target customer, there is no wide-ranging perceptibility of their products at any given moment. Product step downs are overseen by mechanised enterprise resource planning (ERP) or legacy supply chain management systems. Moreover, information is spread across multiple platforms and is often delayed or out of sync. Most companies have to depend on their audit staff to run inventories and keep an account of all the profits they are meant to obtain.

What is Blockchain?

Traditional supply chain management systems offer extremely limited transparency if any and are excessively complex. Integrating new software on top of them sounds like another headache just waiting to be taken on. But it must be noted that the complexity of these systems arises from the multitude of levels that they manage data on. Apart from holding a great scope for fraud and mismanagement, these legacy systems exist in isolation from other supply chain systems across enterprises.

This is where blockchain software comes in. Blockchain plays a ground-breaking role in transforming the operations of supply chain by reducing the complexity that is inherent in outdated management softwares by combining data that previously was scattered across various programs. They do this by synchronizing data and transactions across networks and enabling each participant to verify the accounts and calculations of other players.

According to Paul Brody, EY Global Innovation Blockchain Leader, “At its most basic level, the core logic of blockchain means that no piece of inventory can exist in the same place twice.” Blockchain transactions secure the inventory by ensuring that no one can change or modify previously submitted data. This is accomplished by storing data in series of blocks which are added one after another and cannot be edited, altered or modified in any manner once saved. While you can verify old logs, any discrepancies introduced in the already existing information will compromise all the following blocks.

Blockchain’s big benefits

Blockchain is set to revolutionalize the field of supply chain and logistics by introducing flexibility, speed and accountability in all stages of the process. Apart from reducing complexity and costs, there are various other benefits of blockchain:

1. Transparency - Bernard Marr of Forbes has said, “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. Everyone on the blockchain can see the chain of ownership for an asset on the blockchain”

The transparency of its operations will ensure that customers and firms get exactly what they ask for and that there aren’t any illegal or unethical practices involved in obtaining or transporting the goods and services you ordered. Unhampered traceability also guarantees product authenticity, cost efficiency and following of safety regulations.

2. Efficiency – By compiling physical, financial and digital data in one place, blockchain helps with conflict analyses and exposes exact points of profit leakage. It brings to light sources of fraud, misuse and everyday wastefulness that help to formulate new directive strategies and solutions to prevent tactical inefficiencies.

3. Convenience – Since the Blockchain technology is famous for its association with the cryptocurrency, Bitcoin, many firms and companies are using blockchain now to handle payments across international borders. Rather than go through the bother of a traditional bank, blockchain allows for the transfer of funds through Bitcoin. The most prominent feature of blockchain thus also comes in use for easing global transactions; an instance of this is the Australian vehicle manufacturer Tomcar which has switched to Bitcoin for paying its suppliers.

4. Rapid payments – Even though transactions between leading firms and companies take place digitally, there’s still a large gap between the sales and payment period. In his article on blockchain published in Digital Magazine, Paul Brody revealed that, “The average U.S. Fortune 100 company has more than 60 days of sales outstanding.” Blockchain can completely close this gap by introducing smart contracts. Smart contracts come into action the moment the consumer gets a receipt; with the proof of delivery from a logistics carrier, invoicing and payment will automatically be transferred from the banking system.

5. Security – Blockchain’s system of digital inventory and record-keeping is highly secure for it is decentralized. No changes or modifications can be made to existing data and the same version of ledgers across multiple enterprises ensures that all participants in a business remain in absolute consensus regarding every aspect of transactions and relocations.

With more and more industries lining up to integrate blockchain-based supply chain management systems in their businesses, sectors from food to mining to manufacturing are changing the way they track their products and record financial data. From warehousing to delivery to payment, blockchain is fast changing the pace of business and increasing its efficiency and transparency. The systems in use right now might have been suitable 30 years ago when businesses still worked vertically but with new supply chain strategies coming to the fore every day, the increasing network of partners and stakeholders in any industry has made the use of new technology like blockchain imperative. To rise up to the standards of modern day supplying and distributing a switch to blockchain is only inevitable.

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