Photo by frank mckenna on Unsplash
The relationship between blockchain and supply chains has developed in recent years. Thanks to concrete examples and successful pilots, blockchain and smart contracts for supply chain automation are now gaining momentum.
In less than a decade we’ve started to see real-world applications and how some industries are already reaping the benefits. Distributed ledger and blockchain technology clearly have many far-reaching implications for global trade and supply chains.
From providing increased efficiency, transparency and integration throughout supply chains,
Blockchain has produced many advancements in the area of global trade
When looking specifically at the way blockchain and supply chains interact, directly or at the application level, it’s easy to spot several areas that can benefit greatly from the adoption of the new technology.
Deloitte published an extensive look into the potential of blockchain for improving supply chain operation increasing transparency, traceability, and automation.
So how are blockchain and supply chain connected?
Before we dive into the technology side, take a look at the products in the supply chain that have drastically changed. The globalization of markets means that companies today are sourcing from different parts of the world. While we all benefit from this as consumers, this has created massive challenges when it comes to bringing these products to market.
This is where blockchain and smart contracts for supply chain automation become useful
It allows for the digitization of specifications — products, packaging, formulas, and so forth — thus permitting companies to create a digital thread through their supply chain.
This digital thread results in increased transparency and traceability between brands and their suppliers. Traceability is also an outcome of improved supply chain collaboration.
Thus, blockchain and supply chains seem like a logical continuation of the technology gaining publicity. Before trickling into the supply chain domain, many organizations were already experimenting with blockchain innovations to fulfill a range of needs.
Since manufacturing has become globalised, and a large portion of manufacturing is done in second-and third-world countries, monitoring and maintaining today’s supply chains has become increasingly difficult.
Today’s supply chain management involves a lot of intermediaries, including regulators, suppliers, and barristers. This translates to extra high costs to global trading. Many supply chains are also too dependent on middlemen to bring trust to the process.
Blockchain, however, operates or rather creates a completely trustless environment. It successfully minimises the amount of trust required from any single party in the system. By distributing trust among different parties, thanks to the agreed consensus protocol, blockchain offers a neutral playfield for businesses.
But what’s even more – blockchain allows any number of individuals or entities to define a protocol that allows them to transact with one another in a “peer-to-peer” decentralized manner.
The end result is promoting a more seamless purchase process, improving transaction flows, increasing traceability and transparency, reducing cost, offering quality assurance, and validating the provenance of any commodity.
Blockchain technology provides a lot of opportunities to transform the supply chain industry, starting with Blockchain for automation in supply chain operation but extending far beyond that.
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