Innovating supply chain management with blockchain technology
Blockchain is on the cusp of changing the way many industries operate around the globe, but perhaps nowhere more than in the realm of supply chain management. Not long ago, blockchain technology news was exclusively linked with cryptocurrency. Now, through its built-in transparency and enhanced data sharing capabilities, blockchain stands ready to innovate the supply chain as well. Here’s what this means for businesses today:
Challenges with the legacy supply chain model
The supply chain — as it currently exists in many cases — is ripe for improvement. For example, many finance records related to supply chain management often are still kept using legacy tools such as faxes, spreadsheets, emails and one of the oldest technologies of them all — paper. Having critical data stored in disparate, disconnected locations this way means they cannot readily be shared or accessed by the parties involved. Supply chain records that are managed in this way are also vulnerable to loss, disaster or tampering, which can compromise trust in the supply chain.
The international shipping industry does use a system known as the electronic data interchange (EDI) for coordinating shared documents, but it’s been around for about 60 years. Technology has radically evolved in the meantime. Nearly everyone, from business executives to warehouse workers, now carries a mobile device — which is essentially a powerful computer — in their pockets.
Data sharing is far easier and more commonplace thanks to the convergence of mobile broadband technology and the cloud. With an emerging technology such as blockchain, businesses can now innovate the supply chain in ways that would have been unthinkable a short while ago.
Blockchain advances supply chain management efficiency and transparency
The supply chain requires effective, efficient communication and coordination among business partners across the globe, but to date, legacy practices have not supported these fundamental requirements well. Fortunately, however, blockchain shines best in precisely this type of scenario, when it is leveraged for transparent information sharing among multiple parties. And since it provides the ability to authoritatively record transactions in a tamper-proof mutually distributed ledger, it is particularly well suited for creating trust in the transactions it logs.
Trust is especially critical when a valuable commodity is being traded, which is why the jewelry industry is now using blockchain to track the provenance of gems through their journey from the mine to the storefront window. As TechCrunch reports, the TrustChain project enables participants to quickly check the validity of transactions at each step, greatly reducing the number of steps that would be required to confirm a precious stone’s origin throughout the supply chain under a manual paper-based system.
Only authorized parties have access to a blockchain, and every single transaction it records is transparently visible to all, so it is easy for one party to communicate with another about each specific entry. This allows any potential issues or errors to be resolved quickly and clearly. This kind of transparency is especially important in the jewelry industry since many buyers are now demanding confirmation that the gems and metals in their valuable rings and necklaces are sustainably and ethically sourced. What’s more, they’re willing to pay extra for jewelry that carries this certification. Businesses that effectively address this consumer demand using blockchain stand to gain an advantage in the market.
Blockchain enhances international trade
Governments also recognize blockchain’s potential to revolutionize the supply chain. As ZDNet reports, Australia’s Department of Home Affairs is proposing a far-reaching modernization effort to improve Australia’s trade process, deploying blockchain in combination with complementary technologies like AI and IoT. Just as a jewelry buyer requires an accurate audit trail when deciding whether to purchase a pair of diamond earrings, a government also needs to authenticate the origin of goods entering its borders via the international supply chain. Blockchain can streamline the evaluation process in both cases.
Equipped with more efficient and transparent access to information through blockchain, a government could cut down on red tape in the form of trade documentation such as licenses, permits and payment evidence. This technological advancement would also speed up the time it takes to process approval for goods entering the country while reducing the costs associated with a manual paper-based process that is often prone to human error. As a result, international trade could proceed more rapidly and inexpensively, benefiting consumers worldwide.
Chinese retail giant Alibaba is pursuing a similar measure, using blockchain to eliminate instances of food fraud in which genuine products are fraudulently swapped out for lower-quality or counterfeit goods, costing the global food industry an estimated $40 billion dollars each year, according to Business Insider.
This pilot project will track goods like health supplements and dairy products as they are shipped from Australia and New Zealand to China. If the trial is successful, the organization’s leadership hopes to expand it into a global supply chain model. Much like the jewelry industry, Alibaba hopes that blockchain can help increase consumer trust in its products and thereby strengthen its position in the market.
Although some observers may still consider blockchain a nascent technology, that assessment may no longer be accurate as businesses increasingly adopt it for mission-critical applications such as supply chain management. By providing transparent audit trails of goods that are globally sourced then verifying their origin as they reach their ports of call, blockchain offers great potential as a foundational platform upon which many of our trusted transactions could soon depend. As such, it has an opportunity to transform the way the supply chain runs from end to end, across the world.