In its simplest form, a blockchain is an accounting ledger – one that can store data on any transaction in the real world of any kind. What is unique is that this registry is decentralized and that its data is encrypted and highly resistant to tampering.
This allows the blockchain to act as a reliable third party in applications ranging from ownership of financial services and ownership to identity verification. And it can do it on a public basis, like Bitcoin or private, with a single entity managing a closed blockchain system.
In India, the blockchain can generate three levels of impact throughout the supply chain.
Improve transparency. The supply chain of India suffers from a lack of transparency and a high process inefficiency due to excessive bureaucracy. As a result, Indian companies are often slow to respond to market demand and end up spending too much on logistics.
There are two reasons why large logistics operators have not implemented a centralized platform: the huge onboarding effort required and data privacy concerns.
Blockchain could face both problems. First of all, the plug-and-play capacity of the blockchain makes the onboarding less onerous: the big players could start by creating their own private blockchains with their suppliers, with the consequent automation of paperwork and due diligence. These networks could then be repeatedly connected to one another to create exponentially larger networks, amplifying the benefits.
But why would companies be willing to connect their blockchains? The Blockchain structure, which combines cryptography and distribution, makes data much more secure and gives each blockchain participant more control over the data. These capabilities increase the advantage of combining a blockchain and drastically reducing the negative sides.
Solution of the dispute The current supply chain structure makes the litigation for defective or defective supplies tedious and expensive, laden with unreliable data. In a blockchain-enabled supply chain, each shipment movement can be monitored and recorded so that all parties can trust, but with data open only to them. The "smart" contracts could therefore automatically penalize the parties from the sums held as collateral.
Opportunities for SMEs: Estimates show that the last mile delivery costs represent 40-50% of all logistics costs. PMI providers have repeatedly demonstrated their cost effectiveness in this area, but the question that prevented large customers from choosing SMEs was the following: what can we trust? Blockchain provides a new solution. Once PMI providers are integrated on a blockchain platform, reputation ratings can be assigned that monitor their performance. As in other applications, tamper resistance to tampering makes it easy to trust performance records. In a short time, customers can have dozens of high-quality logistics options to choose from, all with the certainty that it comes with performance track records that have been verified by blockchain.
The potential impact is twofold, not only allowing SMEs to take home a larger slice of the cake by competing against established players, but increasing the size of the cake itself, increasing demand as the addition of new players reduces prices .
It's a world where a local truck driver can beat the world's largest logistics companies and the Kirana store district can send chills on the backs of even the most sophisticated global retailers.
Mundra is a partner in the Mumbai office of McKinsey and Kulkarni is a business analyst at the Bangalore office.
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