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Do you ever think about where the smartphones, the clothes you wear, or the other things are connected to? In addition to the stores and showrooms you visit to buy these things, there's a long chain of interconnected elements that bring you these things. This chain is known as a supply chain.
Supply chain management
These chains extend over numerous links, directly from the place of origin to the place of distribution. On the basis of the product, a supply chain can involve hundreds of phases, geographical positions, invoices and payments, as well as individuals and entities.
And the management of these supply chains is extremely complex. Supply chain management includes planning, implementation of different processes, as well as the flow of materials, information and financial capital.
Broken link in the supply chain
The problem with the current supply chain is that it is broken at different stages and there is a lack of transparency in the system. Customers and buyers find it difficult to investigate supply chains and find out whether there are illegal or unethical practices. Sometimes, they can not even connect points to find out where and how a product is running or when it reaches its destination.
Today, supply chains are more than conventional networks of suppliers and original equipment manufacturers (OEMs). These have gone further to become large ecosystems, where different variations of a product move through different parts. All these parts try to coordinate and work together.
Supply chains have changed, but companies are still stuck with traditional models and use obsolete technology in supply chain management. Blockchain can help them reshape the ecosystem-wide approach and provide global information.
What is the blockchain?
As the name suggests, the blockchain contains a "chain" of "blocks", in which the blocks consist of information and are chained together. It is a secure, digital and distributed register where participants share information.
The blockchain is the most modern technology today as it allows absolute transactions of information and money, exchange of agreements and contracts, tracking, etc. This technology is highly transparent because all transactions in the chain are recorded on blocks. All participants in a blockchain get a copy of all transactions.
Since it has no central entity, no one can corrupt or steal information. Furthermore, nobody can manipulate or delete information.
Marc Andreesen, the co-founder of a Silicon Valley venture, defines blockchain as the most significant invention from the Internet. Quintessence magazine describes this blockchain as an important and influential invention like the steam engine. It has the power to evolve the world of finance, supply chain and beyond.
According to a report by the Market Reports Center, the global blockchain market will reach $ 60.7 billion by 2024, from only $ 708 million in 2017.
How can the blockchain solve the broken link in supply chain management?
Because blockchain is a highly transparent and efficient technology, it can have a positive impact on the supply chain and its management, from the point of origin to the place of distribution.
Blockchain covers all the essential aspects of the supply chain that are necessary for reliability, trust and integrity. With the blockchain implementation, no participant will have a collision in the supply chain since everyone will have the same copy of each transaction.
While blockchain is more popular for its use in cryptocurrencies, it can also help simplify supply chain management systems. (Photo of DepositPhotos)
Without having a central entity, companies, partners and suppliers can handle all the complicated consultations that arise when any information or resource is delivered for delivery. All data and transactions are synchronized across the network. All blockchain participants confirm the work and tasks of others. This allows for a high amount of cross-checking and redundancy, and is also the reason why cryptocurrencies like Bitcoin and Ethereum are so secure and reliable.
The cases of use of blockchains in supply chain management are really convincing. The basic logic of blockchain is that when a resource is moved from one place to another, the transaction status is updated for all the participants in the system in no time. Everyone can also trace the chain, find the current location of the resource, who is currently the owner of that resource and other similar things.
Blockchain enabled supply chain power
There are several advantages of blockchain in the supply chain. Save time, money and efforts for various purposes.
On average, a US Fortune 100 company is paid after more than 60 days from the completion of an activity or from the delivery of an asset. This is because there is an analog gap that separates companies in a network. This means that after the completion of the job, they generate invoices and send them to the customers via email. In addition, customers manually enter the values and then decide how and when to process the payment.
By applying blockchain, all manual activities can be eliminated and companies can be paid within one day of product delivery.
When entities can track a product in real time, it reduces the overall costs of moving assets in a supply chain. Blockchain accelerates administrative processes in supply chains and decreases the number of people dedicated to order auditing. This eventually reduces the additional costs in the system.
The removal of intermediaries and central entities in the supply chain eliminates the risks of fraud and product manipulation, which helps to save money.
Large technology companies such as Microsoft and IBM are working on blockchain development, in particular to implement technology in the supply chain.
At the start of this year, IBM had worked with Maersk to create a blockchain-based joint venture that would accelerate commerce and secure it. The companies have said that the blockchain can reduce obstacles within the international supply chain, improve economies and create more jobs.
In addition to these big players, companies like Eximchain, Provenenza, Skuchain, Linfinity and Everledger are creating customized supply chains for their customers.
Wrapping up
Blockchain has the potential to transform every sector, including the supply chain. Indeed, this technology can prove to be the most useful in the supply chain sector. So, it will grow at a rapid pace in the next few years, will fix the broken link in the supply chain logistics and will get more benefits.
(Featured image of DepositPhotos)
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DISCLAIMER: this article expresses my ideas and opinions. Any information I have shared comes from sources that I believe to be reliable and accurate. I have not received any financial compensation for writing this post, nor do I have any participation in any of the companies I mentioned. I invite any reader to do their own diligent research before making any investment decision.
