How Blockchain will transform the supply chain industry

From the conduct of payments and audits to the traceability of inventory and resources, blockchain technology will enable more efficient supply chains than ever before. Those elegant clothes, that colorful and smart phone, which distracts the T.V., have you ever wondered how they were delivered to your home or to the nearest brick and mortal shop? The answer is the supply chain. A supply chain is the network of all the individuals, organizations, resources, activities and technologies involved in the creation and sale of a product, from the delivery of the source materials from the supplier to the producer, up to the final delivery to the company. ;final user . The supply chain segment involved in getting the finished product from the producer to the consumer is known as the distribution channel. Managing today's supply chains is extraordinarily complex. With globalization, the supply chain has spread to various areas, serving people like never before.

Blockchain is expanding

Depending on the product, the supply chain can span over hundreds of phases, multiple geographic locations, a multitude of invoices and payments, have several people and entities involved and extend for months. Due to the complexity and lack of transparency of our current supply chains, there is interest in how blockchain technology can transform the supply chain. It is incredibly difficult for customers or buyers to really know the value of products because there is a significant lack of transparency in our current system. Similarly, it is extremely difficult to investigate supply chains when there is a suspicion of illegal or immoral practices. They can also be very inefficient, as suppliers and suppliers try to link points on who needs what, when and how. Blockchain is a digital ledger of transactions that can be programmed to record not only cryptocurrency transactions but practically all of value. Each record contains a timestamp and reference links to previous transactions. With this information, anyone with access rights can go back to a transactional event, at any point in its history, belonging to any participant.

How Blockchain will transform the supply chain

The generation of supply chain value could be limited due to the departments that work in silos and their KPIs that are not aligned with the general organizational objectives. This translates into an opaque supply chain that leads to a poor localization of the product flow. Blockchain is a holy grail for this use case, due to its decentralized nature in which transactions are validated by every node in the system.

Blockchain to date has had a greater impact on cryptocurrencies, but the implementation of technology in the supply chain could bring beneficial innovations. Using value stream mapping, professionals identify value-added and non-value-added assets, these non-value-added components include support activities such as documentation, customs clearance, materials management and cargo. Let's take a look at the case of checking the documentation in the customs clearance. Great efforts and resources of the workforce are needed without adding any value to the customers.

With the decentralized shared ledger of blockchain, verification of documentation could be accelerated by cutting dependency on any intermediate part. Transport and shipping add a significant cost to supply chain operations, in this case it is possible to use blockchain to identify the path traveled by the truck so that it can be analyzed to identify the economically advantageous route. The blockchain fed with the Internet of Things (IOT) could also be used to track the general health of the trucks by memorizing the status of the spare parts that could help a better truck maintenance. Industry advocates are implementing blockchain in their operations. Maersk as an example has implemented blockchain solutions with IBM in its supply chain for better monitoring of its loads. Walmart also uses this technology to track products at the origin.

Increasing trust and reducing costs

Beyond monitoring, the blockchain could also help increase trust among stakeholders and reduce financial risk in a supply chain with the application of smart contracts. The former are digital contracts (in practice, computer codes) that have their algorithms that execute contracts without human intervention.

The supply of common items is a difficult segment to insert, where established players are preferred to newcomers due to reliability and their ability to deliver as promised. Buyers avoid the risk of making transactions with newcomers due to the risk associated with newcomers, in this case smart contracts could come in handy. Consider a simple transaction between a buyer and a sender validated by a smart contract that includes the payment of money when the buyer receives the goods. The smart contract charges the money from the buyer account, storing it in an escrow account until the transaction is legally complete.

The contract is digital and automatically validates the terms and conditions of completion. In the event that the seller is unable to fulfill the contract, the retained money will be credited to the buyer's account. This could open up new dimensions in the supply chain by allowing new players to enter through increased risk mitigation. Increased competition could also help reduce the overall costs of supply chains

Blockchain, with its various use cases, has the potential to circumvent the way companies manage supply chains. To reap additional benefits, there is a constant need for companies to digitize themselves by training their workforce to adapt to continuous digital transformation.

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