Do you know what it is that makes blockchain technology highly sought after in supply chain management?
Increased transparency, security, and efficiency makes blockchain technology crucial for supply chain management.
It can transform the supply chain industry. Blockchain allows all involved in the supply chain to operate on a shared ledger. This allows supply chain teams to improve their current systems. It is especially helpful in areas like product traceability and authentication of goods.
Here’s how blockchain fits in the equation for supply chain managers.
Blockchain In Supply Chain Management
Supply chain management is becoming an increasingly complex process. This is largely due to Globalization. It allows companies to operate and collaborate with suppliers and partners all over the world. This has helped companies reduce their operational costs and increase efficiency. However, this has come with its own unique challenges.
One of the challenges currently faced by supply chain managers is maintaining visibility across the entire supply chain network. This is because when goods are moved from one location to another, it becomes difficult to track them efficiently. Leading to a lack of transparency. Causing unnecessary delays and errors in the supply chain process.
This is where blockchain plays a part in the supply chain. This technology helps create a secure and transparent network that promotes real-time tracking of goods at every stage. Blockchain technology helps address many of the challenges faced by supply chain managers.
Blockchain technology provides a tamper-proof ledger that keeps data secure and allows access to information in real time.
Now that you know why blockchain is crucial for supply chain management, let’s understand the basics of blockchain.
Understanding Blockchain Technology
Blockchain is basically a decentralized digital ledger technology. It records each transaction in a very secure and transparent manner. Blockchain technology was introduced for the first time as the underlying technology behind cryptocurrency in 2008. But now this technology has expanded to a wide range of applications.
The blockchain technology consists of blocks that are connected in a chronological order, forming a chain. Each block in a blockchain contains a set of verified transactions. Once a block has been added to the chain, it can not be altered.
Decentralization is a feature that is unique to blockchain technology. Unlike any other traditional databases, blockchain allows multiple parties to view and verify transactions. Making blockchain technology highly secure and efficient.
Security is another crucial feature of blockchain technology. This is due to the use of cryptography. Cryptography is what makes sure that data recorded on the blockchain is not altered. Making it almost impossible for hackers to tamper with the data.
The basics of blockchain can not be fully understood without talking about the different types of blockchain. The types of blockchain include;
- Public blockchains: These blockchains are open to anyone and do not require permission to join.
- Private blockchains: As the name suggests, these blockchains can only be accessed by a select few users. It can only be accessed after the network owner has granted permission.
- Consortium blockchains: These blockchains require permission from multiple parties to join and are considered semi-private.
In short, blockchain’s decentralized nature and efficient security is what makes it a perfect match for supply chain management.
Now that the basics of blockchain are down, you might wonder how it helps in blockchain management. What are its benefits? Let’s find out!
Why Use Blockchain?
From improved traceability to reduced costs and better customer experience, using blockchain for supply chain management offers multiple benefits.
Improved Transparency & Trust
The ultimate benefit supply managers get from using blockchain is the transparent and verifiable record of all the transactions. This is helpful in keeping track of the products from their origin to their destination. Improving accountability and minimizing the risk of fraud.
It also leads to greater transparency within the supply chain itself. Allowing team members to track and monitor performance in real time. All of this ultimately promotes trust among all the parties involved in the supply chain.
Increased Efficiency
Blockchain technology can also help automate many processes within the supply chain process. This helps increase overall efficiency and reduce operational costs. The processes that can be automated using blockchain technology include;
- Payments
- Inventory Tracking and Management
- Logistics
It also helps speed up the supply chain, which is critical for success in the industry.
Reduced Costs
Perhaps this is the most valuable benefit of implementing blockchain for supply chain management. Blockchain is responsible for reducing costs across the entire supply chain. It does that by eliminating the need for intermediaries and reducing overhead administration costs.
Cost reduction using blockchain starts from the development and planning phase and goes all the way to manufacturing, delivering, and returning products.
Let’s take the example of the automotive industry for better understanding. The automative industry can reduce its costs of inventory tracking using blockchain. This is because the current process of inventory tracking involves many manual tasks. Tasks like checking for stock availability and updating records manually. Blockchain technology can help automate this process, reducing the overhead costs associated with it.
Blockchain technology can also help lower costs associated with manual data entry and reduce errors. All thanks to its decentralized nature. It allows everyone from manufacturers to suppliers and distributors to access data in real time, promoting collaboration among them.
Blockchain can also be used in the manufacturing process, reducing the product development cost. It can provide a secure platform for tracking progress throughout the design process. This helps make sure that the changes are being tracked accurately.
Immutability
The use of cryptography and the distributed nature of the blockchain technology makes it highly secure. Immutability is another important feature of this technology.
Immutability in blockchain technology refers to the characteristic of blockchain that when data is recorded it can not be altered. This makes immutability a fundamental characteristic of blockchain systems. It makes sure that all transactions are verifiable and permanent.
Data is permanently stored on a blockchain using distributed ledgers and cryptographic techniques. Immutability also improves traceability within the blockchain. It is because all the data stored in a blockchain can easily be tracked back to its source.
Improved Customer Experience
Using blockchain in supply chain management ultimately improves customer experience as well. How? It does that by enabling businesses to deliver products faster and more accurately.
Additionally, it also allows customers to track their products throughout the supply chain. This helps foster trust among the customers as they are able to verify that the product has been sourced responsibly.
It isn’t all roses and lilies when it comes to blockchain in supply chain management. There are a few challenges and limitations associated with using blockchain in SCM.
Challenges and Limitations
Yes, blockchain technology offers multiple benefits for supply chain management. But it also has its own fair share of challenges and limitations. Such as;
Integrating With Existing Systems
It is one of the biggest challenges currently faced by companies that are looking to integrate blockchain technology with their existing systems. It can be a highly time consuming and complex process. Especially if the company already has multiple legacy systems in place.
This means that companies must allocate a lot of time and resources to make sure that their systems are linked properly to the blockchain.
Scalability
The current infrastructure of blockchain technology may not be able to handle a large number of transactions simultaneously. Doing so may result in delays and other performance issues. This raises scalability concerns among the companies using blockchain.
Legal Uncertainty
There is no legal framework that regulates the use of blockchain technology in different jurisdictions. This poses legal and regulatory risks to the companies that want to adopt blockchain technology. If you want to integrate blockchain technology in your supply chain management process, make sure that you are aware of any regulatory changes that can impact the use of blockchain technology.
Privacy Concerns
There is no doubt that multiple security and data privacy risks that are associated with the use of blockchain technology. It is largely because there is no regulatory authority for it. Yes, the distributed ledger makes sure that the data is stored safely, but what about the malicious actors?
They can still take advantage of vulnerabilities and compromise seemingly secure networks. The same is the case for data privacy. There are always concerns that if proper precautions are not taken, its highly transparent nature could expose sensitive information.
So, if you want to incorporate blockchain technology in your supply chain management process, you must remain vigilant at all times. Use cyber security measures such as firewalls, encryption, and identity verification to ensure data privacy and security. You should have these cybersecurity measures in place regardless of if you’re using blockchain or not.
Be Smart, Get Help!
If you feel like the benefits of using blockchain outweigh the challenges, then go for it. However, you must take smart decisions. Decisions such as getting expert help for implementing blockchain for your supply chain management process.
Yes, you can try doing it alone with the help of your in house team. But that may cause unnecessary delays and overhead costs. You don’t want that right?
So, reach out to Seattle Software Developers and leave all your blockchain worries to us!
