Estimated reading time: 2 minutes, 52 seconds

Managing today’s supply chain can be highly complex. Depending on the items or products involved, supply chain may involve hundreds or even thousands of stages, different geographical locations, payments, entities and even number of days. As a result of this complexity and opaqueness, many professionals believe that blockchain is the silver bullet which could transform the challenges encountered in this sector. So from this point of view, how is blockchain likely to be used in the supply chain to sort out the current challenges? Here we look at the unique characteristics of blockchain and how it can help in the supply chain.

  1. Strengthening the traceability of goods

The distributed ledger system which is the main attribute of blockchain technology can be used to record the status of a product from production stage all the way to delivery to the consumer. The records are tamper proof, immutable and permanent and therefore makes it easy for the product to be traced to its source. Such records also make it easy for the manufacturer of a given product to identify the person who bought a product in an event of a product recall. Improving traceability mitigates the problem of high costs of production therefore adding value to a company’s supply chain.

  1. Automating processes

Many supply chain processes are done manually, and majority of them entail cumbersome paperwork. Accordingly, the entry of blockchain eliminates some paperwork used for such things as tracing of products, keeping of records, and those datasets are automated. In the end, it increases the speed of operations and makes the processes less costly.

  1. Cost reduction

Tracking of products within the supply chain reduces the cost of moving the products. When blockchain is applied in supply chain processes, the costs within the system are hopefully reduced while at the same time guaranteeing security of transactions. Furthermore, blockchain eliminates middlemen and intermediaries that add markup at every stage. At the same time, this technology will be useful in reducing fraud and eliminating product duplication which in the long run leads to financial gains.

  1. Payments

With digital currencies now in wider acceptance, it is just a matter of time before customers and suppliers appreciate the role that this technology plays in payments. With that, payments will be made by different individuals in the supply chain using cryptocurrencies rather than relying on the current methods of payment. This will be a huge stride towards efficiency and elimination of risk of losing products due to lack of proper recordkeeping mechanisms.

  1. Build trust

Building trust in the supply chain where many participants are involved is often difficult but necessary for the smooth running of operations. For example, the manufacturer should be able to depend on the records of the products he shares with the suppliers. This is also the case when it comes to compliance with regulatory frameworks. The immutability of blockchain records will play a vital role in making sure that tampering of records is eliminated and trust is built as a result of accuracy presented by these records. The copies of the shared ledger offer finality and hold the same version of the truth which cannot be altered.

Although it might be too early to outline all the advantages of blockchain and how it will be used in the supply chain, it is without a doubt that it will solve issues which are experienced in this sector currently.

Sources

https://www.mckinsey.com/business-functions/operations/our-insights/blockchain-technology-for-supply-chainsa-must-or-a-maybe

Last modified on Monday, 08 July 2019
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Scott Koegler

Scott Koegler is Executive Editor for PMG360. He is a technology writer and editor with 20+ years experience delivering high value content to readers and publishers. 

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