Businesses across the globe, particularly those involved in the manufacturing and distribution of goods, have invested substantial time, energy, and resources to streamline and improve their supply chains.

Any friction in a supply chain network can have cascading effects that adversely impact the entire business. For example, simple transactions can devolve into complex, multi-step procedures, resulting in higher logistical and distribution costs and longer time to market.

What are the bottlenecks in the supply chain? 

Supply networks have become significantly more complex with globalization. Regardless of the commodity, whether it is hard goods like electronics, appliances, and heavy equipment, or soft goods like food items, clothes, and textiles – supply chains are rife with bottlenecks. For example, a large portion of global manufacturing occurs in China, and the finished goods are shipped to various countries. This current setup makes it extremely difficult to identify and investigate inefficiencies and malpractices across the value chain. 

So, is blockchain the answer? 

The majority assume that blockchain, being a distributed, digital ledger, would primarily be used to track the movement of “money” (hence, cryptocurrency.) However, applications that require tracking, agreement/contract exchange, and payments can leverage blockchain to make transactions more transparent and secure. 

The way blockchain ledgers store data is quite different from the way a regular database does. Instead, blockchain ledgers store data in silos, or blocks, with each block having a predetermined data storage capacity. Furthermore, each block is linked to the one next to it, resulting in a chain-like structure and hence the term, “blockchain.” Such a method of information decentralization makes blockchain highly efficient, scalable, safe, and transparent. 

Supply chains may employ blockchain’s strengths to boost efficiency and transparency across the value chain, right from warehouse management, transportation and logistics, delivery and distribution, and finally to payments and invoice management. 

Benefits of Blockchain in Supply Chain Management 

Blockchain technology helps businesses in so many areas and has become an important tool to improve supply chain operations. It uses what is already in place and gives more value to businesses by making them more productive, reliable, and by encouraging better teamwork among different groups involved in their internal operations.

Let’s explore blockchain’s strategic benefits to supply chain management- 

1. Great Efficiency

Traditional supply chains usually have many steps, require manual recordkeeping, and take a long time to reconcile. Blockchain technology makes this easier by creating a shared, clear record that everyone can see at the same time. This system removes the need for middlemen, lowers the chance of mistakes, and makes transactions faster.

Smart contracts automatically, by predetermined rules, help out in supply chain tasks. This allows checking if things are correctly done, making payments easier, and initiating actions based on pre-specified conditions. 

2. Risk Reduction

The risks associated with supply chains come essentially from 4 directions — sourcing, transportation, processing, and distribution. Businesses use the blockchain to monitor and confirm each supply chain step in a decentralized, secure manner — from sourcing to distribution. 

This transparency aids in the detection of potential risks and weaknesses, such as counterfeit products, unapproved alterations, or shipping delays. 

3. Increased Trust

A supply chain typically involves multiple stakeholders, processes, and practices. Trust is important in creating smooth operations and a lasting distribution flow. A traditional supply chain often suffers from the problem of insufficient information, which reduces clear understanding of what others are doing, causing inefficiency and potential fraud. 

In blockchain, each transaction is timestamped and connected to the ones that came before it. This results in an irreversible audit trail that can be reviewed by all parties concerned. Through this shared, secure record of transactions, blockchain technology builds trust among the people involved in the supply chain 

4. Strengthen Cooperation

The typical supply chain includes multiple stakeholders such as manufacturers, suppliers, distributors, retailers, and customers, each with its own systems and databases. This separation can lead to conflicts, delays, and ineffective teamwork. Every participant in blockchain has access to a shared ledger that records and audits each transaction or event one-on-one.  

Blockchain enables safe and transparent data sharing, allowing for better collaboration and communication among parties. This partnership facilitates effective demand forecasting, inventory management, and inventory tracking, which raises productivity and reduces expenses. 

The Role of Future Technologies in Enhancing the Blockchain Functionality in the Supply Chain  

Supply chain management is being transformed with advanced technologies and blockchain. Blockchain is secure and transparent and integrates well with AI/ML, digital twins, the Internet of Things, edge computing, and robotic process automation. All these put together make supply chains more efficient, intelligent, and robust. They help with better decision-making, increase transparency, better ways of doing things, and reduce costs. All this makes businesses meet market needs and change over time. Here, let’s look at the role of these technologies: 

1. Artificial Intelligence (AI) and Machine Learning (ML)

Predictive Analytics: Artificial intelligence algorithms can sift through historical and real-time blockchain data to predict potential disruptions such as weather delays, geopolitical conflicts, and equipment malfunctions. This data enables businesses to implement proactive risk-reduction measures. 

Fraud Detection: Machine learning models excel in detecting suspcious patterns in blockchain transactions, highlighting anomalies such as counterfeit items or errors in shipping documents. This improves trust across the supply chain. 

2. Internet of Things (IoT)

Real-time Tracking: IoT sensors allow real-time tracking by continuously monitoring parameters such as temperature, humidity, and the location of goods in transit. This information can be automatically recorded on the blockchain, resulting in an immutable record of conditions that ensures product quality and safety across the supply chain. 

Smart Contracts: IoT devices can trigger smart contracts on the blockchain, automating activities such as payment release or shipment acknowledgment based on certain conditions. For example, a smart contract can immediately process payment after an IoT sensor confirms that the products have arrived in perfect condition. 

3. Digital Twins

Real-time simulation: Digital twins provide virtual representations of real-world assets such as factories, trucks, and warehouses. Blockchain networks can be connected to these replicas, enabling real-time tracking and status updates on every supply chain link. Businesses can better understand their operations and improve performance by simulating various scenarios.
Enhanced Transparency: Businesses can precisely monitor the lifecycle of an asset or product by combining blockchain technology with digital twins. From conception to delivery, every stage is recorded, offering total transparency and accountability.  

4. Robotic Process Automation (RPA)

Automating Repetitive Tasks: RPA solutions effectively manage repetitive processes, including order tracking, reporting, and invoice preparation. Businesses can reduce human error and increase operational efficiency by ensuring that these automated operations are carried out with integrity and transparency when paired with blockchain technology. 

 Supply Chain Auditing: RPA is essential for tracking each phase of the supply chain by automatically documenting events and actions on the blockchain. This guarantees that the entire procedure stays auditable and conforms to legal requirements. 

5. Edge Computing

Faster Decision-Making: Edge computing analyzes data near its source, like IoT devices or machines, instead of routing everything to a central cloud. By combining edge computing with blockchain technology, data gathered on-site can be verified and logged instantly, which minimizes delays and allows for faster decision-making in supply chain management. 

Data Privacy and Security: Edge computing can bolster the privacy and security of blockchain data by handling sensitive information locally before it’s added to the blockchain. This approach helps ensure adherence to data protection regulations. 

Should you join the bandwagon? 

As the adoption of blockchain gathers momentum, businesses should keep an eye on their peers who have begun experimenting with blockchain. As more stakeholders across the SCM value chain adopt the technology, its benefits will become more apparent. Major organizations from different industry verticals have already started investing their resources in the gradual integration of blockchain into their existing supply chain infrastructure. 

Walmart uses blockchain to track the origin and dispatch of the products sold at Walmart stores globally. 

Ford Motors has recently announced that it will use blockchain to trace cobalt supplies, a key ingredient in the batteries of Electric Vehicles (EVs). 

Logistics behemoths, like UPS and FedEx, have revealed that blockchain is a breakthrough technology that would offer transparency and traceability to each of their shipments while also securing customer and cargo order information. 

Final thoughts 

To summarize, while the current supply chain framework is functional, it is plagued by numerous issues such as opaque traceability, complex compliance needs, data privacy and security, and financial transparency, all of which make the overall stakeholder management challenging.  Integrating Blockchain in the supply chain network will address these issues by increasing accountability, facilitating a more seamless and transparent audit process, reducing redundant costs, and streamlining the entire distribution network, resulting in faster shipment order delivery times. 

We, at eInfochips have been constantly following these evolving changes in supply chain management and have developed capabilities around them to help our clients improve efficiency, achieve incremental cost benefits, and add value to their customers with respect to an optimized delivery schedule of their shipment orders. 

If you wish to know about our supply-chain offerings that are tailor-made to suit your business needs, please contact us here.