With its various inefficiencies, high costs and even slave-like labor practices, Supply Chain Management (SCM) is yet another major sector bound to be disrupted via Blockchain. Estimates show that Blockchain and Supply Chain can contribute to as much as a 5% global GDP increase and a whole 15% of total trade volume increases. And that’s just the tip of the iceberg. Once you dive right in, there’s a lot more to be found.
To keep it practical, I’ll be discussing Blockchain’s main characteristics and break down how they specifically translate into SCM optimization.
With a slight risk of (un) intended product placement, Iet’s begin with a series of quick questions.
Have you ever thought where your precious limes are coming from? Like, who grew them really? And did they arrive at the local market on a train? Or perhaps they got shipped in giant ship containers? Could it be that, without you having any idea whatsoever, they came from a place with a recent plant virus crisis?
Yeah, I have no clue either…
From ancient trading routes such as the infamous Silk Road to present day vast logistics networks, global supply chains are steadily evolving. And while our world is becoming more and more interconnected, current goods tracking systems have not seen much innovation since the last century.
This particular feature of blockchain-enabled through the hash function, makes imported data immutable, meaning it cannot be altered. In the context of SCM, this falls nothing short of revolutionary. The immutability of the ledger essentially eliminates virtually any possibility of fraud or third-party record intervention. Sure, 51% of attacks are a thing, but corporates will most likely allocate sufficient resources to alleviate such risks.
What the immutability of the ledger means for the industry is the ability to track a product from its very inception, up to the moment when it reaches consumers. This solution spells the end of a perennial issue of having to second guess the true origin of consumer goods. Achieving such a level of transparency will therefore massively enhance trust between all relevant stakeholders along the supply chain – from producers to distributors and lastly to the end-user.
That’s some pretty bad news for counterfeiters out there though… I mean, there probably won’t be as many Rolex replica buyers out there, nor fashion gurus wearing the latest Adibas and Gucɔi footwear or jeans. Don’t want to mention any names here though, so I’ll leave some way for imagination on your side to think about who’s doing what.
In fact, there are quite a few companies who have rolled out their own blockchain-based SCM systems. For food, a number of leading supermarket chains are already implementing blockchain to make their whole supply chain as transparent as possible. French giant Carrefour is one of the more recent examples. Starting this month, the Carrefour Quality Line of milk will come in special bottles with their own QR code that consumers can scan to see the true origin of the dairy. American multinational Walmart has also hopped on the blockchain train.
There’s a variety of other use cases too, one even for the diamonds industry, where the Everledger project utilizes blockchain tech to track the quality of diamonds and where they come from. The world’s largest mining company, BHB Billiton, is another prominent example of the move from simple spreadsheets, towards a more over-arching blockchain-based SCM system.
Consumers are not the sole beneficiary either. Being able to track the true origin of a certain good has a significant positive impact on developing countries, where child and slave labor still looms at large. In line with an increasingly socially-conscious society, blockchain’s application within SCM is in a position to provide a better life for those less fortunate working under severe conditions.
A distributed ledger
At its core, blockchain is a type of DLT – rather than having one central authority in charge of the database, there are multiple data entry points that collectively store the information. Businesses can potentially capitalize on this innovation in a number of ways.
Real-time tracking of products is one of the more obvious benefits. DLT presupposes that every company branch or department enjoys access to the same information, updated on an almost momentarily basis. Cross-border teams could, therefore, synchronize their internal efforts without having to worry about the validity of the data they’re processing. In the end, this adds up to huge savings on logistics and grossly limits the human error aspect.
If a certain issue or a software bug surfaces (and it most certainly will at a given point), dedicated teams will be able to react promptly and provide a fast and efficient fix. In the specific scenario of international trade, border checks often result in waiting queues and customs jams. Now that data can be freely distributed among the relevant stakeholders via private blockchains, the process of moving goods from A to B will be massively simplified, whilst also reducing time constraints.
With its current archaic design, the international trade network constantly suffers from inefficiencies due to clearing and settlement flaws. Through the use of smart contracts, payments can be carried out instantaneously and merchants will no longer have to lose sleep over a missed invoice or questionable fees. Having all these administrative processes automated inevitably creates more room for actual deal-making and business.
And that’s just one part of the equation. Even today, we still use so much paper to deal with similar issues and international trade. With a blockchain infrastructure in place to deal with these, we will be able to not only reduce paperwork delays but also limit the overall degree of paper usage. Once energy usage of blockchain computing has been optimized, it even becomes an eco-friendly alternative!
A LimeChain solution for Blockchain and Supply Chain
At LimeChain, we’re constantly looking to apply our expertise in sectors where it will cause the greatest benefit. Seeing how blockchain will revolutionize SCM, we’ve also developed our very own solution to propel more efficient and scalable supply chains. Especially given that mass adoption tools are still lackluster, we designed it in an easy-to-use and intuitive way.
We’ve developed a tool that allows various actors to record information about an asset while it is moving across the supply chain. The result is that the end-user whole journey of the asset from start to finish.
Sounds like something you need? Do get in touch with us.