How Can Blockchain Improve the Supply Chain Management?

We try to answer the question that is increasingly being asked by businesses all around the world.

supply chain management

If you are keeping up with Wallet Weekly at least a bit, you have probably realized that blockchain has many business use cases. Utilizing technology to improve Supply Chain Management (SCM) is one of its most quoted examples, with blockchain’s unique properties increasing transparency and trust among the companies included in the process.

Before we delve into details, let’s get back to the basics first…

What is a Supply Chain?

Wikipedia defines supply chain as the connected network of individuals, organizations, resources, activities, and technologies involved in the manufacture and sale of a product or service. A supply chain starts with the delivery of raw material from a supplier to a manufacturer and ends with the delivery of the finished product or service to the end consumer.

Consequently, Supply Chain Management (SCM) presumes the management of the flow of goods and services, including the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.

Companies implement SCM solutions for multiple reasons, including to increase revenues & decrease costs, improve quality, accelerate production & distribution, and more.

It’s all about the trust

In order for a supply chain to function properly, it is required that all parties involved in the process trust each other.

Right now, systems that are used for Supply Chain Management are centralized, with one usually big companies controlling the process from one or a few locations. With the use of blockchain, however, that process could/will be decentralized, increasing the trust in the process every step along the way. Simply put, once the information is saved on a ledger, it can’t be (easily) changed.

Adding blockchain to the mix

Blockchain is much more than a buzzword in the Supply Chain Management. It could improve this process in a significant way, making sure that all parties involved in the supply chain have the right information, from material suppliers to end users.

Some things that could be improved with blockchain-based SCM are:

  • Traceability – it lets parties trace the materials used, and see who did what in the supply chain.
  • Contract Enforcement & Management – makes sure every company included in the supply chain does its part; otherwise, it doesn’t get paid.
  • Damage & Mishandling Management – if there was a mistake/error with a product/service, a blockchain-based solution could help determine where the problem was caused.
  • Oversight On Counterfeiting – which is very important for luxury brands; their buyers want to know they are getting the “real deal.”
  • Supply Chain Auditing – makes life easier to auditing firms, with blockchain letting them explore the process from the inside out.
  • Consumer Trust – if an end product is made for consumers, a blockchain-based solution could let them learn the ins and outs of the item they are looking to buy.

In a nutshell, blockchain adds a lot to supply chain management, and unsurprisingly there are many companies looking to take advantage of the technology.

Examples

We could envision a supply chain management solution used by a big pharmaceutical company to check on its products (pills) as they reach consumers in a local pharmacy. A smart solution could work alongside sensors to make sure pills are stored and transported at proper temperatures, all while ensuring only verified molecules are used in the medicine’s production.

All information about this pill would be stored on the blockchain’s ledger to, perhaps, even allow end users to verify that the drug they are looking at is genuine and properly managed.

Another example comes from Everledger, which has developed a diamond supply management solution that can be incorporated into the industry as a standard. As such, it could allow potential buyers to verify the origin of a diamond they are looking to buy so they don’t end up financing some blood diamond criminals.

Also, there are companies working on clothing and food supply chain solutions, as well as those — like Original Trail — that aim to create a decentralized protocol a different kind of supply chains could use.

Final word

Blockchain is a tool and like any other tool it won’t solve all the problems of any particular supply chain. However, it is also a powerful tool that could add a ton to the mix, delivering benefits to all parties involved in a supply chain.

Additionally, coupled with technologies like sensors (Internet of Things) and smart contracts, blockchain could pave the way for the new generation of SCM solutions. It will be those solutions that will bring benefits to all us, as we will be able to trace everyday products we buy. And with that information, all of us might just become slightly bit better. That’s one bold goal, when you think about it. 😉

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