What are the Benefits of Blockchain in Supply Chain Management?
Blockchain technology coupled with the ability to program business logic with the use of smart contracts enables the following:
- Transparency into the provenance of consumer goods— from the source point to end consumption
- Accurate asset tracking
- Enhanced licensing of services, products, and software
Even in today’s technologically advanced world, supply chains could dramatically improve efficiency, audible tracking, and limit exploitative behaviors. In the container industry, paperwork can account for half the cost of transport. A nationwide study conducted in the U.S. from 2010 to 2012 by the international ocean advocacy organization Oceana revealed that seafood is mislabeled up to 87% of the time. Mica, which is present in makeup, electronics, and automobile paint is often sourced from illegal mines by child laborers.
Furthermore, consumer goods, especially electronics, pharmaceuticals, and luxury brands, are susceptible to counterfeiting and fraud. In fact, a report from PwC claims that more than 2% of global economic output results from counterfeiting revenues.
The implementation of public, private, and hybrid blockchains will bring traceability, transparency, and accountability to the movement of goods and commodities. The technology can be applied to logistics to make business processes more efficient and to cut costs from supply chain infrastructure.
How does blockchain make supply chain management more efficient?
Supply chains contain complex networks of suppliers, manufacturers, distributors, retailers, auditors, and consumers. A blockchain’s shared IT infrastructure would streamline workflows for all parties, no matter the size of the business network. Additionally, a shared infrastructure would provide auditors with greater visibility into participants’ activities along the value chain.
How does blockchain technology cut costs from the supply chain infrastructure?
Blockchain has the potential to drive cost-saving efficiencies and to enhance the consumer experience through traceability, transparency, and tradeability.
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What are the Blockchain Use Cases in Supply Chain Management?
Enterprise blockchain technology can transform the supply chain with these three use cases:
Traceability improves operational efficiency by mapping and visualizing enterprise supply chains. A growing number of consumers demand sourcing information about the products they buy. Blockchain helps organizations understand their supply chain and engage consumers with real, verifiable, and immutable data.
Transparency builds trust by capturing key data points, such as certifications and claims, and then provides open access to this data publicly. Once registered on the Ethereum blockchain, it’s authenticity can be verified by third-party attestors. The information can be updated and validated in real-time.
Tradeability is a unique blockchain offering that redefines the conventional marketplace concept. Using blockchain, one may “tokenize” an asset by splitting an object into shares that digitally represent ownership. Similar to how a stock exchange allows trading of a company’s shares, this fractional ownership allows tokens to represent the value of a shareholder’s stake of a given object. These tokens are tradeable, and users can transfer ownership without the physical asset changing hands.
How does blockchain technology enhance product traceability?
Global supply chains support everything from consumer packaged goods to product recalls. Sometimes consumer products or raw ingredients need to be recalled to prevent injury or illness. Between lost sales, replacement costs, and lawsuits; recalls on consumer products negatively impact millions of individuals around the world. Blockchain technology can enhance product traceability by reducing counterfeiting and by streamlining product recall.
How does blockchain technology streamline product recall?
Recalls become less expensive and more efficient when manufacturers can locate affected products quickly and easily. Blockchain technology enables a more transparent and traceable supply chain, therefore, facilitating faster and more efficient recalls.
How does blockchain technology reduce counterfeiting?
The Global Brand Counterfeiting Report, 2018 estimates that the losses suffered due to online counterfeiting globally have amounted to 323 Billion USD in the year 2017. Counterfeit consumer goods account for nearly 188 billion dollars of lost revenue regarding prescription drugs alone. Blockchain enables an individual to verify that a product was sourced accurately and ethically.
Documentation counterfeiting and fraud are also common among diplomas, certifications, and official identification. Blockchain records can transparently verify certifications, official legal documents, and coordinate record-keeping immutably, which prevents counterfeiting or fraud.
How does blockchain technology improve supply chain transparency?
Blockchain technology enhances supply chain management through process tracking, regulatory compliance, reporting.
How does blockchain enhancing supply chain transparency and process tracking?
Supply chain traceability is one of the top use cases for blockchain technology. Replacing the traditional processes with distributed ledger technology could increase trade volume by 15% and U.S GDP by up to 5%. Blockchain provides the ability to track any digital or physical product throughout its lifecycle. Distributed ledger technology has the potential to expand the sustainable and ethical production and consumption of any commodity on a global scale.
Almost every industry uses third-party manufacturers or various products from multiple vendors before creating and labeling the final finished goods. In some cases, white-label products are sold before being repackaged and relabeled under another brand. Transparency in process tracking gives producers a bird-eye view into their value chain, allowing them to guarantee the proper handoff of third-party goods and final product labeling.
Blockchain can track the progression of assets, record the information, and show previous asset records. Smart contracts are used to enforce the asset tracking processes on the Ethereum blockchain. Anyone can view the provenance and journey of an asset in real-time, whether the asset is physical or digital.
How does blockchain technology enhance regulatory compliance and reporting?
Regulatory and compliance reporting is a severe concern for pharmaceutical companies given many patient’s reliance on prescription drugs. The supply chain must remain efficient while avoiding under or overstocked medications.
Automated compliance and reporting will reduce friction, reporting costs, and eliminate errors associated with manual activities. Blockchain compliance will further enhance corporate governance by providing information in real-time and seamlessly distributing data to the proper stakeholders. Lastly, blockchain could improve compliance and reporting for medical devices, prescriptions, manufacturers, and other consumer goods.
How does blockchain technology bring tradeability to the supply chain?
Blockchain technology enables efficient ownership and licensing. Verifying past ownership through standardized licensing procedures is vital for numerous industries. Additionally, blockchain can be utilized to accurately license services, products, and software through the use of automated smart contract payments.
Blockchain provides consensus, which means there is no dispute in the chain regarding transactions by design. All entities on the chain have the same version of the ledger, giving it the unique potential to track ownership records for real estate, automobiles, and digital assets.