Block Chain and Its Integration with Supply Chain
Blockchain is the result of the quest for decentralization of applications and operations. As the word suggests, it is a distributed digital ledger spread across a series of blocks containing information. It does not depend on any single entity, but a network which gets updated every time a new transaction is done. The ledger has a secure way of working with each new block of transactions linking back to previous blocks.
Supply chain, which spans over multiple stages, locations, involving several entities and extend over months of time, has a prevalent complexity and lack of transparency.
- It is very difficult to track the products back to the suppliers. Which makes it a challenge to eliminate defects
- Product recall is a challenging task due to the inability of the current system to locate the products in a marketplace
- Customers and buyers do not know the true value of the product due to the involvement of a large number of parties throughout the transaction
It is interesting to know how Blockchain might transform and disrupt the supply chain management system in many ways.
- Due to no intermediary, transactions will be faster, transparent and controlled, resulting in a reduction in to-and-fro movement of documents
- Blockchain can contain every information about the product from the origin to its current state, with the owner of that asset at every point
- Smart contracts, a software program can take the input from the ledger and initiate a transaction. It can also initiate a penalty if the agreed standard or timeline is not honoured
- The multiple copies of the ledger can eliminate frauds, as all the copies would need to be tampered at the same time in an attempt to falsify the record. Hence, making tampering practically impossible
- Better auditability is provided as the transactions become immediately visible to all the stakeholders which prevent the concealment of any information
Some of the IT Giants have coupled up with the Shipping and Freight forwarding companies and have started building a Blockchain network to share documents and grant permission transparently and quickly. They have started to bring more companies onboard so that an end to end supply chain can be integrated in the Blockchain, with every stakeholder on the network. Transactions have already started taking place through this network.
But with every new technology, comes along its set of challenges too. Blockchain technology totally disrupts the existing technology. So, companies would face some challenges to adopt it.
- Training needs to be provided to the employees or new people with the required skillset need to be hired
- Global adoption of the system is very difficult, as supply chain spans across countries and organizations. And various government, as well as organizations around the world, have different regulations
Blockchain will soon become a commonly used technology as efforts are already being made to bring all the stakeholders to a common platform. As and when companies start adopting it, new avenues will open to a more coherent cross-organization setup, resulting in mutual benefit.