Blockchain and the digital supply chain: 5 keys to success
After you make your way through a crowded convention center to listen to the first-day keynote at virtually any modern supply chain conference, common themes begin to reveal themselves. First, the supply chain leaders of tomorrow will have very different skillsets from the leaders of today. Second, sourcing, logistics and supply/demand chains have become more strategic matters in the global marketplace, which is increasingly characterized by friction, such as ongoing trade wars.
Companies—and their leaders—that recognize that the modern supply chain management is dynamic, interconnected, and always on, and can further make operational functions more adaptable in dynamic environments will have distinct advantages in achieving greater profitability and higher market share. They also must recognize that “global digital supply chains” or “the digitalization of supply chains” aligns with the notion that the future of business is heavily rooted in a digital transformation revolution.
The digital revolution isn’t coming. It’s already here.
One of the most landscape-changing factors in this transformation is blockchain. Blockchain has the potential to become the new “operating system” for supply chains. This post focuses on how blockchain is key to creating the digital supply chain of the future. Here are five ways that progressive enterprises are leveraging blockchain for supply chain success.
1) Blockchain for smart contracts
Blockchain technology lies at the center of smart contracts. Specifically, it has the power to eliminate what Accenture calls the “hall of mirrors” effect, where multiple copies of inventory records, payment information, invoices, and proof of delivery exist in the supply chain, yet reconciling them to a “single source of truth” (a smart contract) is incredibly difficult.
Blockchain unravels the immense complexity and interconnectedness of global digital supply chains. It does this by storing all relevant information in a master ledger (the blockchain). Smart contracts ensure that by storing the terms of a contract in the blockchain and measuring all proposed transactions against it, issues with data redundancy are reduced and trading partners can work together much more efficiently.
2) Blockchain for sustainable and ethical supply chains
Ensuring that supply chain practices are ethical and sustainable is no longer just a nice-to-have vision. Rather, such practices are becoming essential. Transparent and ethical supply chains ensure that your product is not created using slave labor, for instance. Want to know which farmers worked to bring your coffee beans from raw material to ground coffee? Enter the power of blockchain.
When a product (or batch of products) is sourced or created, it can be given a unique identifier that’s encrypted. This identifier can be linked to a token that’s time-stamped and follows the product throughout the supply chain. All of this information is stored on the blockchain, enabling supply chain leaders to make sure it was produced or sourced in an ethical, sustainable manner, while concurrently lending operational efficiencies to the overall process of bringing a product to market. Some companies are also harnessing the power of blockchain to support positive and social environmental change, such as the opportunity to say “thank you” (in the form of a blockchain token) to people involved in producing the products they buy.
3) Blockchain for better security
Keeping the supply chain secure is a high-stakes issue across enterprises, with valuable inventory and confidential information changing hands at a fast pace across the globe. Because a blockchain ledger is immutable by nature and set up so everyone involved has a complete copy, it’s virtually resistant to hacks and cannot be altered without the sequential permission of pertinent parties. The built-in safeguard of an immutable ledger makes audits easier and data incorruptible. It further decreases the risk of cyber-attacks because it uses a distributed storage system.
4) Blockchain for better traceability
Right now, millions of products are traveling across the world via global supply chain operations. These products all have information attached to them, such as origin, destination, serial number, and manufacturer. When blockchain is used, it reduces digital supply chain risk by making it possible to track products through every stage of the journey, and eliminates the need for dedicated software or multiple planners dedicated to monitoring the millions of products traveling through the supply chain.
5) Blockchain for greater efficiency
Despite the digital revolution, manual and siloed supply chain processes are still quite common, and spreadsheets are often heavily involved in supply chain planning cycles. Such manual processes often result in inefficiencies and slowdowns, and inefficiencies and slowdowns hurt the bottom line of an enterprise. There’s no room for this type of operational mire in today’s fast-paced and competitive markets.
Because blockchain is immutable and transparent, all parties involved in the digital supply chain can track relevant information to a product and access that information in real-time. This yields a significant boost to supply chain efficiency. Smart contracts help further raise the efficiency bar, as this safeguard can prevent time lost wrangling over contract issues. Because a collection of terms and conditions travel with a product through the supply chain, this prevents recurring searches for blame when disputes over that information arise.
Collectively, the greater efficiency, security, traceability and ethical standards that blockchain yields for digital supply chains helps businesses not only reach their goals, but also their capabilities for positive social and environmental change to make the world a better place. In essence, everyone wins when you harness the power of blockchain for the modern digital supply chain.