Supply chain networks are not limited to traditional networks of OEMs or suppliers anymore. They have become vast and complex ecosystems that have numerous product variations moving through different parties that are trying to work together. Today’s supply chain operations are also quite dynamic, where product life cycles are much shorter with more intense ramp up and ramp down periods.
Even though supply chain has transformed over the years, companies have failed to update their technologies to adjust to these changes. According to a report from Tractica, the annual revenue for blockchain enterprise applications is set to increase from $2.5 billion in 2016 to $19.9 billion by 2025. By using blockchain technology, companies can re-define their approach towards supply chain management to gain valuable insights and to have a more integrated and comprehensive view of their complex environments.
The Real Value of Blockchain in Supply Chain Management
Supply chain blockchain solutions have the ability to increase trust, transparency and predictability of outcomes by allowing the tracking of shipments at any given time. Blockchain acts like an immutable ledger within a decentralized location, where any changes in ownership and possession of goods along with their movements from the producer to the retailer can be recorded instantly for greater accuracy.
Fatcom, Skuchain, and IBM have been early adopters of blockchain technology in supply chain management. Earlier this year, the US based blockchain company, Skuchain partnered with NTT Data to develop a blockchain platform for supply chain management. This platform natively integrates Internet of Things (IoT) technology with blockchain technology and RFID. The pilot project was successfully completed in the Japan’s manufacturing sector and has showed promising results.
The use of blockchain technology can be a key factor in reducing stock waste, improving efficiency, and enabling companies to have better control over their supply chain management. BHP Billiton, the world’s largest mining company uses blockchain for efficient tracking and recording of data of the mining process with its vendors.
Blockchain As A Viable Solution To Reduce Supply Chain Costs
Businesses are more dependent on global supply chains for transporting their goods and services where the logistics industry will have a more pivotal role to play. The market is controlled by freight brokers who assist in transactions of loads via shippers to carriers with addition of markup. This results in additional costs to the carriers which are pushed downstream to the customers. The large number of intermediaries in the network makes this an even more challenging issue to tackle.
Blockchain can be effective in resolving some of these supply chain related issues effectively. For example, the use of smart contracts, which are automatically triggered when a specific action takes place would be useful in reducing the role of intermediaries. The use of blockchain can help improve inventory management, reduce costly data errors and delays, and shorten resolution time when disputes occur. Sellers would also have the ability to accurately track capacity and costs, estimate delivery times for multiple routes, and make smarter decisions overall. In addition to these cost-cutting benefits, the blockchain can help transport providers to share details about routes and available capacity which can reduce costs and transport time. This in turn will benefit the customers with reduced costs and shipping times.
In a nutshell
Blockchain technology can play a significant role in driving supply chain costs down from warehousing and tracking of good delivery to payment processing by ensuring greater efficiency and transparency in the entire supply chain management system.