Written by: Qazeem FANIRAN
Supply chain management is one of the most complex and challenging aspects of any business, involving multiple stakeholders, processes, and risks. However, a new technology called blockchain could change the way supply chains operate, making them more transparent, efficient, secure, and sustainable. In this article, we will explore how blockchain technology can be used for supply chain fulfilment, highlighting its benefits, challenges, and limitations.
What is Blockchain Technology?
Blockchain technology is a distributed ledger technology that allows for secure and transparent transactions. It is based on a decentralized architecture that eliminates the need for intermediaries and enables stakeholders to transact directly with each other. Each transaction is recorded in a block of data that is linked to the previous block, forming a chain of blocks that cannot be altered or tampered with. This technology has the potential to transform various industries, such as finance, healthcare, and education.
How Blockchain Technology Can Benefit Supply Chain Fulfilment?
Supply chain fulfilment is the process of delivering goods and services from suppliers to the end customers. It involves multiple steps, such as procurement, production, transportation, warehousing, and distribution. The traditional supply chain fulfilment process is cumbersome and inefficient, resulting in significant delays, losses, and bottlenecks. However, by implementing blockchain technology, supply chain fulfilment processes can be streamlined, making them more efficient and effective. Some of the benefits of blockchain technology for supply chain fulfilment are:
- Payment and Settlement: Blockchain technology can be used to facilitate faster and cheaper payments and settlements among supply chain partners, reducing transaction costs, currency risks, and intermediaries.
- Smart Contracts: Blockchain technology can be used to create and execute digital contracts that automatically enact or document relevant events when specific conditions are met, such as delivery confirmation, quality inspection, or payment release.
- Traceability: Blockchain technology can be used to create a tamper-proof record of goods as they move through the supply chain, enabling stakeholders to verify the origin, quality, and authenticity of products.
- Quality Control: Blockchain technology can be used to monitor and evaluate the performance and condition of products throughout the supply chain, enabling stakeholders to identify and resolve any defects, damages, or deviations from standards.
- Risk Management: Blockchain technology can be used to mitigate various risks in the supply chain, such as fraud, theft, cyberattacks, compliance violations, and environmental impacts.
- Transparency: Blockchain technology enables stakeholders to track and trace products throughout the supply chain, from the point of origin to the final destination. This transparency improves accountability and reduces the likelihood of fraud and counterfeiting.
- Efficiency: Blockchain technology streamlines the supply chain fulfilment process by reducing delays, eliminating intermediaries, and improving data accuracy. This efficiency results in cost savings and increased profits.
- Security: Blockchain technology provides a secure and tamper-proof environment for transactions, which reduces the risk of cyberattacks, data breaches, and other forms of fraud.
- Sustainability: Blockchain technology can be used to track the environmental impact of products throughout the supply chain, enabling stakeholders to identify areas where improvements can be made.
Despite its potential benefits, blockchain technology has some challenges and limitations for supply chain fulfilment. Some of these are:
- Cost: Implementing blockchain technology can be expensive, requiring significant investment in hardware, software, and infrastructure. However, to reduce the cost of implementing blockchain technology, supply chain enterprises can leverage existing platforms and infrastructures, such as cloud services, open-source software, and industry consortia. They can also adopt a phased approach, starting with pilot projects and scaling up gradually.
- Scalability: The current blockchain technology infrastructure is not designed to handle the volume of transactions required for large-scale supply chain fulfilment processes. Therefore, to improve the scalability of blockchain technology, supply chain enterprises can use permissioned blockchains that limit the number and type of participants, use efficient consensus mechanisms that reduce the computational and energy requirements, and use off-chain solutions that store some data outside the blockchain.
- Interoperability: Different blockchain platforms may not be interoperable, which can create challenges when stakeholders from different organizations need to collaborate. On the other hand, to enhance the interoperability of blockchain technology, supply chain enterprises can adopt common standards and protocols for data representation, exchange, and verification. They can also use application programming interfaces (APIs) or middleware solutions that enable communication and integration among different blockchain platforms and legacy systems.
- Regulation: There is currently no unified regulatory framework for blockchain technology, which creates uncertainty for stakeholders and limits its current adoption. In addition, to address the uncertainty and complexity of regulation for blockchain technology, supply chain enterprises can engage with regulators and policymakers to educate them about the benefits and risks of the technology, seek clarity and guidance on compliance issues, and participate in industry associations and initiatives that advocate for favourable and harmonized regulation.
Some real-world examples of how blockchain technology has been applied in supply chain management. Here are some of them:
- Walmart: The retail giant is using IBM’s Food Trust Blockchain System to track its meat products that it sources from China. The blockchain records where each piece of meat came from, how it was processed, stored, and its sell-by-date. This improves food safety, traceability, and efficiency. Walmart also uses blockchain to track other products, such as leafy greens, mangoes, and pharmaceuticals.
- De Beers: The diamond company is using a blockchain platform called Tracr to verify the origin and quality of its diamonds. The platform creates a digital certificate for each diamond that records its characteristics, such as carat, color, clarity, and cut, as well as its journey from the mine to the retailer. This helps to prevent conflict diamonds from entering the market and to ensure ethical and sustainable sourcing.
- PepsiCo: The beverage company is using a blockchain pilot called Project Proton to automate elements of its programmatic ads supply chain through smart contracts. The pilot resulted in a 28% increase in efficiency by reducing intermediaries and fraud.
- Maersk: The shipping company is using a blockchain platform called TradeLens to digitize and streamline its global trade processes. The platform enables stakeholders, such as shippers, carriers, ports, customs authorities, and banks, to share information and documents securely and transparently. This reduces delays, costs, and errors in the supply chain.
- Starbucks: The coffee company is using a blockchain solution called Farmer Connect to connect coffee farmers with consumers. The solution allows consumers to scan a QR code on their coffee bags and trace the origin, quality, and social impact of their coffee beans. This enhances transparency, trust, and sustainability in the coffee supply chain.
Some of the ways that organizations can adopt or prepare for blockchain technology for supply chain fulfilment are:
- Identify the use cases and value propositions: Organizations should first identify the specific problems or opportunities that blockchain technology can address in their supply chain, such as traceability, quality control, payment and settlement, or risk management. They should also assess the potential value and benefits that blockchain technology can deliver, such as cost savings, revenue growth, customer satisfaction, or sustainability.
- Choose the right platform and partners: Organizations should then choose the appropriate blockchain platform and architecture that suits their needs and objectives, such as permissioned or permissionless, public or private, or hybrid. They should also select the right partners and stakeholders to collaborate with, such as suppliers, customers, regulators, or industry associations.
- Develop and test the solution: Organizations should then develop and test the blockchain solution using agile and iterative methods, such as prototyping, piloting, and scaling. They should also ensure that the solution meets the technical, functional, and regulatory requirements, such as security, privacy, performance, and compliance.
- Implement and monitor the solution: Organizations should then implement and monitor the blockchain solution in their supply chain operations, ensuring that it integrates well with their existing systems and processes. They should also measure and evaluate the outcomes and impacts of the solution, such as efficiency, transparency, security, and sustainability.
There are many ways to learn more about the technical aspects of blockchain technology, such as:
- Taking online courses: There are many online courses that can teach you the basics and advanced topics of blockchain technology, such as Blockchain Basics, Blockchain Specialization, Blockchain Developer Nanodegree, and Blockchain Fundamentals. These courses can help you understand the concepts, principles, algorithms, and applications of blockchain technology, as well as provide you with hands-on projects and assignments to practice your skills.
- Reading books and articles: There are many books and articles that can provide you with in-depth knowledge and insights on blockchain technology, such as Mastering Bitcoin, Blockchain Revolution, The Truth Machine, and The Bitcoin Standard. These books and articles can help you learn the history, evolution, challenges, and opportunities of blockchain technology, as well as explore its use cases and implications for various industries and sectors.
- Joining online communities and forums: There are many online communities and forums that can connect you with other blockchain enthusiasts, experts, and practitioners, such as Reddit, Stack Exchange, Quora, Medium, and GitHub. These online communities and forums can help you ask questions, share ideas, get feedback, learn from others’ experiences, and discover new resources and opportunities related to blockchain technology.
- Attending events and workshops: There are many events and workshops that can offer you the opportunity to learn from and network with blockchain professionals, researchers, and innovators, such as conferences, hackathons, meetups, webinars, and podcasts. These events and workshops can help you stay updated on the latest trends, developments, and best practices of blockchain technology, as well as showcase your projects and skills to potential employers or collaborators.
Conclusion
Blockchain technology has the potential to revolutionize supply chain management. It is a promising and disruptive technology that can transform the supply chain management process by improving transparency, efficiency, security, and sustainability. However, there are also challenges and limitations to its adoption, such as cost, scalability, interoperability, and regulation. Therefore, more research and collaboration are needed to overcome these barriers and harness the full potential of this technology for supply chain fulfilment.
However, organizations need to identify the use cases and value propositions of blockchain technology for their supply chain, choose the right platform and partners, develop, and test the solution, and implement and monitor the solution. Moreover, future research is needed to investigate the impact of blockchain technology on supply chain performance and sustainability, the adoption and diffusion of blockchain technology in supply chains, the integration of blockchain technology with other technologies in supply chains, the development and evaluation of blockchain-based solutions for supply chain problems, and the theoretical and conceptual foundations of blockchain technology for supply chains. By doing so, organizations can harness the full potential of blockchain technology for supply chain fulfilment and gain a competitive advantage in the market.
Learn more: 1. builtin.com; 2. bbvaopenmind.com; 3. getsmarter.com; 4. oyelabs.com; 5. hbr.org; 6. supplychaindigital.com; 7. blockchain.oodles.io
