What is Blockchain for Supply Chain?
Blockchain in supply chain management uses a decentralized and trusted digital ledger to make every step of a supply chain transparent and traceable. Most companies rely on a permissioned blockchain, which means only approved members can access or update the network. Every transaction is logged in a block, creating a secure, permanent record that cannot be altered. If someone tries to change anything, the system flags it instantly because multiple copies of the ledger exist. This setup helps cut down on fraud and boosts efficiency by giving real-time visibility into how goods move from one point to another.
In a supply chain setting, blockchain can deliver several valuable benefits, such as:
• Allowing companies to verify the authenticity of products. Trace items from their origin to their final destination. And confirm compliance with requirements like temperature or humidity controls.
• Providing validated, auditable data that multiple stakeholders can check. It makes it much harder for errors or fraudulent updates to slip through.
• Enabling smart contracts that automatically trigger payments when certain conditions are met like confirming that goods arrived safely. This helps businesses manage cash flow more smoothly.
A growing use case is tokenized assets. It is where digital tokens represent ownership of a physical or digital asset such as gemstones, intellectual property. Each token acts like a digital certificate tied to a specific portion of the underlying item.
Many companies are also adopting blockchain-enabled scanners that work just like regular barcode or RFID readers. The difference is that every scan is instantly recorded on the blockchain, allowing precise tracking of an item’s journey throughout the entire supply chain.
Why Use Blockchain?
In many ways, blockchain is a great match for supply chain management. It creates a decentralized, tamperproof record of transactions. It becomes much easier to track products and verify their condition as they move from one stage of the supply chain to the next. The built-in security and traceability of blockchain mean every party involved can access the same accurate data. This helps smooth out common issues like delays in updates, miscommunication between partners, or problems with verifying authenticity.
By using blockchain, companies can reduce fraud and human errors, cut down on paperwork and even improve cash flow. All thanks to automated payments that trigger when certain milestones are reached. Overall, it offers a dependable, transparent system for monitoring goods from production all the way to delivery. This makes it a smart investment for any organization looking to strengthen its operations.
Key Capabilities:
- Enhanced Traceability: Blockchain makes it much easier to track a product’s entire journey by using a shared, tamperproof ledger. Every stakeholder works off the same record. Which means each step in the supply chain is updated transparently and in real time. This level of traceability ensures the information you pull up has not been altered. It also helps companies quickly spot delays, damage, or other issues that may require immediate action.
- Smart Contracts in Supply Chains: Since blockchain clearly shows when each step in the process is completed, it pairs well with smart contracts i.e. automated agreements that trigger specific actions once certain conditions are met. When used together, blockchain and smart contracts help eliminate disagreements over whether milestones were achieved and whether contract terms were fulfilled. It makes operations smoother and reduces disputes
- Supply Chain Security: Blockchain strengthens supply chain security by using one-way hashing and keeping multiple copies of the ledger across different systems. This makes the data nearly impossible to alter. One-way hashing generates a unique “signature” for each piece of data that is stored in the public ledger. If the data is changed, the signature no longer matches and blockchain participants are immediately alerted. Even if someone tries to tamper with both the data and the hash, the other copies of the ledger will not match, flagging the issue. Since there are at least three public ledgers maintained, altering just one will be noticed and changing every copy at once is extremely difficult.
Blockchain Enhances Supply Chains By:
- Transparency and Traceability: Each transaction recorded on a blockchain is time-stamped and cannot be altered. This forms a permanent record of a product’s handling and ownership. It allows both businesses and consumers to confirm the authenticity of products and promote ethical sourcing. For instance, companies like Walmart and IBM Food Trust use blockchain to trace food products back to their farms within seconds.
- Improved Efficiency: Blockchain removes the reliance on manual record-keeping and external intermediaries. It is done by enabling automated and transparent processes. Through smart contracts (i.e., self-executing digital agreements stored on the blockchain), transactions and compliance checks are carried out automatically. This minimizes errors and delays.
- Increased Security: Information stored on a blockchain is encrypted and shared across numerous network nodes, making it nearly impossible to tamper with or hack. This decentralized structure safeguards data integrity and ensures that every record within the supply chain remains accurate and trustworthy.
- Reduced Costs: By cutting out middlemen and preventing the circulation of counterfeit products, blockchain technology can greatly reduce administrative and operational costs. That leads to improved efficiency and profitability.
Applications of Blockchain:
- Food and Agriculture: IBM Food Trust (used by Walmart, Nestlé, and Carrefour) employs blockchain to trace the journey of food products from the farm to the shelf. Blockchain helps reduce the time to trace the source of expired food from 7 days to just 2.2 seconds. This helps improve food safety and efficiency.
- Pharmaceuticals: The MediLedger Network enables pharmaceutical companies to verify the authenticity of prescription drugs across the supply chain. This complies with the U.S. Drug Supply Chain Security Act (DSCSA). It ensures only legitimate medicines reach patients, reducing counterfeiting.
- Luxury Goods and Fashion: LVMH’s Aura Blockchain Consortium tracks the production and sale of luxury goods like handbags and watches. This enables customers to check product authenticity and helps prevent counterfeit sales.
- Energy and Sustainability: Everledger uses blockchain to trace the origin of diamonds, minerals, and other high-value assets to ensure they come from sustainable sources. This increases transparency and promotes responsible supply chains.
Blockchain enables supply chains to become transparent and trustworthy. It creates a permanent and tamper-proof record of every step a product takes. This allows companies to confirm its origin and authenticity, along with compliance with regulations. Blockchain is expected to redefine global trade as more companies are adopting this technology.
References:
https://www.oracle.com/sa/blockchain/what-is-blockchain/blockchain-for-supply-chain
https://www.ibm.com/think/topics/blockchain-for-supply-chain
