7 applications of blockchain in the supply chain

Blockchain, the tamper-proof distributed ledger used to validate and store digital transaction records, is transforming the supply chain by increasing security, transparency and efficiency.

Blockchain can improve supply chains by enabling products to be delivered faster and more cost-effectively, improving the traceability of products, allowing partners to collaborate and share information more effectively, and helping to improve access to finance.

Here are seven uses for blockchain in the supply chain.

Improve tracking and transparency

By implementing blockchain together with IoT devices, such as smart sensors and RFID tags, companies can more efficiently record the movement of goods through the various stages of the supply chain and record the condition of these products, e.g. temperature, humidity, etc., at each step. Since transactions are always up-to-date and time-stamped, businesses can query the statuses and locations of products at any time.

Blockchain offers more transparent and accurate visibility into the tracking process, helping organizations detect and more quickly address potential issues, such as non-compliance, counterfeit goods, delays and waste. Organizations may also choose to share tracking and tracing data with their customers to validate the authenticity of their products and confirm that they are engaging in ethical supply chain practices.

In addition, blockchain builds trust among supply chain partners because it provides open access to the key information it captures.

Improves traceability

Another use of blockchain in the supply chain is traceability. In supply chain management, traceability is the ability to locate past and present locations of inventory, as well as gain visibility into the inventory of that inventory, as products move from raw materials to vendors and customers.

Supply chain partners can use blockchain to effectively track the activities along the supply chain. And transactions happen in real time as blockchain consists of decentralized open source ledgers that record data, which can be copied among users. Using blockchain, stakeholders can access information about products, including dates, prices, origin, quality, certification, destination and more.

Cut down on counterfeiting

Provenance is key when it comes to controlling the quality and reliability of products. Because blockchain allows partners to track goods throughout the supply chain, they can accurately verify the provenance of those products. A quick check of the provenance of certain goods consequently reduces counterfeiting,

Address food safety issues

A number of issues surrounding food safety, such as the spread of foodborne diseases and cross-contamination, are difficult to trace individually. In addition, the lack of data and visibility in traditional supply chains makes it difficult for organizations to act quickly if there are problems, which can affect their reputation and bottom lines. Due to the reliability and integrity of the blockchain, it is particularly suited to address these issues. Blockchain makes it possible to trace the origin of a food product, thereby helping the food industry to increase the overall quality and reliability of food products.

Encourage more sustainable and ethical sourcing

Demand for the use of blockchain in the supply chain is driven in part by customers’ need to know the exact origin of their products and whether they were made ethically. Blockchain can help assure consumers that companies source their materials and products ethically and sustainably.

Blockchain can verify the origin of materials or products and present this information to consumers who can then decide whether to buy certain products. And the traceability and tamper-proof capabilities of blockchain give consumers a transparent way to verify how products were produced, as well as where and how they were shipped throughout the supply chain.

Make payments more efficient

It usually takes weeks or months for invoices to be paid. However, with blockchain-based smart contracts, invoices can be paid immediately. And the distributed infrastructure of the blockchain can help establish a transparent payment system that enables all parties in a particular supply chain to see payment transactions, reducing human error and fraud.

In addition, supply chain partners using blockchain-based cryptocurrencies can pay each other without having to use banks, saving money on fees and accelerating the payment process.

Enables better communication and collaboration

There is a lot of back and forth between the various partners in today’s supply chain regarding invoices, contracts, order requests and more, which can lead to disagreements and delays. However, using blockchain technology in the supply chain can improve this communication and collaboration between stakeholders. For example, by sharing databases between different parties, blockchain can cut out the need for intermediaries to verify, record and/or coordinate transactions. In addition, smart contracts incentivize all stakeholders to fulfill their agreed obligations in a timely manner.

What’s Ahead for Blockchain Technology in the Supply Chain?

Applications of blockchain technology can solve certain problems in traditional supply chains, such as eliminating the need to prepare paper documents. Moreover, a decentralized, immutable record of each transaction enables stakeholders to track goods from their sources to their delivery destinations, enabling a more transparent supply chain.

Implementation of blockchain in the supply chain has still not been widely adopted, as significant expertise is required to realize its benefits. In addition, because blockchain is still an emerging technology, it must comply with government regulations that vary from country to country – regulations that can affect supply networks. Blockchain-based technology is likely to gradually replace traditional supply chain processes and networks; however, the transition will not happen all at once.