The Use of Blockchain in Supply Chain Management

Introduction

Blockchain is a relatively new technology that companies use to track and improve supply chains. This technology creates an open relationship between companies and suppliers because neither party can edit the data in the system (Institute for the Future, 2016). It gives companies confidence in the quality and origin of products in the supply chain. Moreover, the blockchain allows companies to establish trusting business relationships and reduce the risks of incorrect behavior by any parties in the event of a conflict of interest.

Traceability and Guaranteed Origins on Products

Possible Problems

The use of blockchain technology can provide greater transparency and accurate, end-to-end monitoring of shipments. Organizations can digitize their physical assets and create a decentralized ledger of all their operations. However, blockchain’s advantages can cause problems in the supply chain. If a company uses a vast network of suppliers, then organizing data and tracking the origin of products can be time-consuming. In addition, food often comes from countries where the technology may not be sufficiently developed (Hyperledger, n.d.). Because of this, companies cannot use blockchain technology or are forced to look for other providers.

Blockchain Benefits for Supply Chains

One of the successful examples of the use of blockchain is Bitcoin. The technology helps track transactions and records of ownership with virtual money (Institute for the Future, 2016). It makes Bitcoin impossible to falsify or use twice, as the company sees the origin of digital cash, and no one can change the system. This technology prevents both the organization and its customers from fraud and violations.

Another example is retail, where a decentralized database built on the blockchain allows for efficient tracking of touchpoints in the distribution of goods to customers. For example, Walmart is actively implementing blockchain to track product quality and interact with suppliers. By monitoring all points in the supply chain, the company can ensure that the product will reach the consumer correctly (Hyperledger, n.d.). Restaurants can also use this technology and other stores to ensure that their products are safe for customers. That will help reduce the number of customer complaints and increase the company’s reputation. Using blockchain for supply chains ultimately helps increase company profits by building trust with existing customers and attracting new ones.

Trust and Conflict of Interest

Another essential advantage of blockchain for supply chains is an increase in trust and the impossibility of incorrect actions by one of the parties to a business relationship in the event of a conflict of interest. For instance, two companies working together can use a blockchain system to record the location and ownership of their materials and products. Anyone in the supply chain can see what happens when resources move from company to company (Institute for the Future, 2016). Since the data records cannot be changed, there will be no question of who is responsible if something goes wrong. Moreover, in the event of a conflict of interest, neither company can change the data for it’s benefit or advantage.

In addition, the blockchain guarantees increased monitoring of the supply of materials within the supply chains, which makes it impossible for employees to violate the company. For example, employees cannot change information about materials or goods that an organization receives from suppliers. That reduces the number of manufactory thefts or embezzlement of company property by employees and makes it easier to detect these violations (Hyperledger, n.d.). As a result, the company’s productivity increases, and costs are reduced for those items that might not initially be obvious.

Conclusion

In general, using blockchain in the supply chain contributes to decentralizing and automating all processes. Since companies can trace the origin of products, they have more guarantees of their quality. Moreover, due to its transparency, this technology increases trust between all participants in business relations, making it impossible for one of the parties to violate the agreements for personal gain. Therefore, using blockchain for supply chains improves the company’s reputation among customers, contributing to increased profits.

Reference

Hyperledger (n.d.). How Walmart brought unprecedented transparency to the food supply chain with Hyperledger Fabric [PDF document]. Web.

Institute for the Future. (2016). Understand the blockchain in two minutes [Video]. YouTube. Web.