Supply chain management is the lifeline of modern commerce. It serves as the connective tissue binding organisations, creating a seamless movement of goods from suppliers and manufacturers to shelves and customers’ doorsteps.
A system as intricate as the supply chain requires efficiency, transparency, and accountability. As such, many believe it can significantly benefit from blockchain technology. Adopting blockchain for supply chains creates an additional layer of trust, protecting your business and customer interests.
This infographic presents a picture of the role of blockchain in supply chain management to help you understand how this rapidly proliferating technology can make your business successful.
What is blockchain in supply chain management?
Blockchain is a distributed and decentralised digital ledger with immutable and secure records of transactions, such as those for digital currency.
In supply chain management, blockchain maintains transparent information about the movement and ethics of goods while preventing unauthorised transactions and fraud.
Traditional supply chain processes typically involve a complex network of intermediaries, often leading to inefficiencies and ethical concerns.
However, blockchain’s inherent features address these concerns by creating a record of every transaction and movement within the supply chain. In effect, key stakeholders have an indelible and verifiable audit trail of a product’s entire journey, including:
- Product origins
- Manufacturing processes
- Transportation routes
- Ethical practices during production
4 key actors in blockchain-based supply chain
As supply chain management interacts with blockchain technology, new participants emerge. These entities collaborate and create a network that fosters transparent and efficient movement of goods from origin to destination.
1. Registrars
Registrars act as the blockchain network’s gatekeepers. They provide participants with distinct identities and record new transactions or data onto the network.
Registrars also verify information before it becomes a permanent part of the blockchain. For example, when a product moves from raw materials suppliers to the manufacturer, registrars ensure the transaction’s legitimacy to prevent fraudulent or unauthorised entries from corrupting the network’s integrity.
2. Standard organisations
Standard organisations establish industry-specific protocols and best practices throughout the supply chain to ensure consistent quality, safety, and ethical conformity. In turn, stakeholders can harmonise rules across the board to minimise non-compliance and other discrepancies.
In the blockchain, standard organisations may codify their work into smart contracts—self-executing programs that launch when the contracting parties meet predefined conditions.
3. Certifiers
Certifiers are responsible for verifying the authenticity and compliance of individuals and products in the supply chain. They digitally sign off on product attributes, manufacturing processes, and ethical practices, which registrars then record on the blockchain. This cycle creates an unalterable record of certifications that consumers and stakeholders may use to make informed decisions.
4. Actors
Actors refer to the participants producing, distributing, and consuming goods. They include suppliers, manufacturers, distributors, retailers, and end users or customers.
Registrars and certifiers validate actors on the blockchain to create a comprehensive system of auditable trails and retain network credibility. Every participant coordinates with each other and holds everyone accountable, keeping unauthorised or fraudulent transactions from disrupting the supply chain.
6 benefits of blockchain in sustainable supply chain management
Adopting blockchain for sustainable supply chains and management brings unprecedented transparency, accountability, and other assurances to a traditionally unpredictable system. These benefits include:
1. Prevent illegal business practices
Blockchain in sustainable supply chains and management records every transaction and movement to create a transparent and immutable trail for tracking by authorised stakeholders. It discourages counterfeit goods, unauthorised substitutions, and unethical practices, as any attempt to manipulate recorded data is evident.
Furthermore, traceability ensures enterprises in the network adhere to legal standards, safeguarding companies and consumers from unlawful products and operations.
2. Improve sustainability performance
Sustainability is a pressing concern in modern supply chains, with eight in 10 executives gearing toward more eco-friendly operations. Blockchain plays a pivotal role in this shift by recording information about the materials, processes, and certifications involved in a product. This data allows you to create verifiable records of your sustainability efforts, bolstering your environmental consciousness credentials.
3. Enable operational efficiencies
Blockchain streamlines the supply chain by automating and digitising various processes. For instance, smart contracts automate payments by executing specific actions in financial transactions when a party meets predetermined conditions. Once both parties finalise the exchange, the record goes to the blockchain for easier verification.
Additionally, blockchain offers real-time visibility into inventory levels, demand patterns, and other critical data for more efficient decision-making and inventory management.
4. Improve overall supply chain management
Blockchain enhances supply chain management operations by providing a single source of relevant data accessible only to authorised parties. As such, there’s a lower chance of misinformation, eliminating the need for time-consuming reconciliation among stakeholders. Real-time updates on the blockchain ensure all participants have access to similar data, streamlining communication and resolutions.
5. Satisfy shareholders
Shareholders are always concerned about the integrity and sustainability of the companies in which they invest. Blockchain’s ability to provide verifiable and tamper-proof records of supply chain practices helps demonstrate your commitment to responsible operations, building trust among investors. In effect, you improve your reputation and secure long-term financial stability.
6. Sense market forces and trends
Staying on top of market developments is critical to succeeding in a rapidly evolving business landscape.
On this note, blockchain in sustainable supply chains and management is a valuable tool for proactively identifying and adapting to these changes. Its real-time visibility and constantly growing data repository provide a comprehensive view of the supply chain ecosystem, which you may use to pick out customer preferences, demand patterns, and other emerging trends.
How sustainable supply chain management can use blockchain
The potential of blockchain for supply chains extends beyond theoretical possibilities. Here are practical applications of this relationship that revolutionise how you move and process goods.
1. Inventory management
Managing inventory across multiple locations is usually a complex operation prone to errors. Fortunately, blockchain offers a solution by providing a single, shared database accessible to authorised parties. It records every movement of goods and updates in real time, ensuring an accurate record of inventory levels. Then, you can prevent stockouts, overstocking, and inventory errors.
Case in point: Walmart Canada recently integrated blockchain tech to create a single network for managing invoices and payments. This initiative drastically reduced discrepancies from 70% to 1%—a staggering success for such a new implementation.
2. Reduced paperwork
Traditional supply chains usually involve unmanageable paperwork, such as contracts, memos, invoices, and receipts, often resulting in processing delays and errors. Even as more companies utilise digital documents, they’re still prone to tampering and fraud.
However, blockchain for supply chains reduces the need for physical files by digitising and securely storing critical information. It streamlines administrative tasks, minimising the chances of oversights while accelerating supply chain processes.
3. Food safety
Food safety is critical to the supply chain, and blockchain technology helps by recording every step of a food product’s journey from farm to fork. So, when a safety issue arises, you can easily trace it back to its origins and identify the root cause.
Walmart also tested this system a few years ago. Using traditional tracking systems, tracing a package of sliced mango from a store back to a farm took almost a week. However, leveraging IBM’s blockchain tech allowed the retail giant to trace it within two seconds, setting the stage for blockchain integration in the food industry.
4. Compliance
Regulatory compliance is a growing concern among most companies, as failure to adhere can result in penalties and reputational damage. Thankfully, blockchain’s ability to create tamper-proof records helps you meet relevant standards and requirements by documenting every transaction accurately. As a result, audits become more efficient, reducing the risk of errors and non-compliance.
5. Sustainable sourcing
Sustainability is rising, with 60% of consumers rating it as an important purchasing consideration. As such, you must take advantage of every opportunity to become more eco-friendly in your sourcing practices.
Blockchain for supply chains lets you showcase your commitment to sustainable sourcing by providing a record of every stage of a product’s creation, from raw material extraction to transportation. Customers can see your eco-friendly initiatives, potentially boosting competitiveness.
Unilever is a company doing just that. It leverages GreenToken by SAP to trace a product through the supply chain and verify whether it uses ethically sourced raw materials like palm oil. It does so in real time, providing complete visibility into its supply chain.
Elevate your supply chain with blockchain
As concerns about supply chain transparency, traceability, and accountability arise, there’s a growing demand for a solution to address these shortcomings. Here, blockchain takes the stage. The marriage of blockchain with sustainable supply chains and management enables more effective commerce, keeping business environments moving toward a lasting, profitable future.
Likewise, the BSV blockchain is an infrastructure for a data-based economy that can help improve your supply chain’s visibility and security. Download the ‘Enterprise blockchain’ ebook to learn more about the BSV blockchain or our ebook on ‘Revolutionising agriculture in the digital age’ to learn more about blockchain in a specific sector. We also have an extensive library of articles about BSV and blockchain and their applications.
