Blockchain in Supply Chains

Those swanky clothes, that colorful smartest phone, that distracting T.V., ever wondered how they were delivered to your home or to nearest brick and mortal store, the answer is Supply Chain. With globalization, Supply Chain have spread to areas where they are serving people like never before. But scope of improvement in Supply Chain would always remain, which would serve to augment value served. Supply Chain value generation may be limited due to department working in silos and their KPI not being aligned with overall organizational goals. This results in an opaque Supply Chain that results in poor tracking of product flow. Blockchain is a holy grail for this use case, due to its decentralized nature where transactions are validated by every node in the system.

Blockchain till now have bigger application in cryptocurrency, but implementing Blockchain in Supply Chain could bring in groundbreaking benefits. By utilizing Value Stream Mapping professionals identify value and non-value adding activities, these non-value adding components encompasses supporting activities like documentation, custom clearance, material handling, loading etc. Let’s take the case of verifying documentation in custom clearance, it takes significant effort and resources of your workforce without adding generating any value for customers. With Blockchain decentralized shared ledger, verification of documentation could be expedited by cutting dependency on any intermediate party. Transportation and shipment adds significant cost to supply chain operations, Blockchain could be used here to identify the path traversed by the truck so that it can analysed to identify cost-effective path. Blockchain with use of IOT could also be used to track overall health of trucks by storing their spare parts status that would help in better maintenance of trucks. Industry stalwarts are implementing Blockchain in their operations, Examples : Maersk has been implementing Blockchain solution with IBM in its Supply Chain for better tracking of its cargos, Walmart could trace products back to their origin.

Beyond tracking, Blockchain could also help in increasing trust between stakeholders and reduce financial risk in a Supply Chain with the application of Smart Contracts. Smart Contracts are digital contracts (basically computer codes) that have their algorithm executing contracts without any human intervention. Supply of common items is a tough segment to enter, where established players are preferred over newcomers due to reliability and their ability to deliver as promised. Buyers avoid the risk of doing transaction with newcomers due to the risk associated with newcomers, here Smart Contracts could come handy. Consider a simple transaction between buyer and sender validated by a Smart Contract that includes buyer money being released when buyer gets the possession of goods, Smart Contract would debit the money from buyer account and keeps it in a escrow account until transaction is legally complete. The contract being digital automatically validates terms and condition of completion of contracts. In case the seller is unable to fulfil contract, the money held is escrow account would be credited back to buyer’s account. This could open new dimensions in Supply Chain by allowing new players to enter into it due to increased risk mitigation, and increased competition could help in decreasing overall costs for Supply Chains.

Blockchain with its use cases for Supply Chain has potential to turn around the way companies are managing supply chains, but to completely reap the benefits there is a constant need for industries to digitize themself and train its workforce to adapt to digital transformation.

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