Serious business owners know how important supply chain management is to the success of a business. After all, you need to get your inventory exactly where it needs to be for your business to run smoothly. The problem is that globalization has made today’s supply chain to be an extraordinarily complex process. While it’s true that it has unlocked the possibility to share goods and services across the globe, globalization has also led to inefficient processes. These processes involve multiple stages, hundreds of countries, and numerous parties in a single transaction. This results in a system that is difficult to navigate for consumers and service providers alike.
Supply chain management requires detailed and constant attention as companies manufacture and distribute goods to the market through wholesalers and retailers. As such, the process of sourcing, making, and ultimately selling products to the target market could benefit greatly from transparency, consistency, and accountability. Most of the times, traditional models do not check all the boxes when it comes to the mentioned traits. There will always be delays and human error. To top it all up, the decentralized documents and data can really slow down your workflow, and even worse, bring it to a halt.
Luckily, blockchain technology promises to offer some solutions. Let’s dig deeper and see how this technology can help streamline the global supply chain for maximum efficiency.
What Makes Blockchain Perfect for Supply Chain Management
As we may already know, blockchain is basically digital ledger technology. This is why it is perfect for the global supply chain management. One of the greatest problems that companies face with complicated chain management is lack of transparency. This is especially true if you have various suppliers across multiple countries and states. It can be difficult to keep an eye on everything. And, this is where blockchain comes in.
With this technology, you can document every transaction and every interaction in the chain. Each block provides a snapshot of a particular moment in the life span of the ledger. Every piece of data links to those before and after it. In the supply chain, you can do this for material and shipping information as well as financial information.
The blockchain process makes everything much easier as one is able to see all the happenings that are taking place in real time. You can monitor your transactions in real time. Again, the distributed ledger allows you to get updates and know what is happening as the goods move through the chain. Indeed, blockchain technology is a real blessing to the supply chains! It not only enhances financial record keeping and data security, but also analytics, marketing, and logistics.
Benefits of Blockchain’s Smart Contracts in the Supply Chain Management
Smart contracts refer to digital contracts that self-execute once pre-agreed requirements are met. These contracts occupy a greater part of the blockchain technology. They are code-dependent, and enable agreed-upon operations (like payments) to take place seamlessly. The process is immediate and automatic, and you don’t require middlemen once both parties fulfill the terms of the agreement.
A smart contract serves as an agreement between parties in a transaction. It holds each party accountable for their part in the transaction. They define the rules of engagement and penalties surrounding a transaction, just like in a traditional contract.
With smart contracts, all involved parties can view the terms of the contract. This is an excellent way to improve your supply chain management. These contracts can help ensure different suppliers are meeting their commitment. You are able to see what is happening at multiple locations and monitor shipment using smart contracts. Suppliers manage all these using a distributed public ledger, which makes the whole process secure. This also inspires trust among the players.
Integrating Smart Payment in Supply Chain
For most people, the word blockchain is synonymous with Bitcoin. The financial aspect of blockchain remains one of the bonuses of this technology. Traditional payment options charge huge fees and can take multiple days to be completed. On the other hand, blockchain transactions are instant and secure. As if that’s not enough, these transactions often cost less.
Smart payment solutions make it easier for players in the supply chain to interact and make financial transactions. The best part is that they benefit all parties. Procurement departments can place their orders faster, and suppliers can get their money more quickly. Furthermore, you can make payments automatically and at the exact time you receive the deliveries. In other words, the whole process becomes just one transaction that you execute in a more efficient and transparent manner.
Potential Hurdles in Regards to a Blockchain-Driven Supply Chain
Even with all the promises that blockchain offers, there are some major obstacles to adopting it in the global supply chain. Here a few of the problems:
While the transparency of blockchain may be beneficial to all parties in the supply chain by making all transactions visible, it can be disadvantageous in some situations. This is where companies may want to keep their data and transactions with their partners confidential.
The complexity of the blockchain
Yes, the whole idea behind blockchain sounds very simple. But, effective implementation would require comprehensive support and training from the gurus in order to bring your entire team up to speed. Also, some suppliers and staff may prove resistant to change due to inadequate information.
The need for global adoption
For blockchain to be fully implemented in the global supply chain, the number of organizations, companies, and governments using the technology has to increase. This is the only way blockchain will be able to simplify the complicated supply chain for everyone involved.
Blockchain may not be the solution to every problem in the global supply chain. However, it can help organizations appreciate all the benefits that come with a digital supply chain. You can avoid information delays and other eventualities that may lead to “the bullwhip effect. All you need to do is to share vital information such as inventory levels, sales data, and shipment details. The benefits of adopting blockchain into the supply chain greatly outweigh the drawbacks. That is why companies such as Walmart and IBM have already started implementing this technology into some of the areas of their operation.