Blockchain offers a simple, effective solution for managing complex supply chains around the world. Also known as distributed ledger technology (DLT), blockchain is steadily gaining ground in this arena for numerous reasons:
- Supply chain partners can record validated information on an immutable digital ledger that is both jointly managed and resistant to tampering;
- Risks are minimized and operations are accelerated across far-reaching locations;
- Business processes and workflows can be simplified while performance and outcomes improve;
- Companies can respond and adapt quickly to changes in the market;
- Supply chain anomalies such as food contamination are easier to detect and trace.
Aside from the above, however, there are three other significant areas where blockchain can improve supply chain management, according to Forbes.
1. Regulatory compliance
A blockchain-based record of the supply chain allows companies to comply with government regulations as well as business and trade laws more efficiently and transparently. For instance, companies may be required to provide periodic reports that show where, when, and how products are acquired or produced.
In combination with the Internet of Things, blockchain presents an opportunity to compile all of this information in a verifiable, visible way – and reduces the complexity of compliance reporting. Companies benefit from the immutable audit trail offered by blockchain and can even share the validated data with other parties, such as customers who want to know where their products have come from (e.g. organic, ethical sources).
2. Supplier performance management
With blockchain, all steps on the supply chain are recorded with validated transaction data as well as metadata. This gives companies a detailed, metrics-based insight into supplier performance in real time, allowing them to pinpoint weak points, detect unethical actors, and even reward good performance.
Information about contract fulfillment, price, volume, quality, sourcing, legal, procurement, and more is visible on the blockchain, which makes performance-tracking much more efficient. The smart contract layer can also be used to automate processes like workflows and incentives. For instance, a smart contract could allow a well-performing supplier to receive earlier payment as a reward.
3. Trade finance
The trade finance market involves an enormous amount of documentation, often with multiple copies required for all relevant parties – plus revisions along the way. The complexity of this process can result in delays, fraud, and duplication errors.
Supply chain partners can use a blockchain network to minimize these types of problems, in turn reducing disputes with suppliers and brokers, avoiding late penalties, and decreasing other costs related to storage and detention.
As Anant Kadiyala describes in Forbes, we are currently in the early stages of embracing the “programmable trust” that blockchain provides. As features evolve, however, “blockchain networks will form an important support structure for the hyper-connected future encompassing the Internet of Things, data analytics, artificial intelligence, and other emerging technologies.”
For businesses who embrace blockchain today, the value is already here – and will only continue to grow. If you’re interested in learning more, our team at Olypsis is available to help you harness the technology of the future.