Defining Blockchain Technology
Think about traditional supply chain functions in relation to payment processing and order fulfillment. The payment is collected by a bank during a transaction. Now, the only information the customer has access to is when a product may be shipped.
Through blockchain technology, the customer could gain access to more information about where the product originated, which includes specific supplier information, by tracking the blockchains along the path. In other words, blockchain technology allows all participants in a given system have access to an equal about of information about what went into producing and order a given product. This technology could be leveraged by consumers to see how quickly a given product has been received and what type of feedback is available.
Blockchain technology originated with the development of the payment system, bitcoin. Rather than simply initiating changes between accounts, bitcoin goes a step further by recording every motion in a long chain of events. As a result, each transaction can be successfully traced back to its point of origin, and the same process can be traced in a forward direction as well for forecasting and customer-retention tracking.
The Impact of Blockchain Technology on the Supply Chain
The key benefits of blockchain technology can be summed up into seven primary categories, which include the following:
- Compliance and Transparency – Transparency is the most influential and important benefit of blockchains. Blockchains will help to prevent organizational silos within existing parts of the supply chain and help supply chain leadership, such as C-level executives understand how to make the supply chain more efficient and productive.
- Better Tracking of Orders and Assets – Since blockchains can be effectively tracked through all processes, companies using blockchain technology will be able to more readily produce detailed information about a product’s lifecycle, including supplier information, manufacturing details, and logistics information.
- Reduction in Errors in Payment Processing and Auditing – Regardless of personal opinion, banks do make mistakes. Occasionally, auditing may not identify all of the potential overbilling or overpayments as well. But, blockchain technology can make reducing these errors easier by creating a finite paper-trail to isolate where the problem occurred. Therefore, the company can verify all operating systems that were effected and make changes to prevent the problem from occurring again.
- Identification of Attempted Fraud More Easily – Even the most scrutinizing audits can overlook indicators of fraud in mountains of data. However, blockchain technology is already enabling today’s supply chain entities to identify attempted fraud more easily. For example, an employee that goes into the system to change past events will alter the coding of the event. However, the altered coding appears so differently that it would be practically impossible to not notice the change This will allow companies to recognize the fraud and who initiated the change almost immediately, further driving down costs from poor employee practices or even potential fraud attempts by customers. Furthermore, blockchain technology is not patch-based, making it more secure than many of today’s cybersecurity initiatives.
- Greater Trust by Consumers – Customers trust what they can “see.” If a customer knows where a product originated, they are more likely to develop a trusting relationship with a given supply chain entity. However, this trust extends beyond supplier information. It can show if a company provides realistic delivery expectations for its truck drivers and more.
- Real-Time Feedback From Consumers – The benefits of blockchain technology also include how customers respond to products. For example, a customer may seek to place future orders on produce when it drops below a specified rate after purchasing food items that were prepared with produce from a given farm. In addition, this feedback will be connected to the information of the supplier and manufacturer, which will help the supply chain create more accurate forecasts in real-time.
- Better Scalability – This benefit is actually a compounding benefit of real-time feedback, but it is extremely important to denote how blockchain technology enables scalability for parts of the supply chain. In other words, blockchain technology can be used to identify potential trends and help an organization prepare to grow a business to respond to possible surges in the market. Furthermore, the use of blockchain technology is independent of politics, making it necessary for supply chain entities to enter new markets.
Putting It All Together
There are many different benefits of blockchain technology, and its implications range from simple asset tracking and transparency to real-time feedback from customers. Yet, the true scope of the benefits of blockchain technology is unlimited, and it could be one of the most remarkable breakthroughs in the supply chain in history. With a world that is becoming more connected on a daily basis, blockchain technology will inherently develop into a symbiotic relationship with the Internet of Things and today’s advanced logistics and supply chain management systems.