Modern-day customers want everything at their fingertips. Whether it’s digital content or groceries, they just do not want to wait. However, they often do not recognize or think about the voluminous efforts that go into sourcing a product from its place of origin and delivering it to the end consumers in the marketplaces.
To meet these ever-evolving customer expectations and stay competitive, organizations need to constantly invest in building highly resilient and scalable supply chains. When supply chains are streamlined and optimized, businesses can gain increased visibility into the entire product journey - from farm to fork - and use the critical insights to drive decision-making, reduce administrative costs, and build better relationships with vendors and customers.
However, the traditional supply chains were not equipped to seamlessly integrate with modern tools and technologies and help address complexities emerging out of businesses expanding beyond geographical boundaries.
Traditionally, companies and supply chain managers have had very limited visibility into their supply chains, and most processes were paper-based, and data would often reside in disparate systems. This reliance on paper-based transactions and legacy technology would translate into higher operational costs, losses from gray market practices, and reduced ability to track and trace objects on the move.
To overcome these bottlenecks and build more accuracy and automation into supply chains, an increasing number of businesses have begun experimenting with a new technology that was once known to be the bedrock of cryptocurrencies - Blockchain.
PwC defines Blockchain as “ a decentralized ledger of all transactions across a peer-to-peer network. Using this technology, participants can confirm transactions without a need for a central clearing authority. Potential applications can include fund transfers, settling trades, voting, and many other issues.”
Once considered the bedrock of Bitcoin and other Cryptocurrencies, businesses across various industries have started experimenting with the idea of using the technology to solve their business challenges.
How Blockchain can strengthen global supply chains?
Blockchain-driven digital solutions can help organizations regain control over how they produce or deliver to end-consumers while creating value for every stakeholder across the supply chain, including the producers, transporters, supply chain managers, wholesalers, retailers, and customers. By implementing blockchain-driven innovations in the supply chains, companies can realize significant advantages, such as:
- Increased transparency: Integrating blockchain-based solutions within a supply chain is an effective way to build trust among all the stakeholders (such as manufacturers and supply chain companies), as the distributed ledger technology enables everyone to access critical data points it captures. Also, its traceability enhances its transparency.
- Traceability: Imagine a scenario where you can track and trace every product across the supply chain lifecycle. Blockchain technology takes traceability to new heights by weaving an intricate web of actions, where you can effortlessly trace the journey of every product from its source to where it’s consumed. In addition, blockchain provides an immutable record of transactions, enabling you to delve deep into your supply chain and explore every stakeholder involved and the meticulous care taken at every step of the journey.
- Immutability: Blockchain technology is based on a rigid and complex methodology, making it almost impossible to tamper with the data or information blocks are built of. To delete or add any new information, the hacker must make the changes on all the nodes, which makes committing fraud a highly unlikely affair. The immutability of the data thus makes the supply chains more resilient to counterfeiting.
- Speed: Blockchain expedites the entire supply chain management with smart contracts - programs that are triggered when certain predetermined conditions are met. Supply chain stakeholders can leverage smart contracts to automate various aspects of the supply chain and automate tasks such as releasing payments to vendors, issuing a ticket, or registering a vehicle. The capability to automate workflows further builds trust among blockchain stakeholders and paves the way for more innovation and efficiency.
Start-ups, established businesses, and even academic institutions are experimenting with blockchain technology to drive innovation and achieve better outcomes. - Provenance: Tracking Tuna on the Blockchain
- Maersk and IBM Introduce TradeLens Blockchain Shipping Solution
Key challenges a business can face while implementing Blockchain technology in its supply chain ecosystem
There is no doubt that blockchain holds tremendous potential for global supply chains. However, implementing blockchain in supply chains is often a complex process. Start-ups to established businesses can face a multitude of challenges while embracing this powerful technology in their supply chains, such as:
- Lack of standardization
The major challenge with blockchain implementation in the supply chain is the diverse ecosystem of stakeholders. In the real world, all these individuals and companies operate in silos, making it difficult to establish a unified blockchain infrastructure. To harness the power of blockchain, all the stakeholders need to agree on common data formats, protocols, and communication standards. Achieving this consensus from all the parties is a challenging and time-consuming process. - Scalability is a concern
Scalability is a concern for enterprises planning to adopt blockchain to streamline their supply chains. As the volume and complexity of transactions increase, the capacity of blockchain networks begins to take a toll. To deliver capabilities in modern supply chains and meet demands for high transaction volumes and real-time updates, scalability is a prime challenge that must be addressed. - Integration with monolithic systems
Big corporations work with legacy systems that have been in operation for decades. Integrating blockchain technology into the existing supply chain infrastructure can pose new challenges in these scenarios. For example, it’s often difficult to incorporate new technologies with legacy systems; doing so requires both significant development time and investment. In addition, there will be a need to collaborate with multiple stakeholders and build a comprehensive strategy for the successful migration of data and integration with existing systems. - Complexities in the supply chain ecosystem
Supply chains are built of numerous participants, such as producers, suppliers, supply chain managers, logistics companies, distributors, retailers, and customers. The ecosystem comprises a multitude of activities as well, such as sourcing, manufacturing, shipping, and delivering. Monitoring and following the movement of goods throughout their journeys from inception to consumption necessitates meticulous data collection, verification, and coordination, which can be overwhelming. - Cost and adoption barriers
Blockchain-driven solutions can entail significant upfront costs in terms of infrastructure and expertise. Convincing the supply chain stakeholders, educating/training them to get familiar with the platform, and bringing their data and resources to one unified platform can add to the costs. This might not be a feasible solution for companies with limited resources.
How to overcome the challenges to unleash the full potential of Blockchain in the supply chain?
There is no doubt about the formidable challenges in implementing blockchain-based solutions within a supply chain. However, organizations can overcome most of the common challenges by engaging a reliable blockchain development partner like Kellton. Opting for consortium blockchains can be a powerful tool to accelerate your journey toward blockchain adoption in your supply chain without starting from scratch. In fact, as per Deloitte research, approximately 74% of organizations are opting for blockchain consortiums. Businesses are also exploring Layer 2 scaling solutions, such as sidechains and off-chain protocols, to address their scalability concerns. Advances in privacy-enhancing technologies are also being developed to address confidentiality concerns.
Foster a culture of collaboration and innovation
At the core of a successful blockchain technology implementation reside robust collaboration and communication among all the supply chain participants. Initiating pilot projects to test the feasibility and effectiveness of blockchain solutions in specific segments of the supply chain can help identify challenges and refine implementation strategies. In addition, collaborative efforts involving industry consortia, regulatory bodies, and technology providers can foster knowledge sharing, promote best practices, and drive the adoption of blockchain in supply chain management.
Conclusion
The winners across industries are increasingly investing in their supply chains to mitigate risks, lower costs, and generate increased revenue. However, the complexities of the supply chains, coupled with their reliance on legacy systems and processes, significantly reduce the ability of a business to track and trace its products and eliminate cases of fraud and counterfeiting.
New technologies, such as Blockchain, can bring new waves of change within this industry. By capturing the potential of blockchain, companies can streamline and accelerate their supply chains and deliver products that create value. Kellton is a long-standing blockchain development partner for businesses of all sizes across geographies and has helped its clients harness the power of blockchain in driving their businesses forward. So whether you want to explore blockchain use cases in supply chains or build an application that transforms how you connect with your employees, customers, or partners, Kellton can help you build next-generation Blockchain Solutions.