Blockchain, the revolutionary technology behind Bitcoin and other crypto networks, is, without a doubt, a game-changer in the financial industry. Indeed, it is not just the financial industry. Other entities, from gaming to tax-related institutions, are also adopting it to enhance efficiency.
One particular area where blockchain has ushered in the new dawn is supply chain management. Here is a closer look at the main benefits that come with the application of blockchain technology in supply chain management.
A Brief Outlook at the Recent Developments in the Supply Chain Industry
As blockchain technology continues to gain popularity, large corporations, as well as startups, are exploring ways of making the advances to the next level. They are focused on using the high potential technology to address their shortcomings, either individually or in the entire industry. In the supply chain sector, companies are also in the race. They are using the technology to cut processing times at different custom checkpoints, and reduce the cost of operations.
Two companies that have adopted blockchain in their supply chain systems are DHL and Accenture. They have developed a blockchain-based serialization prototype with nodes in different geographical areas for tracing pharmaceutical products they handle.
The ledger helps to track the medicines and the data is shared with stakeholders, including warehouses, manufacturers, pharmacies, hospitals, and doctors. Other companies that have adopted blockchain to improve the logistics include:
- De Beers.
The Main Benefits of Using Blockchain in the Supply Chain Industry
When you adopt blockchain technology, it comes with a host of benefits, and we are going to list the most common:
1. Helps to Increase Efficiency and Speed of Transactions
The traditional supply chain networks have often had to contend with long, unpredictable lead times and poor/no visibility. Therefore, small delays can easily result in massive inventory and stock-out in some parts. Well, blockchain was designed to help address these challenges. So, how exactly does this work?
When blockchain is employed to enhance the efficiency of the system, the finished products, process capacity, raw materials, and work-in-process inventory are looked at like digital currencies. For example, machine time, as well as inventory at different stages, can be reliably assigned client orders, eliminating the risk of errors. It also eliminates the double-spend challenges and erroneous allocation of a unit to two orders.
This efficiency is also reflected in the payments. Instead of relying on bank transfers that are very inefficient, blockchain makes it possible to process transactions in real-time. When both the supplier and recipient are on the same network, payments for goods or services are instant, and deliveries are more efficient. See: why stick to the traditional supply chain network when blockchain is here to solve all your efficiency needs.
2. Helps to Enhance Contracting and International Trade
When companies share inventory and financial flows on the blockchain, they are able to optimize global trading benefits. Let’s take the design of contractual agreements between a supplier and buyer. Traditionally, this process would take a lot of time because the respective papers had to be physically signed by the involved parties. If the supplier and buyer are based in different countries, the complexity edges a notch higher.
Using smart contracts, contracting is now easy and straightforward. The seller and buyer only need to agree on the commitment and the smart contract will execute automatically. The contract will self-execute within the set time frame if the buyer has selected preferred items by committing money when the products are delivered within a specific period. Therefore, you do not have to worry about getting scammed because all the details and verifications are handled by nodes on the blockchain. Also, identifying counterfeits is very simple.
3. Reducing Inventory
When importing raw materials/ finished products from abroad, a lot of paperwork is required. First, both parties have to review products, generate correspondences, share bank-related information, and a lot more. In addition, the clearing and forwarding firm adds to the list of the required paperwork. Handling all of these can be a herculean task.
However, blockchain technology helps reduce this inventory because the processing of the transactions is done by independent third-party nodes spread in the system through a proof-of-work (PoW) or proof-of-stake (PoS) consensus system. Although it might be impossible to go 100% paperless because there are some offices, such as the customs authorities, that might have a separate system, the entire inventory can be reduced with a huge margin.
These are only a few benefits that come with adopting blockchain in the supply chain system. Indeed, you should expect a lot more, such as enhanced traceability, lower cost of transactions, and eliminating the risk of data loss. To learn more about blockchain technology and its application in the supply chain or other industries, make sure to visit Mantra Dao.