How Blockchain In Supply Chain Improve Security And Transparency

What if a business could track every step a product takes, from raw material collection to production, and all this information is accurate and secure? Yes, it is possible with blockchain in supply chain technology.

Today, supply chains are not secure due to fraud, data manipulation, and a lack of trust. This is a big challenge for all businesses. Using blockchain technology can give a solution to these threats because it is almost unchangeable.

In this article, you can learn about blockchain technology, compare it with conventional supply methods, and discuss common challenges. We also examine how different industries use blockchain methods in the real world.

What Is Blockchain Technology?

Blockchain is a different technology that uses a decentralized digital ledger to record transactions across multiple computers. This means that no single entity controls the data, and every person in the network can access a shared version of the records. Each transaction (block) is securely linked to the one before it. An innovation like this can create a chain of blocks, which makes it almost impossible to later for scammers.

The blockchain method ensures transparency, security, and immutability. Due to this reason, many industries use this technology to build trust with their clients. It has acceptance in many sectors, from finance to supply chains, and provides a more reliable and transparent way of managing information. With this, companies can secure their information and data from fraudulent activities and build trust at every level.

Do you need more information about blockchain technology? Watch this video that gives a basic picture on this technology, how it works, and more.  

In the following section, let’s analyze how this technology is going to help your supply chain business. 

How Blockchain In Supply Chain Helps Businesses

The supply chain is an essential sector in today’s world. Blockchain technology in this sector can help companies by providing more security. With a decentralized method, companies can now improve their operations. Here are the six advantages of blockchain in the supply chain:

1. Enhance Transparency: With this technology, every transaction or movement of your goods is recorded on an immutable ledger. This supply chain transparency allows businesses to track products from the beginning till they reach the right customers. Such a system increases customer trust and verifies the authenticity of products or transactions.
2. Increase Security: Security is a great concern for every industry. Using blockchain encryption can protect data and make it difficult to alter or falsify for scammers. In a supply chain, this method is useful to secure data, such as shipment details and contracts. Mitigating such security risks is vital to strengthen relationships with suppliers and customers.
3. Reduce Costs: The initial cost is high during the implementation, but later, you can reduce the overall cost. Blockchain eliminates the need for middlemen and simplifies the transaction process. Certainly, avoiding middle persons can help you save money in the future.
4. Increase Efficiency: Efficiency matters a lot in the supply chain, and this is possible with blockchain technology. Now, you can automate and streamline processes, speed up transactions, and reduce administrative burdens. Using blockchain for this work can assist businesses to respond more quickly to demand and manage the supply chain easily.
5. Better Inventory Management: Inventory management is a headache sometimes in the traditional system. Blockchain in supply chain allows you to track inventory and provide an accurate view of stock levels. An innovative technology like this can reduce overstocking or stockouts and help you with your whole inventory management system.
6. Improve Supplier Relationships: Blockchain is an excellent choice if you want to maintain better communication with your suppliers. With clear transactional records, there is little chance of dispute between these two parties. This technology is vital for smoother operations with suppliers.

After understanding the use of this technology in this field, let’s explore the difference between the traditional  and blockchain method. 

Conventional vs. Blockchain Supply Chain Method

Comparing the traditional supply method, there are several differences to the blockchain supply chain. Supply chain transparency is an advantage of the blockchain method, but you may not get clear, verifiable information from the conventional method. Let’s compare conventional supply chains and blockchain supply chains to see the differences:

Data Accessibility And Accuracy

Accuracy is a great thing in the supply chain as it helps to build trust with the customers.

• In traditional supply chains, data is stored in centralized systems or spreadsheets. This data is accessible to different parties but may cause delays or inaccuracies. In this method, the stakeholders such as supplier, manufacturer, distributor, or retailer, maintain their own records that may have discrepancies and errors.
• Blockchain in supply chain does not lead to such problems as it provides a single, decentralized ledger that is accessible to all in real time. The information is updated and cannot be altered by these parties. This system ensures all stakeholders access the most accurate and up-to-date data. There is only a small chance of errors and disputes in this method.

Tracking And Verification Of Products

Tracking where your product is vital in the supply chain because it shows the status of the product or services.

• Tracking products in the traditional systems is difficult as it follows paper or non-automated processes. This is very slow and creates frustration among the parties. Verifying the authenticity and condition of goods also takes more time than the blockchain method.
• The tracking of products from the point of origin to the final consumer is easier with the blockchain method. Each transaction is recorded, and you get the time of the product’s reachability with its details. This is important to quickly verify a product’s journey, improving trust among every party.

Efficiency And Speed

Efficiency and speed are vital to the supply chain. They improve your productivity and avoid frustration.

• The traditional system has lots of intermediaries, such as brokers, warehouses, and customs authorities. Each stakeholder is different, and they add a new step to the process.  This usually slows down your transaction and delays shipments.
• The blockchain in supply chain avoids these complexities and automates many processes. Now, work will be faster and more efficient, which positively impacts every process. For example, smart contracts can automatically execute transactions after meeting certain conditions. This process saves time and increases efficiency.

Security And Fraud Prevention

Nowadays, many companies are worried about security and fraudulent activities. Let’s see how it is managed using two methods.

• Traditional systems are weak and vulnerable to fraud, data manipulation, and breaches. If any parties alter the supply chain’s information, it can go unnoticed without auditing. This may create issues internally and externally.
• When you adopt blockchain in supply chain, you get high-level security with encryption and immutability. Once a transaction is recorded, it is difficult to change or record, so it is nearly impossible to tamper with data. This is vital to strengthen your security, prevent fraud, and build trust in the supply chain.

Operational Cost

The short-term and long-term costs are different in traditional and blockchain methods.

• The conventional method has a higher chance of high cost due to paperwork, manual audits, and intermediaries. Here , you need lots of manual work and resources comparing other methods. 
• Blockchain is not like the other methods as it reduces the cost in the long term. This technology comes with the automation of many methods that also help you save time. This innovative technology avoids third parties and reduces the chance of manual tracking and auditing.

Let’s see the disadvantages of this technology to get more ideas before implementation. 

Drawbacks Of Blockchain In Supply Chain Management

Like many, there are several challenges in blockchain supply chain management. Here are some of the key problems a business faces during the implementation.

1. High Initial Costs: Implementing blockchain technology needs lots of investment. A firm must invest lots of money in hardware, software, and skilled personnel to maintain the system. Using this technology saves money in the long run, but it may be a burden for small businesses.
2. Integration: Many supply chains still depend on traditional systems and processes. New technologies like blockchain in the supply chain can cause some difficulties or time while integrating with existing systems. If you have a plan to take this into your company, you need to improve infrastructure and train employees.
3. Scalability Issues: As blockchain technology grows, your system needs to handle larger volumes of transactions. Since there will be thousands of transactions in the future, scalability will become a concern for many.
4. Lack Of Standardization: There is no commonly accepted method for blockchain in supply chain. Different industries may use their versions of blockchain, so this makes it difficult for parties to communicate and share data. The lack of uniformity can limit blockchain across industries.
5. Regulatory And Legal Uncertainty: Blockchain is a decentralized technology that raises concerns about legal frameworks and regulations in several countries. The nature of this technology makes it challenging for businesses to understand the legal compliances in different countries. 

Implementing this technology will be a challenge for many industries as you may face problems with laws and regulations. GDPR (EU) and China’s strict blockchain policies are the perfect example of this problem.  

Do you think only supply chains benefit from this technology? No, it’s not. Let’s see other industries that use this technology. 

Different Industries That Benefit From Blockchain

The supply chain is not the single industry that benefits from blockchain technology. It offers transparency, security, and efficiency in many areas. Some of them are:

1. Retail And E-Commerce: The retail sector can track products from production to delivery and ensure authenticity with this method. The blockchain helps customers check product origins and improve trust with clients.
2. Food And Agriculture: Do you want to trace the food supply chains from farm to table? This technology makes it possible. Companies like Walmart and Nestlé are using blockchain to build consumer confidence and trust.
3. Pharmaceuticals: Blockchain helps combat fake drugs by verifying the authenticity of medicines. This technology also provides health care to ensure proper storage conditions during transportation. By using this technology, a pharma company can track the entire journey of products, and protect patient health.
4. Logistics And Transportation: The smartness of the blockchain improves shipment tracking and documentation. Do you wonder how? It reduces paperwork and ensures timely deliveries through its automation. Companies like FedEx and Maersk use blockchain in supply chain to improve operational efficiency.
5. Healthcare: Securing the patient’s records and maintaining privacy is easier with this method. It also facilitates easy data sharing between healthcare providers and maintains trust and accuracy in the records.
6. Finance And Banking: Many banks, such as JPMorgan Chase and HSBC use blockchain methods to improve transaction speed. This is excellent to reduce the costs of cross-border payments, improve security, and reduce fraud. This blockchain method makes financial operations more transparent.
7. Real Estate: This is another sector where blockchain shines. It simplifies property transactions by digitizing records and automating contracts. This is one of the best methods for reducing paperwork and increasing transparency in ownership transfers.

Are you interested in learning about quantum computing? Read: What Is Quantum Computing? How Can It Empower The Future Technology?

Alright, let’s see some case studies of blockchain technology now. 

Case Studies Of Blockchain Technology

Blockchain technology is now successful in various industries due to its security and transparency. Let’s explore some of the notable case studies:

Walmart

Challenge: Tracing the source of contaminated food during recalls was a big problem for Walmart. This was a serious concern for the company as it affects health and damages consumer trust.

Solution: The company used blockchain technology to solve this issue. This blockchain in supply chain helped the company track the food journey at all levels. With the assistance of tech giant IBM’s Food Trust platform, they implemented a system that can track the origin of the products in seconds.

Result: The system improved food safety, faster recalls, and increased consumer confidence in product quality.

Maersk

Challenge: Companies in the shipping area faced lots of issues due to paperwork and delays.

Solution: Maersk partnered with IBM and launched the TradeLens blockchain platform to address this problem. This platform helped their shipping business to digitize supply chain documentation and provides real-time tracking.

Result: The technology reduced costs, improved shipment efficiency, and enhanced transparency.

De Beers

Challenge: The diamond industry was facing criticism for selling conflict diamonds because the proceeds fund armed conflicts and human rights abuses in several areas.

Solution: De Beers introduced a Tracr blockchain platform to track diamonds’ complete journey. This method assisted the company to ensure ethical sourcing and boost consumer trust.

Result: The platform improved transparency, reduced fraud, and support for ethical business practices.

Everledger

Challenge: People lack trust in the authenticity of high-value assets like diamonds, artwork, and luxury goods from companies like Everledger.

Solution: By using blockchain, Everledger came up with the idea of a digital record of assets to address this. This system gave a solution for buyers and sellers to verify the history and authenticity of items.

Result: The technology increased trust in high-value transactions and protection against fake goods.

VeChain

Challenge: Many businesses faced limited visibility into their supply chains before blockchain. This problem led to inefficiencies and mistrust.

Solution: VeChain blockchain-based solutions for supply chain management gave a solution for this. Through this system, all stakeholders can track products and verify data authenticity.

Result: Blockchain improved operational efficiency, reduced costs, and strengthened trust among partners and consumers.

Final Takeaway

Blockchain in supply chain areas is a great way to build trust, improve transparency, and increase efficiency. It is also helpful to ensure food safety and combat counterfeit goods. This technology is not limited to one area but fits many industries in this world. Your business can simplify the process and tackle many challenges by using the blockchain method.

Moving to this innovative method can be complex at the beginning, especially for small and medium-level companies. There are many challenges you face, like high costs and regulatory uncertainties. It is also important for companies to grow with the technology as it grows stronger in the future.