How Blockchain is Revolutionizing Supply Chain
By: Jason Whang
The process of manufacturing and distributing a commodity is multifaceted, spans numerous geographic locations, and involves countless sectors and workers. This elongated process results in numerous inefficiencies and heavily relies on transparency and verifiability of transactions that occur throughout the process. Unfortunately, due to a lack of transparency within supply chains, the vast majority of businesses have no way of monitoring its suppliers, and if a problem occurs, there is no definite way to know where the problem originated. Also, many businesses are at the mercy of their customers who may commit chargeback fraud because they cannot adequately verify transactions. Blockchain technology provides a unique solution to address these weaknesses in the current system.
Blockchain employs smart contracts, which limit fraudulent claims by automatically enforcing agreements only when both parties verify that they are satisfied, and eliminates the need for middlemen, allowing businesses to directly reduce the time and cost of producing the commodity. This increases transaction efficiency throughout the supply chain process that may span across numerous geographic locations and reduce the number of human errors that plague the system. As such, while many transactions take days to complete, blockchain transactions are instantaneous.
Furthermore, the security provided by the distributed leger system allows for privacy to be maintained throughout the process. As each transaction is encoded by cryptography and must be verified by the majority of the participating nodes, it is almost impossible for a transaction to be falsified. By encoding each transaction, the privacy of the individual is maintained despite being available to the public to verify. This added security will keep business transactions confidential and secure.
Finally, blockchain is able to track a commodity throughout the manufacturing and distribution process starting with the source. For example, it is critical for many retailers in the food industry to trace where their product is sourced from, processed, stored and packaged as well as its sell-by date. As such, companies such as Walmart have begun utilizing this completely transparent and immutable record to ensure these quality measures are accurate and to store this information securely and accurately for reference (Marr). Another example is the mining industry, which has begun implementing blockchain to track diamonds from the point of where they are mined to ensure that they are genuine and not from the black market. Other industries are also using blockchain for similar benefits.
The current supply chain system is vastly inefficient and subject to human error, however, blockchain’s copious benefits have created a novel path for businesses to secure greater efficiencies and margins. Businesses are continuing to innovate ways to further develop this burgeoning technology and enhance the enormous potential it may provide in the near future.