The global supply chain is quickly becoming one of blockchain technology’s top applications. The use of emerging technology has rapidly gained traction in the last couple of years with the launch of several platforms like VeChain, Waltonchain, Shipchain, and Provenance among others.
A recent Deloitte survey sampled the views of 1,000 company executives, with 53 percent of them revealing that their companies have explored various “blockchain use cases” in the field of supply chains.
The driving point appears to be the challenges that continue to besiege many companies, especially concerning difficulties in establishing visibility and capturing data about the movement of goods across the supply chain.
There have been concerns that poor management of the supply chain process could be the cause of several disease outbreaks. That, and the availability of management software worth an estimated $12B market, has seen entrepreneurs seek to use blockchain technology to fix problems in the supply chain.
Entry points for blockchain-based supply chain platforms
Blockchain platforms can have a profound impact on the supply chain by offering services that cater to the needs of firms and companies.
One of the needs relates to limited visibility, with many companies finding it near impossible to obtain full visibility. In 2017 a survey that followed professionals within the supply chain industry showed that only 6 percent of firms could claim to have “full supply chain visibility.”
Having limited visibility can hurt a company due to its supply chain being vulnerable to exploitation, with defective products easily slipping into the supply process. These faulty goods find their way to consumers, leading to injuries and even death.
Blockchain platforms can also have a significant impact in stemming fraud across the supply chain. Companies often need to engage multiple entities, with the resulting web of connections making supply chains a playground for fraudsters.
The complex nature of the business has often impacted negatively on companies. Fraudulent deals have seen shipping companies lose billions of dollars, with one estimate putting the losses at $3.7 trillion.
Cases like those leading to the availability of blood diamonds or counterfeit drugs can be tackled with a tamper-proof blockchain-based solution.
Another entry point regards challenges with payments and the huge administrative costs that companies have to shoulder. Delays in payments run into months, with contracts that specify settlement upon delivery delayed for up to 60 days.
How can blockchain-based platforms solve supply chain problems?
The entry of blockchain platforms can help handle the challenges companies face regarding limited visibility, fraud, and delays in payments or high administrative costs.
For visibility, blockchain-enabled solutions distribute and transmit all the information to all parties across the supply chain in real-time. It is easier to monitor the movement of goods, while the need for consensus ensures all changes are agreed upon.
The use of RFID tags coupled with blockchain’s immutability feature makes engaging in fraudulent activity a tall order for bad actors.
Platforms that offer smart contract functionality can help companies handle issues related to delays in payment or reduce operational costs. The smart contracts, from blockchain systems like Hyperledger and Ethereum, automatically execute and can significantly reduce day sales outstanding for the companies involved in the supply of goods.
While blockchain can greatly help the supply chain industry, there are still several drawbacks that can derail meaningful developments. Such disadvantages come from the human aspect of the chain, with beforehand physical tampering one aspect tracking may not solve.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.