Why Merging Blockchain with the Supply Chain Is Good

Blockchain and supply chain management are as often discussed as they are widely misunderstood. Complicated though both may be, they play an important role in modern commerce. Without supply chain management, there are no products.

And while blockchain is admittedly a much more recent development than supply chain management it too plays an important role, increasing security and efficiency.

In this article, we take a look at both of these processes. What they are, why they are important, and how they can work together to improve processes.

What Is Blockchain?

Blockchain is a system of recording transactions through ledger-backed crypto logged on a network of peer-to-peer computer systems.

Did you get all that?

Basically, blockchain is a way to record transactions so that the information can’t be hacked, destroyed, or changed by an outside party.

The idea, of course, is to add an extra layer of security to sensitive or important information. That is why blockchain has become an increasingly important way of protecting electronic health files. Since e-health information is legally required to be encrypted to meet HIPPA standards, blockchain is there to make security simple (relatively speaking) and highly effective.

What Is a Supply Chain?

The term “supply chain” refers to all the stops a resource takes on its way to becoming an item that can be purchased at the store. It includes the moment said material is harvested, through its processing stages, and all of the transportation that is involved.

A single product can have dozens of supply chain links. For example, one smartphone could be constructed from dozens of components, all of
which were harvested, processed, and shipped from different parts of the world. Said components then come together in a single location where the phone is assembled.

Even after the phone has been assembled, the supply chain is not complete until the phone has arrived on the shelf.

The ability to understand a supply chain is important for several reasons. For one thing, when the supply chain experiences disruptions (as has been the case with alarming regularity as of late) the ability to look at what happened and say “ah! Here’s where it all went wrong!” may help fix the problem quicker.

By being able to isolate a problem spot in the supply chain— say a factory that had to close up shop because of a natural disaster— manufacturers can look for substitutions and get their production lines up and running again quickly.

Being able to easily identify links within a supply chain can also be important in the event of a product recall. For example, when contaminated food products wind up on store shelves, a look at the supply chain may be able to help identify what products are corrupted, and how the corruption took place.

Not only does this help the recall move along quicker, but it can also reduce the number of safe products that would have wound up getting
thrown away.

Unfortunately, even with modern technology, it’s not always easy to monitor and understand supply chains. Incorporating blockchain into the
equation may make a significant difference.

Blockchain Adds Transparency

Because blockchain makes it very difficult to alter or hack information, data recorded through its system is considered accurate and dependable. Similar to a Single Source of Truth within a business’s information network, blockchain allows supply chain data to be accessed anywhere it is needed without any third parties having the ability to alter its contents.

Theoretically, this allows for an unlimited number of third-party users to interact with the supply chain without any need for intermediary intervention. In other words, no one needs to be there supervising each transaction to make sure they are logged honestly and accurately.

Blockchain makes the information:

·       More trustworthy

·       Granular

·       Easier to understand

Below we will look at several situations where this can make a significant difference in supply chain management, both for manufacturers and consumers.

Verifiable

The way a product is harvested and processed can have a significant influence on how it is marketed and consumed. For example, Vidalia
onions must, by definition, come from the Vidalia Georgia region. There are similar standards that get applied to certain potato, olive, tomato, and grape products.

The idea is that soil quality can have such an impact on certain products that the taste cannot be replicated by any other area on the planet. These products market themselves on the grounds that they are more than just a regular onion. They are a Vidalia onion.

But how do we know?

With blockchain, the origins of a product become clear and indisputable. Not only does this keep marketing departments honest, but it also helps ensure that health and safety standards are being upheld. Manufacturers can’t cut corners with their supply chain and keep it under wraps when there is clear documentation.

And, when there is a problem— say a bad batch of onions— it’s
easier to isolate where it came from. This leads to…

More Sustainability

Because blockchain-infused supply chain management makes the shipping and product development process more efficient, it also naturally reduces waste. Less stock is wasted overall, and supply chain managers can optimize their internal processes as well.

For example, blockchain allows supply chain managers to take their operations paperless, making it more affordable, more sustainable, and significantly more accessible.

Integration

Finally, blockchain is also an important step toward updating other business-related technologies. It integrates seamlessly with tech like the Internet of Things, making it easier for businesses tools to communicate with one another, sharing information in a way that is both secure from bad actors and accessible for the people who need it.

Currently, this level of cooperation amongst business tools is considered an advantage. However, that won’t remain the case for long. As more and more businesses couple blockchain with their supply chain management strategy and link up their tech stack, full integration will become standard.
Those without it will fall quickly and decisively behind.