In the world powered by innovation, efficiency is the emperor, and transparency is the national anthem. That’s exactly why blockchain solutions have been making waves in the digital world, revolutionizing everything from art and healthcare to finances and supply chain. When it comes to logistics, blockchain’s potential is immense, and the industry has already understood it: according to Statista, back in 2019, 38.2% of retailers, brands & manufacturers stated that they spent money on understanding blockchain technology, compared to 55.3% of surveyed logistics service providers. Given that products’ authenticity is becoming increasingly important, and process automation can significantly boost the efficiency of the entire supply chain, it isn’t surprising that the industry sets its eyes on the blockchain technologies. What is the role of blockchain in the supply chain? Can it revolutionize the way we approach logistics?
Customers expectations grow: products’ authenticity and provenance matter
With the growing customers’ expectations and increasing need for traceability of the goods, blockchain is likely on the verge of mass adoption within the supply chain industry, especially when it comes to the food supply. Safety and quality standards are starting to play a bigger role in customers’ shopping choices, and customers are willing to pay more to make sure that they get the products of the best quality. That’s exactly why goods’ provenance and authenticity matters: both businesses and customers want to track goods’ journey to the shopping shelf to ensure they’re fresh and safe. One of the retail giants, Walmart, created a blockchain-based traceability solution for its food supply chain back in 2016 in partnership with IBM. Aside from ensuring products’ freshness, blockchain can be used to certify the origins of goods. For example, it is estimated that in China, approximately 30,000 counterfeit wine bottles are sold every hour, mostly imitating established wine brands. Quite often, fake bottles contain harmful chemicals and sweeteners, which are meant to improve their taste but may leave customers with health problems. With the help of unique QR codes, every bottle can be easily verified for its authenticity, saving both customers’ health and wallets. What are the most common challenges within the supply chain industry?
The lack of automation is the mother of errors, waste, and overcharges
As the supply chain usually involves numerous parties, there is often no coordination of the databases, which results in poor information infrastructure, insufficient communication among supply chain participants, and very limited transparency regarding the entire supply chain process. Since the supply chain can have numerous stages, the entire process requires extensive document work, and any missing form might result in delayed deliveries. For fresh produce, even a day of delay might be lethal. Such burdensome paperwork encourages errors, delays, and fraud, often leaving parties with conflicting records or imprecise information on the supplied products. Blockchain could potentially address all of these problems, introducing transparency, traceability, and clarity of information into the supply chain industry. What are the potential benefits of mass blockchain adaption in the supply chain?
Why could Blockchain be an answer to the problems of the supply chain?
- Access to a real-time, validated product status
Thanks to real-time access to all the relevant product information, administrative costs of the supply chain are significantly lowered, products can be easily verified, errors can be detected earlier on, and delays become very rare.
- Lower bureaucracy costs
Automation of trade documentation is both time- and cost-efficient. With the help of blockchain, one can easily automate freight invoices, proofs of delivery, proof of insurance, manifests, letters of credit, receipts, and tax documents. They are all essential for legal and customs compliance, so their automation saves companies a lot of trouble.
- Improved traceability of goods
With the improved traceability of goods, we can avoid shipment delays and increase products’ transparency, providing customers with detailed information on a product’s journey to the shop. As a result, customers are reassured, and businesses can enjoy greater customer trust.
- Higher automation of the supply chain process
Automating the supply chain makes it possible to increase the efficiency of the entire process, and improve quality control, especially for temperature-regulated goods, which are sensitive to temperature changes and may go to waste before hitting shop shelves if they are not transported in right conditions.
- Increased liquidity in trade finance
With the use of smart contracts and digital tokens, it is possible to improve the speed of trade payments, making the entire process of the supply chain smoother.
- Reduced error costs and waste
Mistakes in freight invoices and processing transactions result in overcharges, which cost companies a lot of money in the long run. Reportedly, supply chains are responsible for 40% of food waste in North America. According to the report by ReFed, the US wastes 218 billion US dollars annually on the food that is never eaten. An automated supply chain process would result in fewer mistakes, potentially lowering the amount of food waste.
Obstacles on the way to wider blockchain adoption
Although they are numerous advantages to blockchain adoption, there exist legal and practical concerns regarding the technology’s use in the supply chain. Firstly, unlocking blockchain’s full potential is possible only when there are enough participants willing to use blockchain in their operations. As supply chains often involve many parties, the majority of them would have to get on board with the idea of implementing blockchain solutions. Moreover, since blockchain is quite a new technology, its use is not regulated in numerous countries, which may be problematic for international trade. Although blockchain’s potential is enormous, it cannot verify certain aspects of transactions, which creates the need for anti-fraud safeguards and generates significant costs for the industry. Without collaboration between competitors, clear legal frameworks, and standardized procedures, wide blockchain adoption will remain just a dream.
All in all, blockchain technology is on its way to revolutionizing the supply chain if only the industry gives it a green light. Not only could it significantly improve the traceability of products, prevent harmful food fraud, and improve the quality of food we purchase but also increase liquidity in trade finance and reduce error costs and waste. Blockchain could be an answer to numerous supply chain problems. In the world, which values efficiency, but generates tremendous amounts of waste, a little automation would go a long way.
Sources:
https://www.ibm.com/blockchain/industries/supply-chain
https://medium.com/@infopulseglobal_9037/blockchain-in-supply-chain-management-key-use-cases-and-benefits-6c6b7fd43094
https://www.blockchainandthelaw.com/files/2019/06/Proskauer-Blockchain-a...
https://www.europarl.europa.eu/RegData/etudes/STUD/2020/641544/EPRS_STU(2020)641544_EN.pdf
https://bccs.tech/how-to-implement-blockchain-in-supply-chain-management/
https://www.supplychaindive.com/news/developed-countries-food-waste-cons...
