How is Blockchain Revolutionizing the Supply Chain Industry?

How is Blockchain Revolutionizing the Supply Chain Industry?

Blockchain is one of the most talked-about emerging technologies with numerous applications across many industries but can it modernize the fragmented and inefficient logistics industry? 

The blockchain technologists predict it to have a massive impact throughout many industries including the logistics sector. While best known for its role behind the various cryptocurrencies such as Bitcoin. Supply chains are becoming increasingly complex with many players involved requiring large numbers of contracts payment tracking and communications. Blockchain is one such technology predicted to help in connecting several players and handoffs within the supply chain industry bringing efficiency to the many disjointed elements in the supply chain.

Broadly speaking, blockchain technology describes a distributed highly secure platform ledger or database where everything from money, stocks, bonds, intellectual property and deeds, music and even votes can be stored and exchanged. Without powerful intermediaries blockchain in the logistics industry will likely be used as a distributed ledger. This could provide better transparency throughout the lifetime of the shipment.

The blockchain data is decentralized and cannot be changed once created thus creating a more secure and transparent information pathway that would follow a shipment from origin to destination. Due to this decentralization, it is unlikely a system could be disrupted due to a localized failure or attack. 

The implications could mean quicker processes, lower transactional cost and more secure and reliable data exchange within the industry. However, for this to happen, there needs to be a unified set of standards across the industry and that’s where the blockchain in transport alliance comes in.

BiTA standards are intended to create a common framework to help organizations develop and adopt blockchain technology. The Blockchain in Transport Alliance ASA forum is held for promotion, education and encouragement to develop and adopt blockchain technologies in the trucking and transportation and logistics industry.

Its goal for members is to create and adopt industry standard uses of blockchain applications and to provide clarity and direction for the development of blockchain technology in the transportation industry in a manner that will create efficiency, transparency and foster trust. 

The idea is to create a single source of information about products in a supply chain that are stored in a global ledger. Each component would have its entry on the blockchain that gets tracked over time. The involved parties could then update the status of a component in real-time. The result is once you receive your product you could track every component back to its manufacturer. 

Theoretically, you could trace the supply chain back to the mines where the raw materials came from. The companies can also use the blockchain technology in the supply chain as a single source of truth for their products. They can manage and monitor risks within the supply chain, ensure the quality of delivered parts and the track delivery status. Moreover, companies can use smart contracts to manage and pay for supply chains autonomously. 

Earlier supply chains were fairly simple. Mines and farms provided natural resources to skilled craftsmen like blacksmiths and tailors who then created and sold finished products.

But now supply chains narrate a different story altogether. They have become much more complicated, fragmented and difficult to understand. Hundreds or even thousands of suppliers all around the world contribute to creating and shipping products that you just purchased.

Most of the time the various companies don’t know about each other and as a consumer, you likely don’t know anything about how, where, when and under what conditions your product was made. This isn’t just a problem for consumers today’s supply chains are so complex that even the big tech giants have difficulty tracking how their products get made. Smart contracts could make supply chain management simpler and more transparent 

A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions are trackable and irreversible.

To further improve your understanding of smart contacts and blockchain, let’s take an example – A chip manufacturer could be paid immediately upon testing of each chip at the assembly facility. This would reduce the need for large contract invoices and the back-and-forth of refund requests for faulty components. Those same smart contracts could assist with shipping and logistics tracking of valuable products as they travel around the world.

Takeaway

Blockchain technology is widely applicable to many problems and numerous industries. It can truly transform the entire supply chain industry. With the use of blockchain, companies can finally have a complete picture of the process. They could keep track of their products at every stage in the supply chain bringing transparency to the production process.