The use of blockchain technology in supply chain management

Blockchain technology refers to the decentralised, distributed ledger technology that powers digital transactions and digital currencies, such as Bitcoin and Ethereum. It also tracks assets across business networks, as IBM clarifies: ‘an asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding.’

Just about anything can be tracked, and traded, on blockchain networks. As such, the far-reaching benefits of blockchain have transformed entire industries – including banking and financial services, healthcare, government, and media. Another industry that’s made ready use of blockchain solutions – across its operations, processes, and management – is the global supply chain.

Why is blockchain technology used in supply chain management?

Both businesses and customers have come to rely on technology to make our everyday lives easier, from ensuring supply matches demand, to receiving next-day delivery when we need it. Our modern expectations require robust, sustainable, and tech-enhanced supply chain networks to fulfil increasingly sophisticated requirements.

Physical and digital supply chains are not impervious to inflation, climate change, cyberattacks, geopolitical issues, and a whole host of other factors. Supply chain partners, therefore, are always seeking innovative ways to ensure procurement, manufacturing, logistical, and other business-critical processes are duly protected from disruption. Plus, with supply chain tracking often feeling fragmented, blockchain presents a solution that helps address some of the key challenges facing supply chain management (SCM).

What are the business advantages of using blockchain in supply chain processes?

Blockchain goes far beyond cryptocurrency. It offers business leaders and supply specialists an opportunity to conduct their operations with reduced risk, greater trust, increased visibility and transparency, and enhanced value chain.

To illustrate, here are some of the many advantages of blockchain-based supply chain management:

• Supply chain transparency. Transparency and traceability are key features of blockchain networks. All blockchain transactions are recorded and visible to any network participant, reducing the likelihood of fraud and promoting trust across the chain, with all stakeholders privy to the same level of information.
• Smart contracts. These self-executing contracts use predefined conditions to automatically execute actions is certain conditions are met, remove the onus for intermediaries to complete actions, reduce bottlenecks, and speed up operations.
• Inventory management. Blockchain allows companies to organise and track data in real-time. For example, ledger entries can help ‘queue’ supply chain events – such as allocating shipments that have newly arrived at a logistics hub to different transport vehicles or shipping containers.
• Security and immutability. Use of cryptography ensures data, transactions and records across blockchain platforms are secure, tamper-proof, and immutable. Blocks added to the chain cannot be changed, resulting in robust record logs and greater business integrity. This secure record-keeping also supports compliance and regulatory requirements.
• Resilience. Improved accountability, trust and transparency helps to drive resilience and sustainability across the whole supply chain. Blockchain technologies support waste reduction, reduce inefficiencies, help businesses to meet ethical and environmental standards, and reward responsible practices by boosting brand awareness and consumer trust.
• Reduced administrative costs. As well as smart contracts, business processes such as supplier onboarding – which can be a time-consuming, manual process – can be made easier with blockchain. Immutable records hold critical information related to new vendors, enabling businesses to engage with suppliers quickly, easily, and with greater trust.

By addressing considerations such as shipping delays, lack of automation, counterfeit products, unethical sourcing, patchy distribution, and insecure storage, businesses – and stakeholders across the entire supply network – can operate in a more-confident, informed manner.

What are some use cases of blockchain in the global supply chain?

Transport specialist, FedEx, uses a blockchain-based system to enable real-time tracking and monitoring of its shipments – from initial origin right through to delivery destination. Smart contracts are used to automatically transfer responsibility and ownership of shipments at various stages – for example, between retailers, shipping providers, distributors, and individuals receiving goods – providing full transparency regarding shipment status and whereabouts. This not only builds trust, but also improves customer experience and minimises disputes between stakeholders.

Food industry retailer, Walmart, has integrated a Hyperledger Fabric food traceability system to trace the origins of various food products it sells. This offers a number of advantages, such as: upholding food safety standards by tracing and containing outbreaks of food-borne diseases; promoting food trust in consumers and regulatory bodies by demonstrating food provenance; enabling food supply chain suppliers to upload certificates of authenticity to the ledger.

A pilot study by KPMG, Merck, Walmart and IBM sought to address the problem that, in some countries, counterfeit pharmaceuticals account for 70% of all drugs in the supply chain. Using blockchain, the time taken to trace prescription drugs was reduced from 16 weeks to just two seconds. It enabled interoperability between supply chain partners, created a single source of truth regarding pharmaceutical product movement, identified illegitimate and suspicious activity across the supply ecosystem, and improved patient safety.

What are the challenges of blockchain in supply chain management?

PwC’s 2023 Digital Trends in Supply Chain Survey reveals that, despite the huge benefits that the application of blockchain brings, a number of technological and operational challenges remain.

Challenges associated with use of blockchain use in SCM include:

• amending inaccurate records
• digital upskilling of employees
• scalability
• security risks
• high computational overheads
• management of decentralised systems
• multiple party buy-in
• integration of enterprise resource planning (ERP) applications.

Understand how blockchain and other technologies can drive business success

Gain industry-relevant skills and expertise to join a growing, in-demand sector, with Abertay University’s online MSc Computer Science programme.

Whether you’re seeking a career change, or want to advance your skills to progress in your current IT role, our flexible, 100%-online master’s degree is the ideal choice. You’ll combine up-to-date theory with hands-on practice, gaining a comprehensive understanding of the computer science discipline. From web development, databases, and networking to the Internet of Things (IoT) you’ll gain the specialist insights needed to tackle real-world challenges and enable organisations to thrive. Learn key programming skills, and study engaging topics such as emergent technologies, artificial intelligence, and future challenges, on a course that fits around your lifestyle and commitments.