Blockchain technology is arguably one of the greatest innovations in the field of technology in the current age. Since introducing blockchain technology for cryptocurrency through Satoshi Nakamoto's writing regarding Bitcoin and the proof of work verification via blockchain, the technology has gathered extensive roots.
The use of blockchain technology has permeated over cryptocurrency and is quickly gaining applicability in a variety of industries. One of the industries which can benefit from blockchain technology is supply chain management. This article gives an in-depth analysis of blockchain and how it can apply in supply chain management while giving five expert tips for anyone interested in using blockchain in this sector.
How Does Blockchain Work
Blockchain is a distributed ledger system that stores digital data records or "exchanges" in a manner that makes them impossible to alter. Any time a user initiates a transaction, the request is sent to the many nodes that make up the system. Every node is decentralized and, as such, completely verifiable since every computer has an individual record of the entire transaction. This is the fundamental aspect of Web 3.0 and the decentralization of the Internet.
After the transaction has been verified, it is added to other transactions to form a batch for the ledger. The distributed ledger may be used by businesses to keep track of any transaction, including the transfer of files, personal data, and payments, which is paramount for supply chain management.
Blockchain Tips For Supply Chain Management
1. Securing Goods Using Blockchain
A foundational aspect of supply chain management is guaranteeing the security of the goods being supplied. Tracing goods in a centralized ledger in traditional supply chain management forms is often challenging. This is because anyone can manipulate the Ledger provided; they have complete control over it.
However, since the blockchain is decentralized and different entities possess the same transaction record, any changes in the blockchain trigger a notification for every individual with a record. As such, it is possible to trace the security of every good as changes in the ledger are public and permanent. An extra benefit is that every node in the blockchain has a specific identifying hash code. Therefore, it is easy to know who made changes in the ledger whenever necessary.
2. Smart Contracts
In supply chain management, most of the work involves the delivery of certain goods and services and the guaranteed payment for such services. Supply chain management would benefit from blockchain in immediate payment for services and goods rendered. A smart contract facilitates this by ensuring that the moment certain stipulations and expectations are fulfilled as was expected in the earlier defined limits of the contract, payment is immediately delivered.
As such, the payment would be tied up in anticipation of fulfilling the set requirements. Entities involved in supply chain management would be guaranteed payment since the funds can be closed in escrow, pending the set conditions' determination.
3. Goods Tracing Using Blockchain
In supply chain management, it is imperative that all the goods within a warehouse or goods supplied to consumers and customers can be traced to the root source or origin. Blockchain requires that whenever a transaction is entered into the blockchain, it can never be deleted since the whole structure is decentralized and verifiable on a variety of nodes on all computers in the system. Through this, it is easy to verify the origin of a specific batch of goods and ascertain its source whenever required.
4. Reducing Transaction Costs
Transaction costs in supply management can eat into an organization's profits, especially where the transaction costs involve a very integral element of the entire transaction, such as verifiability. However, you can use blockchain technology to reduce the transaction costs of the entire supply chain management by ensuring that the system is based on a verifiable blockchain system. As identified above, every node in the system contains a transaction record.
As such, it is unnecessary to involve third parties to verify the transaction since the system verifies it. This will save on the cost the organization has to spend in terms of verifying contracts.
5. Secure Payments
The primary foundation of the existence of blockchain technology was to develop cryptocurrency. While cryptocurrency is largely unregulated in many jurisdictions, it can be very beneficial for supply chain management, especially where secure payments are concerned. As noted above, transactions on the blockchain are permanent, indelible, and irreversible. Therefore, parties engaging in trade can be confident that any transactions they enter can be traced during the business transaction.
As such, even with trade interactions with new entities, business owners would not be worried about the security of their payments since blockchain guarantees this for them.
Blockchain and decentralized ledgers are among the most revolutionary technologies of the modern age. The applicability of blockchain and various industries makes it invaluable, especially in the coming years. As such, it is crucial for any organization engaging in supply chain management to incorporate blockchain technology for its various benefits and to guarantee prosperity and assimilation to modern technology.