Exploring the Benefits of Blockchain in Supply Chain Management

✍️ Opinions

Varun Bhardwaj

Sep 20, 2024 — 5 min read

Benefits of Blockchain in Supply Chain Management

This article has been contributed by Atul Anand, Director - Business Strategy (Industrial & Logistics), XRE Consultants.

First thing First, how I see blockchain is as a collection of blocks (because it is a collection, hence it is called blockchain) which are encrypted in a particular manner and are irreversible (means you can add but can’t amend or delete), and these blocks are stored at multiple locations at the same time in the network. This way records become tamperproof. This is a boon for supply chains that need pointed information for every step in the journey of product/information.

Revolutionary & Transformative

Blockchain technology adoption in the supply chain is bringing revolutionary & transformative changes in supply chain management. Drawing from my experiences in India and the broader APAC region, I have seen firsthand the profound impact this technology can have on enhancing transparency, efficiency, curbing fakes, and building trust within supply chains. Blockchain is making the supply chain more resilient than ever.

Transparency

Transparency, a somewhat illusionary word in supply chain, is now finding its true meaning where the users can see complete transparency & visibility by adopting blockchain technology and thus removing the mistrust from the stakeholders. Blockchain addresses the transparency challenge by creating a decentralized and immutable ledger that records every transaction. This transparency ensures that all stakeholders have access to the same information, fostering a culture of trust and collaboration.

In overly complex & fragmented supply chain like in India, the implementation of blockchain has been a notable change. For example, Blockchain technology has affected positively, the agricultural sector by enabling farmers to track their crops from the farm through the consumer’s table. Such advanced traceability guarantees the delivery of fresh and genuine products to the consumers thereby improving their confidence in what they consume. Furthermore, it provides farmers with useful information concerning the market requirements and prices of its products and thus helps make the right decisions and improve performance.

Automation

Blockchain automates processes which reduces the need for human intervention, eliminating human errors that result in a reduced need for manpower, administrative cost is reduced, transactions become efficient, and automation streamlines operations & thus overall efficiency increases & cost reduces.

In the APAC region, for example in the electronics industry supply chains span multiple countries and many a time use intermediaries, adoption of blockchain in procurement reduces lead times, lowers procurement costs, reduces lead times & eliminates the need for intermediaries, real-time visibility increases efficiency & lowers the cost.

Trust & Security

Trust being a critical part of any supply chain’s robustness is a winning block brought upon by blockchain with conviction. The distributed database characteristic of blockchain ensures that no single one can muffle & has control over the entire supply chain, thus reducing the risk of fraud and manipulation. Each transaction is securely recorded and cannot be altered, providing an irreversible record of the product's journey.

In India, fake & counterfeit goods are a great concern, blockchain has proven valuable apparatus in combating fakes and counterfeits. For instance, in the pharmaceutical industry, blockchain has been used to track the movement of drugs from manufacturers to consumers, ensuring that only genuine products reach the market. This not only protects consumers but also helps legitimate businesses keep the trust of the customers & their reputation and business volumes.

Bonhomie & Collaboration

Blockchain technology brings great bonhomie & collaboration among the stakeholders in the supply chains. Being the source of truth for a particular supply chain instance, blockchain ensures that all collaborators have access to the same information, eliminating misunderstandings and disputes. This improved collaboration leads to more efficient and effective supply chain operations.

Supply chains often involve multiple stakeholders with varying levels of technological sophistication because of geography positioning, and technology adoption of blockchain has helped better collaboration. For example, in the automotive industry, blockchain has been used to coordinate the production and delivery of components, ensuring that all parties are aligned and working towards the same goals. This has resulted in smoother operations and improved product quality.

Blockchain in Supply Chain- Challenges & Way Forward

In the future, blockchain technology has the potential to become an “Operating System” for supply chains but it is not free of challenges. There are several issues on regulatory compliances, scalability & interoperability to make blockchain technology widely accepted & adopted. However, the sun is shining bright on blockchain technology as more technological advancements are coming along & awareness about blockchain technology is increasing exponentially.

Let me touch on some of the concerns of blockchain technology. For me, many of the challenges are easily resolvable & superficial to an extent. However, listening to the critique makes technologies robust and going forever.

The ability to handle Mammothness of transactions in the future is a cause of concern as it is feared it might result in slower processing times & higher associated costs. However, it will be sorted by enhancing the technology to build blockchains.

Integrating blockchains is not easy with different systems & platforms. It is a cause of concern because different partners in blockchain use different systems & protocols. It makes integration complex, time-consuming & costly. However, as we see large benefits of blockchain technology, in the future, I hope to see some common protocols that will make integration easy.

Regulatory hurdles as countries don’t have standard regulations & complicate the implementation of blockchain in international supply chains.

High Consumption of energy in blockchain technology adoption raises concerns about the environmental impact & there is a need to work on this front to take this negative notion about blockchain.

Like every other data, data privacy & security is a rightful concern. Putting the ever-evolving layers of security on data is of paramount importance.

Lack of knowledge about the benefits of blockchain among the stakeholders creates doubts about blockchain technology and this results in a lack of adoption.

In conclusion, blockchain technology has the potential to transform supply chain management by enhancing transparency, efficiency, trust, and collaboration. Drawing from my experiences in India and the APAC region, I have seen how this technology can address the most pressing challenges in supply chain management. As we continue to explore and harness the power of blockchain, we can look forward to a future where supply chains are more transparent, efficient, and resilient.