Technology always seems to be moving forward. Every year, we hear about new technologies that will revolutionize how we do things. The internet, for example, was once in this boat. As we know, it has fundamentally changed how millions of people are entertained, shop, communicate, or do business. Other technologies that may be in the future include quantum data to power sophisticated artificial intelligence (AI) or pilot autonomous cars, ships and aircrafts. But one technology already here that is growing in importance is blockchain. While it's been around for over a decade, several of the largest companies in the world, plus a slew of startups, are leveraging it to streamline logistics, lower costs, and smooth out kinks in the global supply chain.
Blockchain was conceived in the early 1990s but didn't become well known until it was used as a decentralized ledger for the cryptocurrency Bitcoin in 2008. Blockchain can best be described as a database that can store and share information so that no one can change it. For cryptocurrencies, it records all token transactions to secure ownership. Because of its versatility, blockchain can work in various industries in several ways.
How does blockchain work?
As mentioned, blockchain is designed to be immutable, which means that once data is inputted, it cannot be changed by any individual or group. It works like this: new information is added to a fresh block. Once filled, the block is attached to the chain and connected to the blocks in chronological order. The chain is simultaneously stored and verified on a peer-to-peer network of computers and servers called nodes, which are spread across the globe. This makes the data secure from tampering because even if someone were to alter information on one computer, all the other nodes would cross-reference the change and be able to identify the node with the incorrect data and reject the alteration. The data is also encrypted, so blockchain provides a high level of transparency, traceability, and security.
For the supply chain, blockchain helps customers, manufacturers, and suppliers keep track of prices, dates, locations, quality, quantity and other data to manage things better. As a benefit, this increased traceability improves compliance while providing oversight into the material supply chain to remove some risk of poor-quality products. Several of the largest companies in the world are starting to use it to streamline their supply chain network, with a strong possibility they will scale its use up as the technology proves its worth.
The integration of blockchain technology can help overcome a few supply chain issues. It gives data visibility to all parties, can process optimization, and is vital to demand management by more accurately forecasting needs for goods and services. These are obvious benefits for virtually every industry, from food and beverage to retail, manufacturing and in the construction sector.
How companies are embracing blockchain
Blockchain has caught the attention of some of the largest tech companies in the world. They are creating solutions using this technology that will allow it to be scaled for a diverse set of customers to use in various ways.
Amazon is best known for its online retail operation, but it has many other divisions ranging from Ring, its smart home and security unit, to Whole Foods Market, a brick-and-mortar grocery store chain. One of its lesser-known services is Amazon Managed Blockchain, part of its Amazon Web Services subsidiary. Customers can join or create a scalable blockchain ledger, and when used for the supply chain, it provides transparency and oversight of all aspects of the system with increased automation. Amazon has a patent for a way to use blockchain to help track its shipments all the way through the supply chain, from its production to delivery. This integration will allow it to cut down on fraud and counterfeit items, while verifying shipments.
Microsoft's cloud computing service division, Azure, has retooled its blockchain offering, calling it Azure Confidential Ledger. The service provides the infrastructure that allows multiple companies to access a ledger and digitize workflows for everything from transportation to payments. Customers can use the service to create more intelligent and efficient supply chains, slash fraud, and improve the speed of transactions. Microsoft is using blockchain in several areas, including sales figures and information on royalties for video game publishers with its Xbox console. Previously, it would take about 45 days for this financial information to be disseminated, but the implementation of blockchain makes the info accessible instantaneously.
Big Blue is a blockchain provider. IBM's service helps exchange trusted data to provide exceptional visibility for all participants across the supply chain. Users can set it up to automatically trigger contract provisions and like payments. IBM's system has real-time oversight, allowing participants to take action sooner if issues arise.
Database management behemoth Oracle has created its Digital Supply Chain with Blockchain solution. This solution creates smart contracts between multiple parties that ensure transparent transactions while boosting efficiencies across the supply chain.
What blockchain can do for the supply chain
In summary, there are several areas where blockchain can help with the supply chain for every industry. Here are a few:
- Ensure authenticity and quality of goods: Companies can leverage blockchain technology to trace products from raw material until it leaves a factory. This reduces the risk of counterfeit items and can be used to monitor the grade of materials.
- Increased efficiency and oversight of shipments: Materials or finished products will have a code attached to them that is scanned throughout their journey to the end-user. Every scan is added to the blockchain, offering a highly accurate picture of where the goods are.
- Optimized transactions: Companies can use blockchain ledgers to streamline invoicing, payment processing, and transportation of goods. The result is less manual labor, quicker audits, and enhanced verification that the correct item and quantity have been shipped and received. This can reduce delivery times, mitigate the risk of fraud, and cut down on human error. Once a shipment has arrived and been verified, companies can automate payment or other obligations to save time and effort.
- Greater transparency: Blockchain offers all participants complete transaction openness. All can review the data at any time, which can eliminate or reduce issues like incorrect paperwork.
With the current global supply chain issues, having the ability to quickly and accurately verify the status of an order or its whereabouts during shipment has only increased in importance. We are no longer in the embryonic stage of blockchain development. As massive companies and many startups continue to refine and enhance their capabilities, blockchain technology becomes more widely used. Eventually, it could become the standard used by companies globally.