Let’s face it. The fourth industrial revolution is already here. In the digital age, AI and Cloud computing are seen as the most disruptive technologies. The implications are everywhere- from real-time work document-sharing across different locations, the Internet of Things, Data Science, and everything else. There is, however, another silent contributor that gets overlooked in the public eye. A key element equally adept in diverse industrial backgrounds as well as finance, medicare, logistics, and supply chain management. In this article, we will be discussing blockchain technology and its undeniable impact on the supply chain industry.
While blockchain technology is synonymous with cryptocurrency, its practical applications are far more wide-reaching and versatile. The technology consists of a decentralized network where each transaction information is recorded and stored in a database or a Ledger. Each participating member or node has a copy of the ledger. The addition of new transaction information requires consent from every member of the network, though recent developments are slightly different.
By being a decentralized network, there is no central authoritative head within the network. Everyone is equal. The validation of a transaction occurs through a consensus mechanism, as explained above.
There are two primary types of mechanism:
Proof of Work
Validators, or miners, have to solve complex mathematical puzzles that require high computing power. A transaction is legitimized only after solving the cryptic puzzles. Miners all over the world compete against each other to add transaction details on the new “block” to be added into the blockchain. Miners usually get rewards in the form of cryptocurrency tokens. Its limitations include high energy and resource consumption. While still faster than other contemporary technologies, the process is more time-consuming than its successor- the Proof of Stake(PoS).
Proof of Stake(PoS)
In the PoS mechanism, miners are replaced with stakers. Instead of solving complex puzzles that require high computational power, stakers place a portion of their own digital asset as their stake for validation. Two factors are decisive for the stake rankings- the amount staked and the duration of possession of the assets staked. On winning, a staker gets a chance to validate, add transaction details on the block and earn some rewards. However, the entire staked amount is burned within the blockchain network if the transaction record is invalid, in a “slashing” event. The PoS mechanism is much more efficient and faster.
Advantages of Blockchain Technology
There are several merits of blockchain as an effective tool for problem-solving. For the supply chain management domain, blockchain offers the following advantages:
All parties within a network must agree on the validation of a transaction. Blocks are neither created nor modified without a consensus. This means all network members, or supply chain nodes, are aware of upcoming changes in real-time and consent accordingly, acknowledging a completed transaction. This consensus mechanism resolves possible supply chain issues stemming from payment clearance, warehouse management, transport, or delivery.
Provenance or Traceability
One of the major advantages of using blockchain technology is the aspect of traceability. It is essential for enterprises to know the exact procurement source of raw materials, along with their current position in the supply chain model. It helps in planning and scheduling upcoming operations- or making adjustments to the existing schedule if needed. Supply chain managers can view asset location and identity of the persons in possession- both in past and present. An asset can be anything- minerals, food items, money, devices, or intellectual property.
It is impossible to make adjustments with an entry made in the blockchain ledger. Each node has a copy of the ledger and extremely difficult to make concurrent changes through all of them at once. A new blockchain event can undo a previous transaction- but it will also require consensus. This makes the blockchain immune to data falsification- be it payment records, inventory control, warehouse conditions, or dispatch documents.
Transparency or Finality
A decentralized ledger contains the same transactions across all copies- at each supply chain node. This brings transparency and an element of finality to the entire management model. Through its intrinsic nature, blockchain technology helps greatly in settling disputes and improving relationships.
What are supply chain nodes?
A supply chain model consists of participants at different locations of the network. These locations are commonly referred to as nodes, while the members are called links. For ease of understanding, let us assume this B2B example. A Company J sells product X to Company K. J is the supplier while K is the customer. In transport ledgers, the product X shipment will be listed in outbound delivery for J, but as an inbound or incoming delivery for K.
The Global Supply Chain Industry
The meteoric rise of Amazon, Alibaba, Walmart, and other eCommerce companies directly gave a big boost to supply chain management- both as a profession and in total market valuation. Supply chain management professionals are in huge demand all over the world. From a financial perspective, forecasts suggest the global market valuation of the supply chain market will rise from US$15.85 billion in 2020 to US$31 billion by 2026. Also, SAP is the global leader in supply chain management software supplies with estimated revenues of US$4.4 billion. But, supply chain management is not exclusively limited to eCommerce.
Blockchain Implementation Examples in Supply Chain
The supply chain model is distinct for every industry. Each has its own set of unique features and challenges. Let us look further into 3 supply chain models, their challenges, and why blockchain is the preferred solution.
Cold Chain Supply for Perishable Food Items
Food items and other perishable commodities need strict regulation over the entire supply chain environment. Parameters whose fluctuation may degree product quality include temperature, humidity, impact shock/vibration, air exposure, and more.
In addition, food safety issues like cross-contamination can be hard to trace and isolate. Without any parametric data, it is even more difficult resulting in wastage of both products and economic resources. The company’s reputation also comes under fire. This is why major FMCG companies like Nestle, Walmart, and Unilever have incorporated blockchain technology into their existing supply chain models.
A blockchain consortium can easily keep detailed updated tabs on product movement. This increases efficiency and transparency while reducing the time taken to deliver quality products at the consumer’s doorsteps. Walmart uses blockchain to trace and ascertain the quality of pork products sourced from China. Acknowledging its success, the company implements blockchain networking for spinach and lettuce suppliers as well.
CoVID-19 Vaccine Supply Chain
The World Economic Forum supports the idea of using blockchain technology for the worldwide distribution of CoVID vaccines. Multiple vaccines, some with claims of more than 90 per cent efficiency have been announced from different corners of the world. Worldwide vaccine distribution is considered an even greater challenge than the R&D.
Vaccines from different manufacturers have separate storage conditions- some require a -20 degree Centigrade for long-term storage. Temporary storage conditions may preserve vaccine efficacy upto a month if kept between 2 to 8 degrees Centigrade. Meanwhile, the Pfizer vaccine requires -70 degrees Centigrade temperature. It can be stored in normal refrigerator conditions for a maximum period of 5 days.
To ensure the optimal efficacy of vaccines, it is absolutely essential to keep storage conditions ideal. Any compromise may lead to failure. Real-time monitoring and validation are required at each step of the supply chain. This is exactly why blockchain implementation is the recommended course of action for a supply chain of such magnanimous proportions.
Global Diamond Supply Chain
The major areas of diamond mining are Russia, Australia, Botswana, and other parts of Africa. Only 1 in 5 uncut diamonds receive a gem-grade certification. Production dropped recently due to the ongoing pandemic, but still managed to scale 111 million carats in 2020.
One of the longest and most complex existing supply chains, diamonds originating all over the world is initially transported to Surat in India. 92 per cent of all diamonds are cut and polished there. Afterwards, they are transported to diamond exchange markets or bourses. Renowned bourses exist at Antwerp(Belgium), Dubai(UAE), and Israel. After trades and brokering- the diamonds are then transferred to retail jewellery stores all over the world.
The main obstacle faced by diamond supply chains is traceability, or determining a diamond’s place of origin. Diamonds originating from war strife areas, or blood diamonds fund terrorists and insurgents in 3rd world countries, especially in Africa. The prevalent Kimberley method of diamond traceability is not fool-proof. Blockchain provides a much more stable solution, offering end-users each relevant information, tracing the diamond’s origin throughout the entire route.
The Best Blockchain Companies to Invest Your Resources
Blockchain development companies create customized supply chain management solutions for business enterprises and organizations. The trick lies in selecting the right service provider for your business rather than selecting the cheapest service provider. A combination of relevant experience, brand reputation, and service charges is thus a wiser choice.
Click here: Business Intelligence and It’s Importance