The advent of new technologies continues to transform organisations, with blockchain leading the charge. After reshaping the financial sector, blockchain is now poised to revolutionise global supply chains. In an increasingly complex environment, this technology offers a pathway to building resilient, transparent, and reliable supply chains. By streamlining processes across every link throughout the chain, blockchain-based solutions are becoming indispensable tools for greater competitiveness and security.
What is blockchain?
Blockchain is a technology designed to store and transmit information securely. Its high levels of security, transparency and traceability stem from its decentralised structure, eliminating the need for intermediaries.
Jean-Paul Delahaye, a renowned computer scientist and mathematician, aptly compares blockchain to "a massive ledger, accessible to everyone for free, where anyone can write but nothing can be erased or destroyed."
In simpler terms, blockchain acts as an extensive database that records the complete history of transactions among users. Operating on a peer-to-peer network, it allows users to add or verify data after undergoing cryptographic identification. However, these records are immutable and cannot be altered or deleted in the future, ensuring data integrity. The decentralised and unchangeable nature of blockchain fosters an environment of trust.
Blockchain networks can be public, open to all users, or private, restricted to selected participants. Accessing a private blockchain requires an invitation from its administrator, enabling businesses to manage sensitive product information more securely.
The advantages of blockchain
Blockchain offers three significant benefits for businesses. Regardless of its application, it enhances traceability, security, and operational efficiency.
Traceability
Within a blockchain, no information can be erased. Each stakeholder can access every node in the network, each holding a complete copy of the database containing the entire history of transactions. In other words, hiding anything becomes highly challenging, if not impossible. This ensures system stability and guarantees supply chain transparency, particularly for food supply chains and other industries where product quality is critical.
Security
Blockchain’s inherent design makes it exceptionally secure. Validation processes are carried out by various users who are unacquainted with one another. Each node in the network monitors the system, creating a mutual oversight mechanism that mitigates the risk of fraud or misuse. This provides compliance with industry standards and ensures authenticity across systems.
Efficiency
Blockchain is entirely user-managed, meaning it operates 24/7, 365 days a year. Transaction times are significantly reduced compared to traditional intermediaries such as governments or banks. The absence of intermediaries also lowers costs and minimises potential errors, improving supply chain operations and business value.
Blockchain applied to the supply chain
Blythe Masters, CEO of FNZ, a global financial services company, explained in The Wall Street Journal: “Blockchain technology can be widely leveraged for processes involving multiple parties where information sharing is essential for transactions, activity coordination, and value exchange.”
It’s clear that blockchain in supply chains have a pivotal role to play. One of the benefits of using blockchain is that it enables a select group of pre-identified stakeholders to safeguard their operations while improving overall performance. According to a study by the World Economic Forum, 86% of industry leaders believe that blockchain provides a competitive advantage in supply chain management.
Strengthened trust
By recording all transactions in a shared ledger, blockchain offers an unprecedented level of trust. All stakeholders within the network have access to the same information, reducing risks of fraud, communication errors, or data transfer issues, while saving time for everyone involved.
This trust is further reinforced through smart contracts. These digital agreements, stored on the blockchain, are automatically executed once predetermined conditions are met. By eliminating intermediaries and avoiding unnecessary delays, smart contracts streamline processes and help build stronger, more reliable business relationships.
Robust risk management
With blockchain, businesses gain access to reliable data, enhancing their ability to manage risks effectively. It enables rapid identification of disruptions in the supply chain and facilitates the exploration of alternative solutions, regardless of the stakeholder involved:
- Supplier;
- Manufacturer;
- Retailer;
- Logistics provider;
- Distributor.
By breaking down silos, companies can now anticipate potential delays and gauge their extent. Additionally, blockchain can address insurance challenges, particularly with smart contracts. This empowers businesses to make informed decisions and seamlessly coordinate the flow of goods across the supply chain.
Improved visibility
By embedding blockchain at the core of their supply chain, businesses can record every transaction across the entire value chain. When combined with IoT (Internet of Things) and RFID (Radio Frequency Identification) technologies, this allows real-time visibility and tracking of goods from their origin to final delivery.
This integration promotes ethical and sustainable business practices at every stage, making it a critical priority for organisations. This is especially vital for industries where materials may be susceptible to counterfeiting or sourced through forced labour. Blockchain for supply chains provides an infallible guarantee of provenance on a large scale, significantly enhancing customer trust.
It is clear that blockchain is a pivotal innovation, redefining the foundations of supply chain management. This technology holds the potential to enhance operations across the entire supply chain by addressing challenges related to execution, traceability, and coordination.
In doing so, blockchain promises to meet the growing demands of customers while navigating the evolving dynamics of global markets. For businesses, the real challenge lies in seamlessly integrating this powerful platform into their existing solutions to unlock its full potential.
