7 Applications of Blockchain in the Supply Chain

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Blockchain, the tamper-resistant distributed ledger that’s used to validate and store digital transactional records, is transforming the supply chain by boosting security, transparency, and efficiency.

Blockchain can enhance supply chains by enabling products to be delivered faster and more cost-effectively, improving the traceability of products, allowing partners to collaborate and share information more effectively, and helping improve access to financing.

Here are seven uses of blockchain in the supply chain.

Key Takeaways

  • Blockchain is revolutionizing the supply chain industry by increasing transparency, traceability, and efficiency.
  • It can enhance tracking, reduce counterfeiting, address food safety issues, encourage sustainable sourcing, improve payments, and enable better communication and collaboration.
  • While the technology is still emerging, it has the potential to replace traditional supply chain processes gradually.

Improving Tracking and Transparency

By implementing blockchain along with Internet of Things devices, such as smart sensors and RFID tags, companies can more effectively record the movement of goods through the various stages of the supply chain and record the condition of those products, e.g., temperature, humidity, etc., at each stage. Since transactions are always up-to-date and time-stamped, companies can query the statuses and locations of products at any time.

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Blockchain offers more transparent and accurate visibility into the tracking process, helping organizations detect and more rapidly address potential issues, such as compliance violations, counterfeit goods, delays, and waste. Organizations can also opt to share track and trace data with their customers to validate the authenticity of their products and verify that they’re engaging in ethical supply chain practices.

In addition, blockchain builds trust among supply chain partners because it provides open access to the key information it captures.

Enhancing Traceability

Another use of blockchain in the supply chain is traceability. In supply chain management, traceability is the ability to locate the previous and current locations of inventory as well as obtain a record of the custody of that inventory, as products move from raw materials to sellers and customers.

Supply chain partners can use blockchain to efficiently trace the activities along the supply chain. And transactions occur in real-time as blockchain comprises decentralized open-source ledgers that record data, which is replicable among users. Using blockchain, stakeholders can access information about products, including dates, prices, origin, quality, certification, destination, and more.

Cutting Down on Counterfeiting

Provenance is key when it comes to checking the quality and reliability of products. Because blockchain allows partners to trace goods throughout the supply chain, they can accurately verify the provenance of those products. Consequently, a quick check of the provenance of particular goods reduces counterfeiting,

Addressing Food Safety Issues

A number of issues around food safety, such as the spread of foodborne illnesses and cross-contamination, are hard to track individually. Additionally, the lack of data and visibility in traditional supply chains makes it difficult for organizations to act quickly if there are any issues, which can affect their reputations and bottom lines. Because of the reliability and integrity of the blockchain, it is particularly suitable for handling these issues. Blockchain makes it possible to trace the origin of a food item, thereby helping the food industry boost the overall quality and reliability of food products.

Encouraging More Sustainable and Ethical Sourcing

Demand for the use of blockchain in the supply chain is driven in part by customers’ need to know the exact origins of their products and whether they were made ethically. Blockchain can help ensure consumers that companies source their materials and products ethically and sustainably.

Blockchain can verify the origin of materials or products and present that information to consumers who can then decide if they want to purchase particular products. And the traceability and tamper-resistant features of blockchain provide consumers with a transparent way to verify how products were manufactured as well as where and how they were shipped throughout the supply chain.

Making Payments More Efficient

Typically, it takes weeks or months for invoices to be paid. However, with blockchain-based smart contracts, invoices can be paid immediately. And the distributed infrastructure of the blockchain can help establish a transparent payment system enabling all the parties in any particular supply chain to view payment transactions, reducing human error and fraud.

In addition, supply chain partners that use blockchain-based cryptocurrencies can pay each other without having to use banks, saving money on fees and accelerating the payment process.

Enabling Better Communication and Collaboration

There’s a lot of back and forth between the various partners in today’s supply chain regarding invoices, contracts, order requests, and more, which can cause disagreements and delays. However, using blockchain technology in the supply chain can improve this communication and collaboration between stakeholders. For example, by sharing databases between different parties, blockchain can cut out the need for middlemen to verify, record, and/or coordinate transactions. In addition, smart contracts motivate all stakeholders to meet the obligations that they’ve agreed to in a timely manner.

What’s Ahead for Blockchain Technology in the Supply Chain?

Applications of blockchain technology can address certain issues in traditional supply chains, such as eliminating the need to prepare paper documents. What’s more, a decentralized, immutable record of every transaction enables stakeholders to track goods from their sources to their delivery destinations, enabling a more transparent supply chain.

Still, implementing blockchain in the supply chain has not yet been widely adopted as significant expertise is necessary to realize the benefits. Additionally, because blockchain is still an emerging technology, it must adhere to governmental regulations that vary by country – regulations that could affect supply networks. Blockchain-based technology will likely gradually replace traditional supply chain processes and networks; however, the transition won’t happen all at once.

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Linda Rosencrance
Technology journalist
Linda Rosencrance
Technology journalist

Linda Rosencrance is a freelance writer and editor based in the Boston area, with expertise ranging from AI and machine learning to cybersecurity and DevOps. She has been covering IT topics since 1999 as an investigative reporter working for several newspapers in the Boston metro area.  Before joining Techopedia in 2022, her articles have appeared in TechTarget, MSDynamicsworld.com, TechBeacon, IoT World Today, Computerworld, CIO magazine, and many other publications. She also writes white papers, case studies, ebooks, and blog posts for many corporate clients, interviewing key players, including CIOs, CISOs, and other C-suite execs.