Blockchain in supply chain

Blockchain in supply chain

December 30, 2016 by Hitesh Malviya

What is blockchain?

Blockchain is a widespread digital database that holds transactions in a tamper-resistant way. Every participant of the blockchain is granted access, inspect, or add to the data to all the nooks and corners of the ledger. This implies 100% transparency of records.

Consequently, blockchain technology is a platform that simplifies and secures business transactions over the internet. Due to its trustworthy infrastructure, it has innumerable usecases. Injecting blockchain into supply chain will also be a revolutionary step in the near future.


Present problems with the supply chain

Supply chain, actually, links all the steps involved in production and distribution of all types of goods. Vast, isn’t it? Managing everything, from raw material procurement to distribution and marketing of finished goods, is a great deal in itself. Hence, supply chain currently counters the following problems:

  1. Due to immeasurable geographical expanse of the supply chains, tracing and managing every stage is tough.
  2. The cost of commodities paid by consumers does not reflect the cost of production in some cases because of lack of transparency in supply chains.
  3. The inevitable “disturbances” that affect supply chain, such as a natural calamity, are neither tracked nor taken into account.
  4. No investigation is done for illegitimate activities involved at several stages in supply chain. These may include-counterfeiting, forced labor and poor conditions in factories, or revenues being used to fund war crimes and criminal groups.

The Blockchain Magic

A sneak-peek of the problems clarifies that blockchain will bless supply chain with solutions to all these. The blockchain will single-handedly register the transfer of goods on the ledger as transactions that would identify the parties involved, as well as the price, date, location, quality and state of the product and any other information that would be relevant to managing the supply chain.

  • The openness of the ledger will allow consumers to trace the products since the very origin of the raw material used.
  • The decentralized infrastructure will prevent exploitation or manipulation of data by one of the members of the production team.
  • The implementations of blockchain will open doors for opportunities abound to create new, specialized uses for the technology.
  • The technology can be used to maximize profit margins for the small scale producers because the middle-men will no longer play a role.
  • The security provisions in blockchain will disseminate the need of audits required by internal systems and processes.
  • The technology will definitely leverage the reach of the supply chain because thousands of touchpoints can be created in the ledger.

Developments Till date

Certain efforts have already been made in this context across the globe. Some of these are listed below:

  1. Everledger (Africa) is trying to inculcate blockchain into diamond supply chain and eliminate market fraught with forced labor and the funding of violence.
  2. Provenance (London) has customized an Ethereum- and Bitcoin-based ledger that adds to transparency of a company’s process of production.
  3. BlockVerify uses blockchain to counterfeit drugs and verify medicines. These not just account for huge economic losses but also take toll of several lives every year.
  4. India-based Mahindra Group has joined hands with IBM to develop blockchain-based supply chain applications.
  5. ConsenSys’s Rebecca Migirov has put forward the concept of “supply circle” and “prosumers (consumers that are also producers based on their vantage point)”. Supply circle is basically a blockchain-based ecosystem that helps in increasing cooperation and collaboration in communities and encourages people to become prosumers.

Thus, blockchain technology has a potential to disrupt every field it enters. Addition of blockchain to supply chain will help in increasing reliability and transparency. And this, in turn, will lead economy to new heights!

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