Blockchain

How Blockchain Can Be Used to Strengthen the Supply Chain?

How Blockchain Can Be Used to Strengthen the Supply Chain?

With globalization, the supply chain industry has witnessed exponential growth year by year. More countries are doing business together, using supply chains to exchange goods in return for money.

Along with the growth, supply chains have faced various challenges. Cutting-edge technologies tackled these challenges and made the supply chain work more efficiently and smoothly.

To tackle the current challenges in the supply chain, such as lack of transparency and the inability to track shipments, blockchain is playing a crucial role in overcoming both challenges.

This blog is all about how blockchain can be used to strengthen the supply chain so that businesses can transport goods efficiently without any hassles. So, if you are an entrepreneur or a business owner looking to enhance your supply chain, read this blog till the end. So, let’s start.

Supply Chain and Blockchain: Some Latest Market Statistics

The supply chain industry has skyrocketed since the last decade. On the other hand, blockchain technology has also been harnessed as more businesses realize its powers, and understand how it can transform their operations.

Here are some of the latest statistics related to blockchain technology and the supply chain industry.

supply chain management market stats

  1. The global supply chain management market size was $25.74 billion in 2022. It is estimated to be worth $72.1 billion in 2032, growing at a CAGR of 10.9% during the forecast period.
  2. The global blockchain technology market was estimated at $17.57 billion in 2023. It is predicted that it will grow to $825.93 billion by 2032, at a CAGR of 52.8% during the forecast period.
  3. According to the latest studies, approximately 40% of businesses have adopted or are considering adopting blockchain technology in supply chain finance.
  4. Walmart, Nestle, Carrefour, Coca-Cola, and FedX are some leading businesses that leverage blockchain technology in their supply chain management.
  5. According to the reports, incorporating blockchain into the supply chain can assist in removing supply chain obstacles and enhance logistics companies’ revenue by roughly 15%.

So, these are some of the latest statistics and information about the current state of supply chain and blockchain technology and their projected growth in the coming years. 

Now, let’s move forward and learn how blockchain will strengthen the supply chain.

How Blockchain can Strengthen Supply Chain Management?

Blockchain is a decentralized ledger used to store data in blocks distributed among the members of the network. It provides transparency, meaning everyone in the network can see the information.

It is secured, which means no one can edit the information stored in the blockchain without letting other users know. Furthermore, blockchain is highly secure. 

The information is distributed among various blocks in the network. It is almost impossible for anyone to steal the data from the blockchain ledger. 

Considering these features of blockchain technology, let’s explore the role of blockchain in supply chain management (SCM):

1. Blockchain for Traceability (Tracking Shipment)

Supply chain companies leverage blockchain technology to track shipments, enhancing traceability. Every transaction or event that happens during the shipping process is recorded in the blockchain ledger.

This can be accessed by the supply chain officials to track the shipment from its origin to its destination. Enhanced traceability fulfills the safety and compliance purposes in the supply chain sector.

2. Tackling Counterfeit Goods

Blockchain technology helps supply chain businesses overcome challenges related to counterfeit goods. When there is a high demand for a product and supply is low, some middlemen in the supply chain replace original products with fake products and charge the price for the original ones. 

This results in high losses to a business and also affects its reputation in the market. However, blockchain can assist companies in tackling these counterfeit goods. 

Manufacturers can store the product information on the blockchain network, creating digital identifiers for each good. When the receiving party gets the shipment, they can cross-check the information, such as manufacturer details, batch number, date of manufacturing, etc., to verify the authenticity of the products. 

3. Streamlining Logistics 

The traditional supply chain requires a lot of permissions from different departments to dispatch a shipment. This results in delays, and costs supply chain businesses thousands to millions of dollars. 

By integrating blockchain into the supply chain, the whole process will be automated and streamlined. 

Smart contracts, digital contracts that contain predefined terms and conditions embedded into codes, eliminate the need for permissions from different officials and help businesses automate the supply chain.

When the pre-defined terms in smart contracts are met, the permissions are automatically granted. Supply chain officials can immediately respond to approvals, resulting in fast and timely deliveries. 

4. Blockchain-Powered Inventory Management

Another way blockchain strengthens the supply chain is by enhancing inventory management.

Blockchain technology can be used to record real-time details of consignments which can be accessed by the supply chain members having permission. 

Also, smart contracts in the supply chain management, automatically trigger reorder points, update the levels of inventories, and allow businesses to manage their inventories efficiently and reduce the risk of stockouts or excess inventories. 

5. Facilitating Payments

Blockchain technology also helps in facilitating payments between suppliers and receivers. In a traditional supply chain, the receiver makes the payment to the supplier and this payment goes through the intermediary, known as a bank. 

The bank charges a commission to facilitate this payment. Also, if the payment is done in a different currency, it charges a commission to convert it, making transactions costly. 

However, blockchain, on the other hand, eliminates the dependency on the intermediaries and allows receivers to pay directly to the supplier. Moreover, it allows them to pay in cryptocurrencies, which is universally accepted, reducing the need to convert currencies. 

All these combined save businesses a lot of commissions and make payments less expensive compared to payments in the traditional supply chains. 

6. Managing Suppliers and Receivers 

Blockchain technology also helps in managing suppliers and receivers in the supply chain. The technology is used to record suppliers’ information, such as their performance, certifications, and contracts. 

This helps receivers know the supplier and reduces the risk of fraud, non-compliance, or unethical practices. 

Similarly, it goes in favor of suppliers where they can know about the receivers, like their size of business, their frequency of orders, their pattern of making payments, etc. 

This helps suppliers make informed decisions in selecting and managing receiving parties. 

7. Compliance and Regulatory Reporting

Last but not least, blockchain enhances compliance and simplifies regulatory reporting in supply chain management. 

The technology is used to maintain a tamper-proof record of documentation related to product quality, safety, and other standards, and the records of transactions. 

This makes it easy for businesses to audit the records and investigate if there is any mismatch in the records.

So, these are how blockchain can strengthen the supply chain. By increasing traceability, tackling counterfeiting, streamlining logistics, inventory management, facilitating payments, managing suppliers and receivers, and compliance and regulatory reporting, blockchain can help businesses manage supply chains more efficiently.

Benefits of Integrating Blockchain in the Supply Chain Management

Blockchain technology in supply chain management automates operations, tracks shipments, and facilitates B2B payments. However, technology provides more benefits to supply chain businesses than just these. 

Below are the benefits of implementing blockchain in the supply chain: 

#1. Blockchain Provides Transparency

Blockchain technology provides a transparent and tamper-proof ledger of transactions. Parties in the supply chain have visibility into the movement and status of goods.

This brings transparency and helps reduce disputes, fraud, and errors by ensuring that all parties have access to the same information.

#2. Blockchain Enhances Security

Another benefit of integrating blockchain in supply chain management is that it enhances security. The information about the supply chain stored on a blockchain ledger is encrypted and distributed on multiple nodes. 

As the information is distributed, it becomes difficult for anyone to edit or manipulate the information without the permission of the majority of members of the network. 

#3. Blockchain Reduces Operational Costs 

Blockchain technology reduces the dependency on intermediaries for facilitating transactions and operations. 

Smart contracts automate the whole process; when the pre-defined terms are met, the transaction and operations are carried out automatically. 

This reduces the need for manual interventions and administrative overhead and minimizes the risk of fraud and errors, saving operational costs. 

Hence, these are the major benefits of integrating blockchain into supply chain management. Moving forward, read to understand how to implement blockchain technology into your supply chain successfully. 

Implement Blockchain into the Supply Chain

You will need expertise in blockchain to implement it into your business’s supply chain. To make it simple for you, we have explained the implementation process in six steps. 

Step 1. Identify the Need

To implement blockchain technology in the supply chain successfully, you need to identify the need for blockchain. You must determine how technology can enhance your business. 

It could be tracking shipments, facilitating payments, or improving the existing security protocols. 

Step 2. Hire Blockchain Experts

As discussed earlier, adding blockchain to the supply chain requires deep knowledge and expertise in blockchain technology. 

Hence, it is recommended to hire a leading blockchain development company to develop custom blockchain-powered solutions and integrate them into your supply chain.

Step 3. Select the Right Blockchain Platform

After partnering with your blockchain experts, choose a suitable blockchain platform that meets the requirements of your supply chain requirements. 

Carefully analyze the scalability, security, consensus mechanism, governance model, interoperability, and support for smart contracts while selecting the right platform.

Moreover, you must decide which type of blockchain will be better; Public, private, or consortium blockchain. Pick the right blockchain that aligns the best with your requirements. 

Step 4. Design and Develop the Blockchain Solution 

Once you choose the blockchain technology, design and develop the solution for supply chain management. Define the architecture, data model, and protocols for your blockchain solution. 

Also, develop smart contracts to automate business operations and implement rules and agreements. You can also integrate blockchain with existing systems and processes to ensure seamless interoperability.

Step 5. Pilot and Test

Before implementing the blockchain into the complete supply chain, start with a pilot project to test the feasibility and effectiveness of your blockchain solution in a controlled environment. 

Partner up with a small group of supply chain partners to validate the use case, gather feedback, and identify any issues or challenges. 

Also, leverage the pilot phase to check on the design, refine the implementation, and fine-tune the performance of the blockchain solution. 

Step 6. Deploy and Scale

Once the testing is successful, deploy the blockchain solution across your supply chain ecosystem. Work closely with supply chain partners and train them to use the blockchain efficiently. 

Scale up the implementation gradually, monitoring performance, security, and compliance as you expand the scope and reach of the blockchain solution.

So, this is how you can implement blockchain into your business’s supply chain. However, remember to monitor the performance of the blockchain solutions and update them for efficient functioning for a long time. 

Also Read: Future of Blockchain and AI Collaboration

Challenges You May Face While Integrating Blockchain Into the Supply Chain

You may be thinking that implementing blockchain in the supply chain is so easy. But the truth is, it is not as easy as it looked in the above section. Various challenges arise when businesses integrate technology into their supply chain. 

We have mentioned some common challenges that arise while implementing blockchain in the supply chain: 

Challenge 1. Businesses Face Challenges While Integrating With Existing Systems

It is possible that the existing systems are not compatible with blockchain technology. Hence it is crucial to invest in the right resources (upgraded systems) and expertise to implement blockchain in the supply chain. 

Challenge 2. It is Challenging to Maintain Consistent Data Standards and Interoperability

For the smooth functioning of a blockchain-powered supply chain, it is necessary to ensure consistent data standards and interoperability across different participants and systems within the supply chain. 

Challenge 3. Blockchain Networks Face Scalability Challenges

Many blockchain networks face challenges when dealing with large volumes of transactions and data in complex supply chains. 

Therefore, it is recommended to always research in-depth while choosing the blockchain network for supply chain management. 

Challenge 4. Businesses Also Face Regulatory Compliance Related Challenges

Regulatory uncertainty and compliance requirements vary across different jurisdictions and industries, posing challenges for implementing blockchain in supply chain management. 

Hence, businesses must navigate legal and regulatory frameworks related to data protection, consumer privacy, intellectual property rights, and international trade when deploying blockchain solutions in the supply chain. 

Challenge 5. Implementing Blockchain Requires Significant Investment 

Significant upfront costs are required for the development, deployment, and maintenance of blockchain networks and infrastructure. 

Hence, businesses must calculate the return on investment (ROI) and demonstrate the value proposition of blockchain in supply chain management. 

So, these are the top challenges faced by businesses while integrating blockchain into the supply chain. It is crucial to understand your requirements and implement the above-mentioned recommendations to successfully integrate blockchain technology to empower the supply chain. 

Concluding Thoughts

Blockchain is an emerging technology that has the potential to transform supply chain management. This blog has shown how blockchain can be used to strengthen the supply chain. We have covered all the major aspects of implementing blockchain into the supply chain.

As blockchain right now is at its initial stage, many supply chain businesses haven’t used it yet. However, leading businesses such as Walmart, Amazon, FedX, and others, have implemented blockchain technology to empower their supply chain. 

So, if you also want to strengthen your supply chain with blockchain, don’t wait anymore. Reach out to the best supply chain management custom software development company and develop custom blockchain solutions to empower your supply chain and gain a market advantage.

FAQ’s (Frequently Asked Questions)

Here are some frequently asked questions related to blockchain in supply chain management. 

Q1. Why do we need blockchain in the supply chain? 

Blockchain technology strengthens the supply chain. It automates the processes, facilitates payments, reduces errors, eliminates dependency on intermediaries, and saves costs. 

Q2. Which blockchain is best for supply chain management?

The best blockchain will depend on the various factors of the supply chain, such as the type of blockchain, the purpose it will fulfill, and other specific requirements. 

Hence, we recommend you get in touch with the ScalaCode team and consult for blockchain integration in your business’s supply chain. 

Q3. How much does it cost to develop a blockchain solution for the supply chain? 

The cost of developing a blockchain solution for the supply chain depends on various factors, such as the type of solution, blockchain network, functionalities of the solution, development team size, and more.

Abhishek
Abhishek

Abhishek is a multifaceted professional who seamlessly blends his expertise in content creation with his passion for customer success. As a blog author, he provides insightful and engaging content, drawing from his extensive experience in nurturing client relationships and ensuring their journey with our company is both successful and satisfying. Abhishek's unique perspective on customer engagement and his ability to articulate complex ideas into relatable content make him a valuable asset to our team and a trusted voice for our readers.