What is Blockchain in Supply Chain Management and How to Use it? (2024)

What is Blockchain in Supply Chain Management?

Blockchain in supply chain management is a transformative technology that provides a digital and decentralised registry for tracking goods and information as they move from one production stage to another. It functions as a distributed database where each transaction is recorded in a series of interconnected blocks, each encrypted and linked to the previous one.

Therefore, Blockchain technology in supply chain management enables all stakeholders to access unique, accurate and up-to-date product movement records anytime. This way, intermediaries are eliminated while data integrity improves, resulting in more efficient supply chain operations.

How Blockchain Works in Supply Chain Management?

Blockchain in supply chain management functions by recording every transaction and movement of goods on a secure, decentralised ledger. Each product is assigned a unique digital identifier that tracks its journey from origin to destination. This system offers complete transparency and real-time visibility into the supply chain. Additionally, smart contracts automate processes such as payments and shipping, minimising manual intervention and reducing errors.

How does Blockchain Technology Improve Supply Chain Transparency?

Blockchain enhances accountability throughout the supply chain by providing a permanent, accessible log of all dealings. Each step in the supply chain, from obtaining raw materials to final delivery, is kept on a blockchain, creating a comprehensive record of every transaction made. This openness allows any party to confirm and follow an item’s entire route, ensuring originality and conformity with specifications. By providing a transparent and verifiable record, blockchain minimises fraud, enhances regulatory adherence, and builds trust among all participants in the supply chain.

Framework for Blockchain Technology in Supply Chain Management

The framework for blockchain technology in supply chain management includes the following key components:

• Blockchain Technology

This component includes using decentralised systems to follow and register transactions securely so that all parties involved have access to consistent and accurate data.

• Data Entry and Integration

This part of the framework accurately captures product details and transaction specifics onto the blockchain and integrates this data with existing administration frameworks.

• Smart Contracts

This component automates tasks such as order fulfilment. It uses self-executing contracts inscribed into the blockchain thus eliminating the need for human intervention.

• Governance and Compliance

This segment sets out rules and responsibilities for maintaining the blockchain system according to applicable legislation and regulations.

• Security and Privacy

This part of the framework assures that strong protections secure information on a distributed ledger and can only be accessed by authorised users.

• Monitoring and Evaluation

It consists of procedures that regularly gauge how well the system works and make sure it becomes more effective or efficient as needed.

Case Study of Blockchain Technology in Supply Chain Management

Let’s explore two case studies now to see how blockchain technology is making a difference in supply chain management:

• Case Study 1: Walmart and IBM - Food Safety and Supply Chain Transparency

Walmart and IBM have used blockchain to improve the food supply chain. This technology helps quickly trace the food source of an illness outbreak, allowing for fast recalls and preventing further spread. It also tracks food from the farm to the store, ensuring safety standards are met at every step. Blockchain increases consumer trust and loyalty by providing clear information about where food comes from.

• Case Study 2: Maersk and IBM - Shipping Industry Transformation

Maersk has partnered with IBM to develop TradeLens, a blockchain-based platform that changes how international shipping works. This platform helps digitise documents, reducing the need for paper and speeding up customs processes. It also gives real-time updates on where shipments are, which helps with planning and managing risks. The blockchain’s secure nature also helps prevent fraud by stopping problems like fake goods and forged documents

Blockchain in Supply Chain Management Examples in India

Blockchain technology finds its way into supply chains across India as illustrated below:

• Karnataka Government’s Traceability Project

Karnataka's government has created a blockchain-based platform for tracking agricultural produce. The primary driver behind this initiative was to increase the transparency of product movements, reduce cases of food poisoning, and ensure that farmers are properly compensated for their goods.

• Aushada

National Informatics Centre (NIC) launched Aushada, a blockchain platform for monitoring drugs from manufacturers to hospitals. It aims to prevent fake medicine from entering the supply chain and ensure all drugs are up to standard.

Benefits of Using Blockchain in Supply Chain

Implementation of blockchain technology in supply chain management has several advantages:

• Improved Traceability, Transparency, and Trust

Blockchain creates a permanent chain of records that enables products to be tracked back from their origin to the ultimate place where they will be consumed. This feature improves responsibility and helps reduce fraud while creating an opportunity for real-time supply chain visibility, among other things. Hence, it promotes trust between the parties involved.

• Increased Efficiency and Speed

Blockchain can automate supply chain processes like inventory management systems and payments. This simplification reduces manual activities and speeds up the speed at which things are done, thereby leading to cost savings and more effective workflows.

• Reduced Costs

Blockchain decreases expenses throughout the supply process by removing intermediaries altogether or minimising administrative tasks. It assists with automating stock control while lessening paperwork, resulting in minimised chances of errors and lowered data management costs.

• Enhanced Security through Immutability

Security is enhanced through distributed ledgers and cryptography techniques, ensuring that data remains secure and cannot be altered. This prevents tampering and ensures an accurate audit trail, which improves traceability and security within the supply chain.

• Better Customer Experience

With blockchain, deliveries are faster and more precise. Blockchain also provides transparency, which can aid in verifying products’ origin. It supports ethical sourcing for a greener planet, thus achieving higher levels of customer satisfaction.

Challenges of Blockchain in Supply Chain in India

Even though blockchain technology offers numerous opportunities for effective supply chain management, various challenges need to be considered::

• Integration with Existing Systems

This can be a complicated and time-consuming process, especially for firms with many outdated systems. It takes a lot of time and resources to ensure that all these systems are properly connected to blockchain technology.

• Cybersecurity and Data Privacy Concerns

Despite blockchain's inherent security features, cybersecurity and data privacy risks remain. Threat actors may take advantage of weaknesses, thereby compromising data and networks. Companies must strengthen their security through encryption or use firewalls to prevent breaches.

• Scalability Issues

Blockchain technology's inability to scale when processing huge numbers of transactions may be a problem. The present infrastructure might not cope with rising transaction loads without slowing down or experiencing performance issues, hence complicating legacy system integration.

• Legal and Regulatory Uncertainty

Blockchain’s regulatory environment is still developing, creating uncertainty for businesses. Legal and compliance risks require organisations to keep track of any potential amendments to regulations affecting their use of blockchain.

• Cost Considerations

Expenses for development, maintenance, and continuous operation can be expensive when implementing blockchain. Limited skilled developers can also push prices, meaning companies must compare these financial points against possible technological gains.

To conclude, blockchain technology provides great merits to supply chain management, such as better traceability, efficiency and security. Despite challenges, it could revolutionise transparency and cut down expenses in the long run.