Blockchain Application and the Supply Chain
Since its inception, blockchain has been disrupting nearly every industry, thanks to its ability to boost security and privacy, lower costs, and enhance visibility and traceability. Come read our blog to see how it can help the supply chain.
Since the emergence of Bitcoin, there's been widespread experimentation and implementation of blockchain technology across industries. From financial services to manufacturing and supply chain management, blockchain presents promising opportunities for improvement in the business world. According to the Bank of England, a blockchain is “a technology that allows people who don’t know each other to trust a shared record of events.”
With blockchain, parties don’t need to know each other to take part in exchanges of value with absolute assurance of trust because a blockchain is made of a “chain” of information-storing “blocks,” where each block contains information such as transactions made, amounts, and parties involved. Each data, like transactions in the blockchain system, is time-stamped and verified by a consensus of the users in the system. This distributed verification method promotes data integrity and transparency. Like with other industries, using blockchain in the logistics industry has the potential to improve the supply chain in so many ways, which include:
Traceability
Blockchain technology enables the digitization of physical assets. Given its ability to create a decentralized, immutable record of all transactions, it makes it possible to track the asset from the point of production to the point of delivery or use. Since consumers demand sourcing information about the products they purchase, this provides more information to consumers about the products they consume and improves operational efficiency for businesses.
By enhancing traceability through mapping and visualizing enterprise supply chains, blockchain reduces counterfeiting and streamlines product recalls. For instance, sometimes consumer products are recalled for safety or quality reasons, and this often comes at an enormous cost to businesses and even consumers. However, with blockchain, recalls can become less expensive and more efficient because it will enable manufacturers to locate affected products quickly and easily.
Transparency
Along with process or product tracking, blockchain technology enhances transparency in supply chain management. According to the Organization for Economic Co-operation and Development (OECD), counterfeit goods account for over $450 billion in trade annually, since almost every industry uses third-party services, to either produce, assemble, or transport finished goods.
However, transparency in process tracking gives businesses control of their value chain, allowing them to guarantee proper delivery. Whether the asset is physical or digital, blockchain can track the progression and record the information for anyone to view in real-time. They enable this using smart contracts on the Ethereum blockchain.
Blockchain’s transparency can help reduce fraud for high-value goods, and it can increase the confidence of end-users by reducing or eliminating counterfeit products.
Tradability
One beauty of blockchain technology is how it establishes efficient ownership and licensing. With blockchain, businesses can verify ownership history through standardized licensing procedures. This means that the technology can use smart contracts to license products and services accurately.
Tradability is a unique blockchain offering that redefines the conventional marketplace concept. Using blockchain, it is possible to “tokenize” an asset by splitting it into shares that digitally represent ownership. In a way that is like how one can own and trade a company’s shares, this fractional ownership allows tokens to represent the value of a shareholder’s stake. This makes these tokens tradable and allows users to transfer ownership without the physical asset changing hands.
By design, this will eliminate disputes regarding transactions. In addition, this streamlines administrative processes and costs by enabling an effective audit of supply chain data.
Even though there are many applications of blockchain in various industries, we are only just scratching the surface. There are no doubts that blockchain can provide increased transparency, as well as reduced operational costs and risk across the supply chain.
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