Benefits of Using Blockchain to Track Supply Chains


If you’re not already using Blockchain for your business, you may want to seriously reconsider. Managing a supply chain is, more often than not, a very complicated process, especially if you’re just getting started. Wouldn’t it be nice if there existed a single system that could easily help keep track of all the materials listed within a particular supply chain? Thanks to the Blockchain phenomenon, you’ll be able to do just that – and more!

Let’s take a closer look.

 Where & How a Blockchain Can Help Track Materials in Supply Chains 

 Out of all the benefits that come with using a blockchain, efficient and transparent material tracking is among the most prominent. But where exactly do blockchains intermingle with supply chains to keep track of everything, and more specifically, how do they work?

 How a Blockchain Works

 First, it’s important to note that a blockchain is essentially used for convenient data storage. This data is stored throughout a series of “Blocks” that are chained together, hence the name Blockchain. Originally, a blockchain was used as a digital timestamp to prevent any outside interference of one’s stored online documents. This basically meant that it wouldn’t be possible for any unwanted data modifications to take place.

 Once you store any data within a blockchain, it’s a lengthy process to make any changes in general – even the ones that you want to make. This is due to the fact that it is managed under a network of computers run by authorized personnel rather than an individual. If any changes are to be made, everyone must vote unanimously in order to do so.  

 How a Blockchain Can Help Track Supply Chain Materials

 The process of creating and distributing goods that you see every day is actually quite complex. However, using a blockchain can help to simplify the task of managing and tracking specific materials listed within a supply chain.

 A supply chain is essentially a system consisting of the resources and general information involved in the distribution of a service or product from supplier to consumer. It consists of several components, including:

  •     Materials
  •     Customers
  •     Natural Resources
  •     Finished Goods
  •     Retail, Services & E-commerce
  •     Returns, Recycling, & Reuse
  •     Ingredients & Parts

When used correctly, a supply chain can benefit your business by leading to an increase in sales as well as optimized production and distribution. In other words, it’s a must-have for the fruition of your company’s potential.

 So, how does a blockchain fit into all of this?

 As important as a supply chain is for the distribution and fulfillment of your materials, the original process is quite layered and complex. In fact, the entire system itself has simply become outdated. For instance, there is no way to verify whether or not the information coming in from your suppliers is completely accurate. However, using a blockchain will allow for the decentralization of every bit of data to ensure that everyone with authorization has access to the same information.

Another major issue with the current system of supply chains is that the data can easily be altered without your knowledge. As a business owner, unauthorized data manipulation can quickly turn into a nightmare for efficient material tracking. When you use a blockchain, the data you enter into a block is there to stay. This is made possible by a series of cryptographic “hash functions” that diversify each and every block within a blockchain. If even the slightest change is made to the data stored in a block, its entire hash identity is changed and considered invalid until approved by the network of authorized personnel.

When keeping track of your supply chain materials, you must also keep in mind the financial transactions that take place. This can be a headache of its own, but using a blockchain will make things easier with remarkable transparency. For instance, a person’s identity is represented by their public address rather than their legal name. You can still view someone’s complete transaction history, but their name stays hidden under specific cryptography. Basically, this keeps them secure while simultaneously being held accountable for every penny that gets spent during the production and distribution process.

Speaking of transactions, the typical supply chain will consist of four main costs, including:

  1. Quality: Your products need to meet the standards of your buyers. To ensure this, you’ll need a team of trained professionals to perform quality checks.
  2. Transportation: Your transportation costs can vary depending on the delivery speed from supplier to customer. It’s ultimately your call to decide whether you’d prefer to go for cheap and slow or quick and expensive.
  3. Inventory: If not managed properly, your inventory costs can stack up pretty quickly. Factors like damaged or stolen products can all contribute to the possibility of finding yourself paying back a loan with interest.
  4. Procurement: Last, but certainly not least, you must pay for the actual products listed within your supply chain. You may also decide to hire procurement officers to handle the process of purchasing raw materials from your suppliers.

What do all of these costs have in common? Each one of them can be made much more transparent and easier to manage by using a blockchain. The data of the costs can be recorded in a specific block so that everyone in your business can analyze it and make decisions accordingly. As a result, you’ll likely notice a large reduction of human error, time delays, and any additional complications that add financial expense. 

Where Blockchains Are Used to Help Track Supply Chain Materials

The good news is that a blockchain is openly available for anyone to use. Whether you’re an aspiring entrepreneur or a seasoned CEO, it’s always an option to greatly enhance the potential of your business. For a proficient insight, we’ll take a look at a few perfect examples of where a blockchain has been used to help track supply chain materials.

The Food Industry

If a company in the food industry faces a possibility of contamination somewhere throughout its supply chain, a blockchain can help pinpoint exactly where the contamination took place and which products are no longer safe to consume. Retail supergiants like Wal-Mart take advantage of this technology, resulting in a consistent reputation of satisfactory product quality.

De Beers

If you’ve never heard of De Beers, they are currently the #1 diamond producer in the world working to prevent the mining of diamonds under violent circumstances. They use a blockchain-based program known as “Tracr” to keep better track of their shipped goods, which allows their customers to trust that their jewelry was not obtained through wrongful conditions.

 The Oil Industry 

The Abu Dhabi National Oil Company has teamed up with IBM in order to maximize the optimization of its newly introduced blockchain program. They intend to use the system’s transparency to keep better track of every ounce of oil produced (approximately 3,000,000 barrels per day) and provide a higher-quality product to their buyers.

These are just a handful of the many other examples of where blockchains are used to manage supply chains. Regardless of the magnitude of your business, you can use a blockchain to produce accurate data, higher efficiency, and increased customer satisfaction.                        

Why Use a Blockchain?

So, just to recap, here are some of the most prominent benefits that come with using a blockchain to keep track of your supply chain materials.

  •     Increased Sales
  •     Transparency
  •     Equal Data Access
  •     Decentralization
  •     Optimized Production & Distribution
  •     Consistent / Accurate Information
  •     Dramatic Reduction of Data Tampering
  •     Reduction of Manufacturing Costs
  •     Overall Simplicity

While a supply chain is fundamental for the success of your business, its complex algorithm is slowly becoming a thing of the past. Making the decision to store all of your supply chain data within a blockchain is the ultimate solution to get the results you’ve been waiting for. After all, in every distribution process, higher efficiency and transparency should always be set as a top priority.

When it comes to using a blockchain to track your supply chain materials, it isn’t a question of whether or not you should – it’s a question of why you haven’t already!  

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