"Blockchain" is set to transform the way supply chains operate with the promise of increased security, efficiency, transparency, and cost savings. What is blockchain you might ask? And what do supply chain managers and logisticians need to know about it? Here are some of the basics and how it can impact your business.
The Blockchain is a public ledger where users make transactions in a secure, verifiable, and permanent environment. The blocks are bundles of records of transactions protected by cryptography. They chain together in chronological order. This creates an endless chain of data blocks where users can trace and verify transactions.
The blockchain is transparent; meaning the data is viewable by all users making transactions differentiating blockchain from banks. The blockchain is also immutable. This means once data or a transaction are recorded in the open ledger, they cannot be edited or changed. Because it's public and open, all users can see all changes to the records, eliminating counterfeiting and fraud. We typically associate bitcoins with blockchain. Bitcoins are a digital currency transacted on a blockchain without the middleman of banks and financial institutions.
Blockchain Meet Supply Chain
While some supply chain management systems offer real-time views of some data points, on a blockchain, every transaction is immediately seen and verified by all stakeholders. For supply chain managers, blockchain serves as a master ledger where all parties can view data, and record all kinds of transactions. Incorporating blockchain technology into a supply chain creates a transparent system that is secure, efficient, and saves money.
Transparency in the Blockchain
Supply chains are complex systems involving more than just the movement of goods through hundreds of stages. Current supply chain software struggles to keep up with the constant flow of information, documents, purchase orders, and invoices moving around the globe and through government agencies. Every transaction made on a blockchain is immediately recorded and visible. These transactions and records can include contracts, documentation, tracking, payment, units delivered, and more. If it is data, it can be transacted on the blockchain.
Security in the Blockchain
The transparency of the blockchain contributes to its security, as the system is open and managed by peer to peer collectives. It is designed to resist modifications to data and records. Once a transaction is recorded, it cannot be altered without also altering all subsequent blocks, which requires a consensus of the network majority. This eliminates any worries about cooking the books.
Improved Efficiency & Cost Savings
Blockchain's open, distributed ledgers provide all suppliers and vendors with the ability to view the same information in real time. This can eliminate steps from typical supply chain processes. Documents can be approved, shipments confirmed, and payments reconciled immediately on an immutable blockchain ledger without the use of more traditional confirmations through mail and delivery. Cutting paper and mail from the supply chain removes delays and leads to substantial cost savings in paper-based transactions alone. The public record keeping system could lead to less need for internal and external auditing.
Accountability & the Blockchain
According to a study by Accenture, anytime a new transaction is recorded in a blockchain, the system automatically checks for balance. It prevents the record entry if it finds a transaction is out-of-balance. This makes for simple accounting and reduces errors, duplications, and anything that violates contract terms. As blockchains are public systems, each touchpoint verifies the transaction.
New Standards for Logistics
Blockchain in Transport Alliance (BiTA) is a focus group with members including BNSF, GE Transportation, FedEx, and other international transportation and logistics companies. BiTa is focused on developing common standards for the transportation industry, collaboration on best practices and thought leadership and education on blockchain technology for the logistics industry. This could lead to more efficient global networking.
Supply Chain Leaders are working the Blockchain
Maersk partnered with IBM to create a new blockchain platform aimed at eliminated Maersk's paper-based system which at times leaves inventory sitting in containers in shipping yards for weeks. With blockchain, all parties including shippers, receivers, port authorities, and government agencies can view the same shipping and delivery information in one immutable ledger. This keeps inventory moving, deliveries on time, and payments made.
Stay on Trend
Want to stay up on trends in supply chain like blockchain? Students in Kettering University Online Master's Degree in Supply Chain Management program network with leaders from around the globe learning critical insights on real-world practices they can apply in their organizations. Talk to an advisor today to learn more about online education opportunities the KUO Master's in SCM.