September 19 by Hitendra Rathore
While blockchain technology is usually synonymous with cryptocurrency, it is a boon for supply chain management. The biggest problem that plagues companies now is the lack of transparency. Business with large inventories and a complex supply chain are caught in a web of multiple suppliers from different states.
Blockchain technology makes it easier for companies to keep track of and manage their suppliers with ease. It helps to identify and pinpoint issues and monitor transactions. Being an open source technology, blockchain enhances traceability and transparency to all the participants of the distributed ledger.
The increase in global connectivity has made the companies entangle themselves in a complex supply chain network with stakeholders such as suppliers, distributors, and customers. Because of such complexity, the companies are subjected to different risks such as fraud and code of conduct violations.
Advantages of Blockchain Technology in Supply Chain
● Blockchain technology enhances the continuity of information effectively among the different stakeholders to ensure transparency, traceability and reduce inherent risks that come with a supply chain.
● Blockchain increases the ease of accessibility to efficiently leverage the enormous amount of data flowing through the supply chain.
● Blockchain lowers business risks with effective fraud detection and makes emphasizing human rights and a code of conduct easy.
● Blockchain makes it possible for a business to share and negotiate business deals with suppliers without involving an intermediary. This makes the process less cumbersome and more efficient.
Smart Business Contracts
Whipping up efficient and flawless contracts can be a daunting task. A good contract is the backbone of a business transaction and making one can be quite a task. One small error can prove to be of great danger to the business. Blockchain makes it easy to create flawless smart contracts, and smart contracts enforce themselves.
Smart contracts ensure that different suppliers meet their obligations. It enables shipment tracking and checking deliveries at multiple locations. Blockchain being a distributed public ledger makes it easier for all signatories to know what is going on.
Smart contracts enable the integration of the blockchain and payments among various logistics partners and financial institutions.
Blockchain also ensures there are no delays in payment by invoking an automatic digital invoicing and payments, doing away with analog payments and the disturbances that come with it. This simplifies financial operations and working capital requirements thus reducing the overall operation cost.
Since every participant in the supply chain has a digital ledger and all transactions and movements are recorded in the ledger, there is absolutely no room for fraud. Any attempt to perpetrate fraud or manipulate the system will be highlighted on the ledger immediately. This instills fear and deters anyone from carrying out fraudulent activities.
Integrating blockchain to business
Blockchain technology can be integrated into many business processes to make them easy. Adding a blockchain to your business infrastructure increases accuracy, gives better visibility of procurements and provides reliable data for analytics. It is not a prerequisite but blockchain is an integrative technology which provides a better technological solution to the business. The blockchain acts as a supplement to your Enterprise Resource Planning software.
The visibility of the business process and the user interface remains the same, but the inventory view is wider. You get to see others inventory levels as well, and the price shown will not be the placeholder price but the actual price of the product based on your consumption. When blockchain is installed, it seamlessly fits into your existing infrastructure and spares you the hassles of learning new software.
In India, several states have come to accept smart contracts and digital signatures. Therefore, it is very much legal and binding. However, there still are many regulatory hurdles in its implementation.
With different countries having a different governance and rules, companies with offices in, and transacting business with others in international countries should consider its impact when using the blockchain as a part of their technology stack. Companies are likely to face some pushback and reservations from the established financial industry because of the integration of payments with smart contracts.
However, the future of the blockchain industry with supply chain management appears bright because of the speed at which business can function due to its integration. Blockchain technology reduces both cost and time,and makes management of the complex and the never-ending business process transparent, efficient, and hassle-free.