Blockchain technology has become a buzzword in recent years due to its potential to revolutionize multiple sectors across various industries. Although its popularity may be attributed to the inception of Bitcoin in 2008, the idea of a decentralized database using cryptography was first introduced in 1991. However, Satoshi Nakamoto‘s creation of Bitcoin brought blockchain technology into the mainstream.
Blockchain technology is a decentralized distributed ledger transforming how people make payments and conduct business. It is not just limited to the financial sector; it has extended to other areas across different industries. Despite its complexity and the technical expertise required, companies are taking steps to increase its mainstream adoption. For instance, forward-thinking companies like Aura set patterns for approaching and leveraging cutting-edge technologies to streamline various processes. Aura is a mobile application that leverages blockchain to enable customers to verify the authenticity and provenance of LVMH products.
The supply chain management sector faces continuous challenges, from data control to product authenticity. As goods become increasingly available to consumers regardless of time or location, the need to overcome the complexities in supply chain management becomes more pressing than ever. Blockchain-related solutions can help future-oriented businesses scale up their operations. In this article, we will explore how innovation-friendly businesses utilize blockchain technology to enhance supply chain management and what is hindering more businesses from introducing it into their management strategies. You may also Check Out Centralized vs Decentralized vs Distributed Blockchain.
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Addressing fraud and counterfeits
Counterfeits are widespread across various sectors and products, ranging from pharmaceuticals to fragrances to foods. The high level of exposure that consumers have to them is worrying. It raises numerous concerns, impacting multiple participants, such as the average consumer, and even affecting the company’s reputation. While it may seem like a radical solution, the only real way to fight fake goods is through a foolproof method that enables participants to track the whole journey of a product from its point of origin to its destination.
Blockchain technology can help eliminate some counterfeit goods that customers have access to by building a digital record of transactions and exchanges and demonstrating the origins of the goods. RFID tags and QR codes are some tracking systems used by blockchain-backed solutions to link items with their digital trail on the ledger. This way, consumers can be instantly updated on their purchase’s origins, legality, and manufacturing process. The supply chain similarly becomes more transparent to the parties involved when the movement of the goods is readily monitorable.
If you are interested in exploring blockchain further, you can also easily buy Ethereum with credit card to delve into this innovative technology. Besides LVMH’s Aura, another powerful example to provide insight into how blockchain technology is used globally is a traceability platform created by IBM and Farmer Connect. This bridges the gap between coffee consumers and growers, enabling app users to trace their products’ journeys and learn about the beans’ quality.
While it’s not a one-size-fits-all solution, and counterfeiting can’t be wholly eradicated, blockchain can improve the business landscape to a considerable level as fraudsters will face difficulties in falsifying or modifying information about the products.
Admin costs and paperwork
Administrative tasks like data management and accounting can be laborious and time-consuming, especially when a lot of manual labor is involved. A business’s ability to grow smoothly is being hampered by factors such as lack of transparency, poor communication, human error, excessive paperwork, etc. These challenges take a considerable cut out of a business’ budget. However, automating and digitizing time- and money-consuming processes by leveraging blockchain-related solutions can save businesses significant money, resources, and time.
When companies can improve transparency in their supply chains and ensure critical data is delivered on time. Costs associated with data management and research are substantially reduced. Instantaneous and accurate digital asset tracking enables businesses to conduct better audits with fewer manual tasks.
Smart contracts have generated a lot of buzz with their potential to help users automate contracts and all the aspects involved in the execution of agreements between participants. They’re designed to automatically negotiate, conduct, and enforce the terms of a deal when the pre-established conditions are met.
Furthermore, they’re solving some obstacles typically encountered in the traditional financial landscape, such as the need to have brokers or banks involved in closing deals with transactions implicated. Here, blockchain technology enables intermediaries to transact freely without reaching physical custodians, thus eliminating delays and reducing costs associated with third-party participation.
While the advantages brought by supply chain management are obvious, it may seem too early to declare them game-changers that make players in the financial system immune to risks and errors. As a continuously evolving technology with numerous complexities currently being worked on, smart contracts bring about different threats and weaknesses, such as cyberattack exposure.
Challenges faced by blockchain in the supply chain area
As with any emerging technology, various limitations and difficulties naturally arise. Introducing blockchain-based applications in supply chain systems is not smooth sailing and necessitates investing considerable capital in IT infrastructure and training. While integrating the technology with the current methods may pay off in the long run, the upfront costs can be off-putting for many businesses that would instead invest in other areas, such as product quality or team expansion. There’s a long way to go until blockchain technology’s ups and downs are fully grasped.
Blockchain technology is recognized to improve security through the immutable record of transactions, but this exact factor generates worries in sectors where customer confidentiality is paramount.
Blockchain technology can significantly benefit supply chain management systems, considering that businesses know all the implications of integrating it with current systems. As the technological landscape evolves, more companies are expected to jump on the bandwagon and leverage blockchain technology.
What is an example of blockchain technology?
The financial sector has adopted blockchain technology to expedite transactions and reduce processing times. In addition, some banks utilize blockchain for contract management and traceability purposes. For instance, the online payment platform PayPal introduced a blockchain-based service in 2020 that enables users to purchase, store, and trade digital currency.
What are the leading blockchain technologies?
There are four main types of blockchain networks: public blockchains, private blockchains, consortium blockchains, and hybrid blockchains. However, each use case requires a different type of blockchain platform, and each has its benefits, drawbacks, and ideal uses.
Why is blockchain technology used?
Blockchain can verify and trace complex transactions, reducing compliance costs and speeding up data processing. It also improves contract management and product origin auditing.
In conclusion, the advent of blockchain technology has brought about a new era of innovation and efficiency in supply chain management. By addressing critical challenges such as fraud and counterfeits, administrative burdens, and introducing smart contracts, it offers numerous advantages that have the potential to transform the way businesses operate. Blockchain technology can ensure the authenticity of a product, streamline administrative tasks, and reduce the need for intermediaries, thereby revolutionizing supply chain processes.
However, it’s important to acknowledge that there are certain challenges that need to be overcome, including the initial implementation costs and concerns about customer confidentiality in certain sectors. As this technology continues to mature and evolve, more and more businesses are expected to embrace it as they recognize the long-term benefits it can bring to their operations. Ultimately, the ability of blockchain technology to enhance transparency, security, and efficiency in the supply chain positions it as a promising tool for the future of various industries.
David Carnoy: TechyHost’s and CNET’s Executive Editor, leading member of the Reviews team since 2000. Covers gadgets, specializes in e-readers and e-publishing.