Role of Blockchain in Supply Chain Management

In this two-part article, the author focuses on exemplifying the role of blockchain and fitting the same into SCM

Author :- Hardhik Potharaju, PGPB6.

 Imagine a world where you do not have to go through the hassles of getting your passport stamped at immigration in an Airport or get your license renewed without going to the government office. Better yet there may not be any need to go to a bank to make an international money transfer. All of this will soon be a reality, at least in Dubai. Because the UAE government is aggressively adopting the blockchain technology to ease the lives of residents.

Dubai, a global hub for trade, wants to incorporate the blockchain into daily economic life. The country believes blockchain technology could put them on the cutting edge of simplified record-keeping, as well as the transportation of goods worldwide. The world’s largest corporations, such as IBM, Microsoft and dozens of big banks, are exploring uses for the blockchain like sharing and tracking information on transactions and contracts.

Role of Blockchain in SCM

Nearly all of the world’s leading companies run computerized enterprise resource planning (ERP) and supply chain management software. From connected manufacturing equipment to digital shipping notices and RFID scanning, products are tracked on computerized systems from their earliest origins, often all the way to the recycling bin.

Two big transformations have swept through global supply chains recently. First, supply chains are no longer traditional networks of OEMs and suppliers. Now they are vast ecosystems, with many product variants moving through multiple parties, all trying to coordinate work together. It’s not uncommon for a single company to have multiple contract manufacturers, all drawing upon a similar supplier network and feeding a range of distribution models, from traditional retail stores to online consignment services.

Secondly, supply chains and operations have become increasingly dynamic. Product lifecycles are shorter, and ramp-up and ramp-down periods are more intense.

Even as supply chains have transformed, companies have not updated the underlying technology for managing them in decades. With blockchain technology, companies can rebuild their approach to supply chain management at the ecosystem level and go from islands of insight to an integrated global view.

Blockchains make it possible for ecosystems of business partners to share and agree upon key pieces of information. But they can do it without having to appoint an intermediary and deal with all the complex negotiations and power plays that come with setting the rules before handing over really critical business information. Instead of having a central intermediary, blockchains synchronize all data and transactions across the network, and each participant verifies the work and calculations of others. This enormous amount of redundancy and crosschecking is why financial solutions like bitcoin are so secure and reliable, even as they synchronize hundreds of thousands of transactions across thousands of network nodes every week.

The core logic of blockchain, applied to the supply chain

Apply that same security and redundancy to something like inventory, and substitute supply chain partners for banking nodes, and you have the foundation for a radically new approach to supply chain management.

The use cases for this new way of working are compelling. At its most basic level, the core logic of blockchains means that no piece of inventory can exist in the same place twice. Move a product from finished goods to in-transit, and that transaction status will be updated for everyone, everywhere, within minutes, with full traceability back to the point of origin.

Adopting blockchain as an enabler will not only allow for economic growth, but will reduce hours of time and tedious paperwork, whilst offering a platform that spirals digitization forward.