Using Blockchain Tech to Optimize the Supply Chain
Blockchain technology is not just for cryptocurrency. It can also revolutionize the supply chain.
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The blockchain space has gained considerable momentum over the past few years. Cryptocurrency remains this technology's most widely recognized use case, but new applications and benefits emerge as it grows. For example, supply chain optimization is one less glamorous but highly impactful use case for blockchains.
Almost 90% of enterprise leaders are looking into blockchain technology in some capacity, and more than a third aim to use it in their supply chains. In addition, many organizations are eager to implement new technologies into these networks in light of the lingering supply chain disruptions from the COVID-19 pandemic. Blockchain developers that serve this need could make a substantial impact.
Tracking Shipments Securely
Blockchain's visibility and immutability make it the ideal solution for tracking shipments throughout the supply chain. Unfortunately, only 21% of supply chain leaders report having good visibility, but if teams can't track shipments accurately and securely, they'll struggle to meet deadlines or respond to disruptions.
Because blockchain records are easily accessible but virtually impossible to change, they offer a promising solution. For example, developers can create tracking systems where each location scan activates a smart contract on the blockchain. Similarly, updates from IoT trackers can create blockchain records to offer secure, real-time information on shipment locations or conditions.
These visible, immutable records offer a more reliable way to monitor goods as they travel throughout the supply chain. Early real-world use cases show their promise, too. For example, two U.K. hospitals used blockchains to track COVID vaccine shipments in 2021, enabling a faster rollout with less loss in transit.
Boosting Transparency and Trust
Similarly, blockchain tracking solutions can help companies become more transparent about the origins of their products. For example, supply chains are often complicated webs of third parties, making it difficult to see if some components or resources come from where they say. Smart contracts offer a solution by providing a clear, unchangeable record at each location scan.
Mining company BHP uses blockchain technology to verify its supplier identities, ensuring its supply chain meets environmental, social, and governance goals. Transparency from systems like this could also help businesses establish more consumer trust, as sharing these records offers proof of ethically sourced goods.
Tracking suppliers through immutable blockchain records will also help monitor their performance, showing companies where they may need to change sources. Today, roughly 70% of businesses favor resiliency over price in their supply chains, and smart contracts could help them ensure their suppliers meet those standards.
Developers can also use blockchain technology to create automated payment systems. For example, running a supply chain involves many partners and third parties like suppliers, packaging facilities, and third-party logistics providers. Timely and fair payments ensure good relationships with these partners and improve efficiency, but conventional, manual payment methods are often slow and lack transparency.
Smart contracts offer a more agile, fair solution. Developers can create smart contract programs that automatically generate immutable agreements to hold both sides of an exchange accountable. As soon as each party fulfills their duty, the smart contract will activate, paying them immediately.
Over 15% of supply chain invoices from late 2021 through early 2022 were overdue, almost double their pre-pandemic levels. Replacing current systems with a smart-contract-based solution will help reverse this trend and ensure a more just and efficient industry.
Reducing International Payment Fees
Another way to optimize supply chain payments with blockchain tech is to reduce processing fees through cryptocurrency. Because supply chains typically span international borders, companies must pay suppliers and other third parties in varying currencies. These international transactions come with processing and conversion fees, but crypto is free of these restrictions.
In conventional payment systems, cross-border payments can take days, and companies may only know how much their fees were once it comes out of their accounts. Crypto is a faster, cheaper, and more transparent alternative.
Like all blockchain transactions, crypto payments happen instantly, regardless of the distance between parties. Using a decentralized payment system also removes intermediaries that may charge high fees. In addition, theIn addition, the blockchain's immutability makes reviewing these transactions easier to promote fairness throughout the supply chain.
Fixing Manual Inefficiencies
Smart contracts and other blockchain technologies like digital signatures can also help streamline back-office supply chain tasks. Using the blockchain to verify and process data transactions instead of relying on manual processes like spreadsheets keeps everything transparent to prevent mistakes and boost efficiency.
The state of Vermont reduced contract approval times by 75% by using digital signatures instead of manual alternatives. Businesses could use similar tools to manage their supply chains.
Contract approval and signature systems, blockchain record-keeping, and smart contract-based data entry could all yield significant time savings. When these back-office processes don't take as much time, supply chains will be able to become more agile overall, reducing delays and disruptions.
Blockchain Tech Has Potential Across the Supply Chain
Supply chains are the backbone of many industries, yet they're rife with obstacles. This challenge presents an opportunity for blockchain developers who can capitalize on these use cases.
Virtually every aspect of supply chain operations has inefficiencies or transparency issues blockchain tech can address. These five use cases exemplify the technology's vast potential today, and new applications and possibilities will keep emerging as technology advances.
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