How Blockchain Is Improving the Supply Chain Management

People optimizing supply chain management using blockchain technology

Supply chain is the backbone of the economy and global markets. Blockchain provides this demanding and complicated industry with fully-fledged solutions capable of making supply chain management much more efficient and advanced.

Managing supply chains has always been a hectic job. A product may pass through hundreds of stages, locations and entities, generating a myriad of payments and invoices, before it gets to its final destination. As well as this, the processes are normally fraught with inefficiency and entirely lack transparency and traceability.

Blockchain presents a great opportunity to completely transform the supply chain industry. In fact, it’s expected that the post Covid-19 global market size of blockchain supply chains will grow to 3,272 million by 2026 so the popularity of blockchain adoption in supply chain management will only increase.

Read on to find out more about how blockchain benefits the supply chain, what solutions it offers, and how world-renowned companies are already leveraging blockchain in their supply chain processes.

What challenges does the supply chain face today?

Supply chain management has its bottlenecks and inefficiencies such as low productivity, wasted labor, high shipping costs, customer frustration, product damages, and communication issues. Let’s take a closer look at them.

A scheme of the supply chain process

Figure 1. Supply Chain Process

Productivity loss

When inventory is misplaced or lost, the entire supply chain process is delayed with production lines shut down, retailers short on inventory, and consumers frustrated. This leads to loss of revenue and hurts the company’s bottom line.

Wasted labor

Troubleshooting logistical issues to fix disrupted chains consumes both labor and time while removing labor from revenue-generating activities.

Higher shipping costs

Lost and misplaced products need to be replaced and re-shipped. To avoid delays, these shipments must be expedited, which is expensive and has a negative impact on profit margins.

Customer complaints

Delayed shipments and lost packages result in angry and frustrated customers. Very often customers aren’t able to track their packages at all. They have also become accustomed to free shipping options, which cut into profit margins.

Damaged products

Damaged products frustrate distributors, retailers and consumers. Improper packaging, loading, transportation, heat, humidity and other factors contribute as well.

Communication issues

Lack of communication and information sharing across supply chain parties leads to a breakdown of the supply chain process.

Furthermore, the COVID-19 pandemic has led to multiple companies and even entire industries rethinking and changing their global supply chain mode. Even if they didn’t experience any issues before, they may now be in dire need of supply chain transformations and improvements.

Discover more about this enterprise blockchain system supporting data integrity for the automotive supply chain

How can blockchain improve supply chain management and address its issues?

Blockchain use cases in supply chain management

With blockchain technology, it’s possible to surmount numerous obstacles in the supply chain and make it more reliable and transparent. Below, we outline exactly how blockchain can make supply chain processes more sophisticated.

Origin tracking

Sometimes even the most progressive companies can lose track of all their transactions and fail to track a product. These inefficiencies result in extra costs and effort, and may even tarnish their reputation.

However, with blockchain built-in sensors and RFID tags, the issues of provenance tracking and record keeping can finally be resolved. The history and movements of a product are possible to track right from its origin to its present location at any given time. Just as importantly, thanks to better provenance tracking provided by blockchain, it will be easier to identify and prevent fraud, even within the most complex supply chains.

Unparalleled security and data protection

Blockchain is made up of secure blocks, which consist of copies of a document that are chronologically stored and connected with the previous blocks. They are highly secure and almost impossible to falsify. This unparalleled security is the very reason why blockchain has been embraced by major financial services and banks.

The supply chain will also benefit from blockchain adoption as its ingenious technology is fully capable of protecting data against cyber attacks.

See how enterprise blockchain can slash your challenges

Cost reduction

The real-time product tracking offered by blockchain can lead to overall cost reduction. Blockchain can substantially cut extra costs while also providing top security levels for transactions.

What’s more, when using blockchain for supply chains, there’s no need to involve intermediaries whose services are quite costly. Consequently, this can save you a lot of money.

Trust among participants

To ensure the smoothness of all operations, it’s of paramount importance to build trust among all participants within supply chains. Because blockchain is totally immutable, all the information kept in it is free from tampering on all levels and the integrity of all records is guaranteed. Therefore, all stakeholders can be confident in the correctness and reliability of the data recorded on the blockchain, and can freely and securely cooperate with one another.

Fraud prevention

Counterfeit goods have become abundant these days. Blockchain, however, can guarantee that you’ll receive a genuine item, not a fake one. RFID tags and sensors can help you track and verify the production of handbags, shoes, clothes, and other items so as to make sure that they’re 100% authentic.

Product safety

People on a forklift taking part in the supply chain management

Determining a product’s condition can be immensely important in some cases. For example, for food retailers and wholesalers it can be crucial to eliminate products that may harm consumers’ health.

Luckily, blockchain can connect farmers, processors, retailers, and consumers to allow the latter to find out more about the product’s transaction history. It’s possible to find out how the product has been grown, stored, refined, and inspected. Having this data at hand will help reduce the number of foodborne illnesses and be better aware of the product’s characteristics.

Higher transparency

Blockchain adoption in the supply chain equals transparency. All supply chain participants can upload data and information about their products and share it in a secure and transparent way. The distributed ledger technology makes data interoperable, tremendously easing data sharing among manufacturers, vendors, contractors, and retailers. Thanks to better interoperability, trust between participants will be greatly improved and they will have fewer or even no conflicts regarding data accuracy.

Opportunity to predict future outcomes

Blockchain is not limited to simply storing and tracking data about a product. It also provides state-of-the-art solutions which help analyze the uploaded information. Based on previous data, blockchain is able to produce forecasts and predictions regarding future outcomes. These insights prove to be very useful and enable companies to cut down on supply chain expenditures and boost their ROI.

Better customer engagement

Retailers can access the blockchain database to get updates regarding items delivered. Customers can view some information about the product too.

For instance, a clothing brand may grant its clients access to blockchain data that includes a how-to-launder guide, information about the garment material’s origin, a social consciousness approval form, etc. This data sharing provides a new level of transparency and helps build stronger and friendlier relationships between businesses and their customers.

In general, blockchain has a lot to offer the supply chain industry, and its potential has been discovered not only by businesses but also by governments worldwide. So, for example, the Australian government is offering $6 million in grants to innovative blockchain teams who can introduce viable blockchain solutions for supply chain tracking in the minerals industry and tax tracking in the food and beverage sector.

It’s just a matter of time before blockchain in the supply chain is adopted more widely. But as you see, even right now its power cannot be overlooked.

Introduce yourself to Blockverify — a blockchain supply chain and anti-counterfeit solution

What companies successfully utilize blockchain in supply chain management?

A person plotting a route next to the office building

Blockchain has established itself as a go-to tool for a number of world renowned companies. They’ve started implementing the technology in order to improve transparency, security, traceability as well as auditability for their supply chain management processes.

Below, we are listing just a few examples of how different companies are making great strides with the help of blockchain.

Walmart and its food safety blockchain solution

Walmart has partnered up with IBM and designed an advanced Hyperledger-based food safety blockchain solution that brings greater transparency to the food supply chain ecosystem.

By using blockchain in its supply chain, Walmart has managed to bring about better traceability, as each node located on the blockchain stands for an entity responsible for the food’s status on its way to the store. Moreover, the time needed to trace the provenance of items decreased from 7 days to 2.2 seconds. This result is impressive.

Ford and blockchain solution to track cobalt supplies

In March 2020 IBM, together with the Ford Motor Company, Huayou Cobalt, LG Chem, and RCS Global introduced a new blockchain platform capable of tracking cobalt production from the mine to the end user. This initiative has given Ford the assurance that the company receives an authentic product to maintain its quality.

Once cobalt has been mined, the corresponding data will be entered into the blockchain, thus allowing the company to track its location as well as other relevant information.

LaneAxis and its blockchain brokerless direct freight network

LaneAxis, a SaaS transportation and logistics company, is in the process of building the first direct brokerless freight network in the US using its own patented direct shipper-to-carrier model.

The company is implementing blockchain technology to eliminate dependence on freight brokers and third-party services. By going direct, shippers will be able to save 20% or more on each load, and carriers — another 20% or more on each load.

Find out how PixelPlex advised LanAxis on the feasibility of implementing blockchain in a shipper-to-carrier direct freight network and check out what solution we proposed

UPS and Inxeption: revolutionizing B2B eCommerce

The logistics giant United Parcel Service, better known as UPS, has set its sights on the blockchain too. In November 2018 UPS became part of the Blockchain in Trucking Alliance (BiTA) with the purpose of promoting transparency within the supply chain ecosystem among all organizations.

Moreover, in 2019 together with Inxeption, a San Francisco technology company, UPS developed Inxeption Zippy — a blockchain-based platform for B2B merchants, which can significantly improve the efficiency of merchant supply chains.

UPS keeps on adopting blockchain at full throttle. The company has also filed a patent for a blockchain system that could store data about package destinations, movements, transportation methods as well as other pertinent information. This will undoubtedly add extra transparency and better interoperability between all parties involved.

FedEx striving for global customs clearance

Being one of the biggest shipping companies, FedEx views blockchain as a groundbreaking technology able to improve its chain of custody. The enterprise has also joined BiTA and introduced its own blockchain-based pilot project aimed at providing insights into what data has to be stored on the blockchain in order to ease customer disputes.

FedEx has also been developing blockchain platforms that empower customers to track their packages and view other relevant details about their shipments.

IBM propelling a wider blockchain adoption

IBM is by rights considered to be one of the driving forces of the wider implementation of blockchain for the supply chain. The company has been at the forefront of many of the latest technology developments, with blockchain being no exception.

IBM has been enthusiastically aiding other companies in implementing blockchain in their supply chains to foster efficiency and transparency. So far, supply chain blockchain solutions by IBM have been used by Maersk, Walmart, Nestle, and so on.

Read this article to find out more about TradeLens – Maersk and IBM blockchain solution for supply chain

DHL and its blockchain-based pharma supply chain project

DHL, a German based international package delivery and express mail service, has teamed up with Accenture to create a blockchain-based serialization prototype that can track pharmaceuticals across the entire supply chain.

The ledger that is responsible for keeping track of these medicines can be shared with manufacturers, warehouses, pharmacies, doctors, distributors, and healthcare institutions. By using one common and secure ledger, it will be possible to attain higher safety standards right from the factory to the patient and significantly cut related costs.

Final thoughts

There’s no doubt that we have seen wide adoption of blockchain across numerous domains and business verticals in recent years, along with much acknowledgment of its importance from the industry’s biggest market players.

As an after-effect of the introduction of permissioned blockchains, and with the strong capabilities and many possible use cases of smart contracts, it is evident that supply chain is one of the many industries where cutting-edge emerging blockchain technology will be enormously influential.

Businesses should definitely be looking into, and trying to take advantage of such an opportunity to streamline their processes, reduce unnecessary expenses, and increase revenue.

To cover the full gamut of blockchain capacity and derive benefits from its implementation, it’s always advisable to reach out to an experienced blockchain development team who will ensure the smoothness of the entire process and guarantee the success of your project.


Anastasiya Haritonova

Technical Writer

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