BLOCKCHAIN: A contraption to increase supply chain transparency & efficiency

The Blockchain is an incredible invention which holds the capacity to bring about incredible changes to the supply chain. It was originally thrived for the digital currency bitcoin and was later analysed by the technology community to have much greater potential beyond its use in the digital currency.

Blockchain: An overview

The Blockchain technology basically allows sharing and distribution of digital information without the risk of data manipulation which means ‘the information can be seen and viewed by a zillion people but the same information cannot be copied, exploited or manipulated by those users’. A Blockchain in the supply chain can be put to use of recording entities like price, date, location, certification and all other relevant information in a shared ledger.

It is a time-stamped series of immutable records that are managed by a cluster of computers and hence each of these blocks of data are secured and bound to each other using cryptographic principles. With no central authority, the Blockchain is a pure instance of a democratized system. It gives a foundation for collaborative commerce and can be used to establish a transparent system in supply chains from origin to the customer with an optimised cost, reduced risk and better efficiency.

Above and Beyond

Blockchain technology start-up Skuchain, builds Blockchain based B2B trade and supply chain finance products targeted towards the $18 trillion Global trade finance market that involves numerous entities including buyers, sellers, logistics providers, banks, customs and third parties. The Coffee Board of India has launched a blockchain based marketplace for improved interaction of coffee growers and the markets, which will remove the middle-men and the growers can transact on a direct basis while at the same time the customers have an improved “bean to cup” traceability of their product.

Far-fetched potential

The Blockchain technology is making a steady and strong mark in supply chain management and the possibilities it holds can revolutionise the supply chains across the world. Using Blockchain, every time a product changes hands, the transaction could be documented, creating a permanent history of a product, from manufacture to sale. This could dramatically reduce time delays, added costs, and human error that plague transactions today.

Documenting a product’s journey across the supply chain reveals its true origin and touchpoints, which increases trust and helps eliminate the bias found in today’s opaque supply chains.

According to Sandeep Chatterjee, Senior Manager of Deloitte Research, “Blockchain could help companies understand how ingredients and finished goods are passed through each subcontractor and reduce profit losses from counterfeit and grey market trading, as well as increase confidence for end-market users by reducing or eliminating the impact of counterfeit products.”

Keeping data redundancy at bay

At its most basic level, the core logic of Blockchains means that no piece of inventory can exist in the same place twice which helps to get rid of redundancy of data and also gives a classified picture of the ledger.

Vikash Khatri, Founder, Aviral Consulting Pvt. Ltd. says, “Blockchain is a distributed database that holds records of digital data or events in a way that makes them tamper-resistant. In the chain digital data flow in a sequential manner for processing as per defined process flow. If one user is authorised to create a record, second to verify and third to approve, as soon as the first user creates a record, the second user can access it for verification, but the same record can be deleted or edited due to encryption. While it can be viewed by all three at any point post verification, the same can be approved by a third person. These three persons can be from different organisations at different geographies or functions having access to the same database ledger.”

A more transparent value chain

With blockchain technology it is possible to digitise physical assets and create a decentralized, immutable record of all transactions, making it possible to track the asset from production to delivery or use by the end user and provide greater product history and transparency. Chatterjee tells us, “This provides more visibility to both businesses and consumers into the products they consume. Blockchain’s transparency may also help reduce fraud for high-value goods such as diamonds and pharmaceutical drugs. According to the organisation for economic cooperation and development, counterfeit goods account for over for $450 Billion in trade annually.”

The Cost Impact

On being questioned about the impact of blockchain technology on the cost of effectively managing a supply chain, Vikash Khatri says, “Blockchain is not a direct tool for cost reduction, but this could reduce time delays, added costs and human error that plague transactions. As a result of this efficiency improvement, Blockchain supports the effective management of cost in Supply Chains.”

According to Sandeep Chatterjee, Blockchain technology provides all parties within a respective supply chain with access to the same information, potentially reducing communication or transfer data errors. He opines, “Less time can be spent validating data and more can be spent on delivering goods and services—either improving quality, reducing cost, or both. Finally, Blockchain can streamline administrative processes and reduce costs by enabling an effective audit of supply chain data.”

Implementing Blockchain solutions in the supply chain requires cooperation from all stakeholders. This could be presented as an opportunity to rethink stakeholder relationships and create more collaborative ecosystems.

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