The supply chain industry is at the cusp of a transformation. Cutting-edge startups are building platform-driven solutions that are all set to disrupt this space by leveraging the power of IoT and blockchain technologies.
Blockchain technology makes it possible to create an indelible ledger of assets and transactions that is time-stamped, secure, and tamper-proof, allowing a wide array of stakeholders to communicate near-real-time. Peer-to-peer transactions of any kind (invoices, payments, shipments) become more visible and easy to track. And information from different sources (end consumers, sales channels, suppliers, contract manufacturers and underlying systems) can be consolidated and digitized for more unified communication across the network.
Because the logistics industry is characterized by fragmentation and huge inefficiencies which drive up costs and negatively impact supply chain reliability and resilience, making savings in this area equals significantly higher margins. Blockchain technologies offer significant cost and resource benefits to enterprises across industry sectors. In fact, 86% of tech-savvy executive teams surveyed by Deloitte said they believe there’s huge business potential in blockchain technology.
In this article, we will trace three significant ways in which blockchain is helping redefine Supply Chain Management as we know it and the advantages it brings.
Accelerating Accounts Payable and Receivable Processes
43% of large companies say achieving efficient invoice processing is a major struggle. Processing a single invoice in 2019 cost companies upwards of 1000 Rs and took 8.6 days on average. Vendors and suppliers who comprise small and medium enterprises have to bear the brunt of longer waiting times, and resolve disputes in case of human error or discrepancies which creep in during these largely manual processes.
Blockchain technologies eliminate the need for paper exchange, bring down costs associated with Optical Character Recognition and reduce the errors and delays associated with generating, processing, verifying, and storing documents. For instance, payment processing is simpler, and dispute resolution is far quicker when organizations can authenticate transactions via a real-time 4-way match of the Purchase Order (PO), Advance Shipment Notice (ASN), Sales Invoice (SI) and Goods Received Note (GRN) without waiting for manual verification. This helps resolve disputes faster, saving operation costs and benefiting the vendor and supplier ecosystem, leading to an overall strengthening of relationships across key players.
Improved Visibility in Contract Manufacturing
One of the best-selling cars in India in its segment, the Renault Kwid is a case study for Make in India, with 97% of its parts sourced locally. Only some critical engine components like fuel injectors and knock sensors are imported, with Indian OEMs and contract manufacturers supplying the bulk of parts required for assembly. In a price-sensitive market such as India, optimizing every step of the supply chain can mean the difference between success and failure. Manufacturers across industries are turning to blockchain to realize these benefits and minimize losses arising during contract manufacturing.
While they outsource production processes to fabricators and procure large quantities of metal body parts, manufacturers can reduce the time and resources they spend, tracking the raw material across multiple stages of material conversion. And instead of using cumbersome excel sheets, modern-day platforms make it simple for personnel to digitally track the movement of raw material, finished goods, and packaging as it moves from authorized vendors to contract job worker locations. Blockchain platforms are equipped with intelligent dashboards that funnel data from various sources in real-time and visualize it so decision makers have better visibility end to end.
Seamless Collaboration for Cross Border Logistics
Containerized shipping has brought the world closer, allowing businesses to trade across borders, but there are many modern-day challenges that plague the maritime transport industry and hamper the free flow of goods and products. Many factors are involved in handling a single shipment, including freight forwarding agencies, customs and port authorities and more. Documentation continues to be both manual and digital, paperwork requirements are stringent, and intermediary costs are high.
Adopting blockchain technologies to digitize paperwork would save as much as 44% in time as per a UN estimate in the context of Asia-Pacific trade. What’s more, near-real-time availability of data about shipment location, condition and movement of goods, would enhance visibility for importers and exporters in their supply chains and help them make better-informed decisions in sales, marketing, logistics, and other areas.
In the past, sceptics have raised valid and important questions about blockchain technologies for enterprises. Start-ups have been working hard to address these real-world problems by experimenting with new toolsets and tech stacks. And today, as both the technology and market mature, many more successful pilots and proofs of concept exist across industry sectors. If you are still on the fence about adopting blockchain to improve supply chain operations, you may want to reevaluate your decision as the ecosystem evolves and unlocks new, more robust opportunities for all.
This article has been authored by Vaideeswaran Sethuraman, Founder and CEO at Param.Network – a multi-tier supply chain technology orchestration platform.