To say that at the time of this writing (late October 2021) we find our supply chain in something of a crisis would be unlikely to elicit much disagreement. Deliveries are taking longer; cargo ships are either stuck in port for loading and/or unloading or waiting in a queue just to get into port (when they’re not getting stuck in the Suez Canal), while shelves at stores are becoming emptier than usual, and everything seems to be more expensive. Though we know we can do very little to help these situations, the current state of the supply chain has once again led to ponder how to apply blockchain in supply chain management.
Now, blockchain technology is not going to be able to resolve the immediate issues concerning the loading and unloading cargo ships (and it certainly cannot prevent the nightmare scenario at the Suez Canal), but you may be or may not be surprised to hear that the implementation of blockchain into supply chain management can help reduce some of the friction and chokepoints in the current supply chain and, hopefully, reduce prices for end consumers.
By starting with an examination of the supply chain as it exists today, it illuminates that there is a reason why things operate the way they do. In general, the supply chain has good data, which practitioners know is transferable across supply chain tiers, but there are still three key shortcomings, which blockchain can specifically improve.
1. Replacing manual processes:
Though the supply chain is capable of handling large, complex data sets, many of these processes, especially at lower tiers of the supply chain, are slow and entirely paper-based. A blockchain-backed supply chain would minimize the need for paperwork and speed up the transaction time.
2. Increased traceability:
Not only does more traceability increase regulatory and consumer transparency—which can be an agent for change and environmental, social, and corporate governance. Improving traceability also adds value by mitigating the costs of quality issues including recalls, reputational damage, or even the loss of revenue due to black- or grey-market products.
Because it’s stored on the blockchain, data on this distributed ledger is decentralized and immutable; therefore, members of the supply chain can trust the data they see on the blockchain. Contrast this with the current supply chain, which requires all members of the supply chain to manage their own data storage and records, which leads to preventable disputes which arise when disparate records don’t match.
With such strong benefits of integrating blockchain into the supply chain, though, there are bound to be some disadvantages, right? Well, one of the most cited issues facing integration is the upfront expense of embedding blockchain into supply chain management. “The cost will be too steep,” they argue, “Planning costs, licensing, and maintenance costs will make it too expensive. We simply can’t afford it.” But with the supply chain only growing larger, more complex, and less efficient as time goes on, can we afford to not include this technology into the way we manage it?
The way we see it, the benefits of integrating blockchain into supply chain management—replacing the labor-intensive manual processes, improving traceability and regulatory compliance, and the general trust it instills—means that, over time, the integration will pay for itself. Like so many other issues, it’s better to be proactive about the problems and agile in the solutions, and blockchain’s application for supply chain management is the proactive solution governments and shippers are looking for.