The Benefits of Blockchain in Supply Chain Traceability
The Fourth Industrial Revolution is now. What is it? It’s a time when many different technologies are converging and blurring the lines between the physical and digital worlds. Blockchain development is a crucial aspect of the Fourth Industrial Revolution, which is characterized by the convergence and integration of various technologies. Blockchain, a distributed and immutable data ledger, has the potential to revolutionize global supply chain management by providing transparency, building trust, and reducing costs within the supply chain. This means that it can be used to securely transfer assets among non-trusted parties without needing a third-party intermediary. Whether you're a beginner or an experienced developer, it's never too late to start learning about blockchain and how it can improve business processes.
Another technology that is being used in the Fourth Industrial Revolution is the Internet of Things (IoT), which refers to the interconnectedness of physical devices and objects that can collect and share data. The combination of blockchain and IoT is being used to create traceability mechanisms (TMs) that can identify and track products and processes. Supply chain traceability has attracted considerable attention in the last decade, particularly in safety-sensitive sectors, like food, pharmaceuticals and perishable agri-food products. Traceability can be useful in product recalls, may improve process control and production optimization and reduce costs of liability claims and lawsuits. Moreover, traceability mechanisms build trust and foster the establishment of long-term relationships among disparate supply chain partners.
One way that blockchain is being used in supply chain management is through the use of smart contracts. A smart contract is an agreement between two parties that can be executed without needing a third party. For example, let's say that you order a product from an online store. The store can use a smart contract to send you the product only after you have paid for it. This way, you don't have to worry about the store taking your money and not sending you the product.
Another way that blockchain is being used in supply chains is through the use of tokens. Tokens are digital representations of physical assets, such as ingredients or products. By using tokens, each logistics unit obtains a digital representation on the blockchain and can be individually traced by any stakeholder as it goes through the various supply chain processes.
There are many benefits to using blockchain in supply chain management. First, it creates undeniable transparency in the supply chain, which builds trust among stakeholders. Second, it enables compliance by external stakeholders through the use of smart contracts and audit trails. Third, it improves process management by providing a secure and decentralized way to track assets throughout the supply chain. Finally, it has the potential to reduce costs associated with liability claims and lawsuits. Despite these benefits, there are still some challenges that need to be addressed before blockchain can be fully integrated into supply chains. These include scalability issues and the need for more complex applications.
A bill of materials (BOM), the list of all the raw materials, components, and assemblies required to build a product, can be tracked and monitored via blockchain with unprecedented results. By using blockchain to track BOMS, we can improve supply chain process management, security and resilience, and by using tokens, each logistics unit obtains a digital representation on the blockchain and it may be individually traced by any stakeholder as it goes through the various supply chain processes.
The decentralized and secure nature of blockchain safeguards the accuracy, trustworthiness, timeliness, and usability of the exchanged traceability records. Keeping permanent traceability records on the blockchain creates an undeniable (and potentially unavoidable) transparency in the supply chain where blockchain-certified traceability of products from source to store may be achieved. Checking for compliance by external stakeholders is further enhanced by the usage of chains that (a) improve the creation of highly robust audit trails and (b) render the overall process fully automated.
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