The Role of Blockchain in Supply Chain Management

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Firms looking for a competitive edge will use Blockchain technology to sharpen their supply chains & evidence to customers the provenance & journey of their products. 

Blockchain’s strength as a transparent and secure technology make it a useful tool in supply chain management. As supply chains become more complex, with more partners involved along the way, its ability to offer increased visibility helps Business’ to gain valuable insights and respond accordingly.  

About Blockchain

What is Blockchain?

Blockchain is way to record and track information. As it is a type of technology and not a specific network, it can be adapted easily to suit your business’ information needs. 

Each Block contains a set of data, a unique fingerprint (known as a hash), and the fingerprint of the preceding Block. As each Block is connected to only one other Block’s fingerprint, they form a long chain of information – Blockchain! 

See Advantages of Blockchain to understand more

Role of Supply chain management 

Supply chains encompass the entire process of creating and delivering your business’ goods/services, from planning right through to delivery to customers. Supply Chain Management is the oversight and improvement of this end-to-end process.  

• Supply Planning: Understand the timing & amount of product your customers will require and in which locations. Accurate planning uses best available information to prevent insufficient stock and excess inventory 
• Sourcing/extraction: Components and raw materials required to manufacture your product 
• Value-add: Bringing the ingredients together into the creation of your product 
• Delivery: Distribution of product, perhaps first to intermediaries, and then onward to customers 
• Returns: Supply chains now extend beyond delivery to customer, to even include the return of product and their re-selling, recycling or disposal 

Benefits and challenges to supply chain management 

“Effective supply chain management is no easy task, but the benefits make it worthwhile for you and your business. Particularly if you do not yet have an end-to-end understanding of your supply chain, including suppliers and distribution partners, then there is likely an opportunity for improvement,” says Jude Rajkumar, Project Lead in the Sydney Office.  

• Deliver on your strategy: An effective supply chain will help you deliver on your core business proposition aligned to customer expectations. If a customer expects a pizza delivered in 30 minutes, you need a supply chain to match 
• Better value inputs: An understanding of the end-to-end supply chain will allow you to find the best value inputs based on what you need & when you need it. For instance, using a cheap screw at assembly might save you money but if the quality is low, it might cost you when it comes to customer returns. The manager who has a grasp of the entire supply chain will be able to make the best decisions for the Business 
• Speed & Quality: With a strong grasp of the end-to-end supply chain, you will be able to spot opportunities for improvement. Areas of focus and investment will be guided by customer & profit expectations, competition, as well as benchmarking of suppliers against each other and best practice  
• Traceability: With an increase in buyer’s sustainability obligations and concerns, blockchain technology can be used to track the entire lifecycle of a product, from the manufacturing origin to the consumer, allowing customers to easily verify the authenticity of products and the conditions under which they were made, helping to improve traceability and preventing counterfeit and substandard products from entering the supply chain 
• Cost efficiencies: Savings will come from process improvements, such as a reduction in stock wastage or improved shelf life 
• Risk management: We are all familiar with Covid’s impacts on supply chains. Good supply chain management considers risk at all stages and allows you to mitigate or manage. For instance, choosing to use more than one supplier for a critical input is one approach to reducing your risk, even if it comes at a greater cost 

There will be any number of challenges in your supply chain that your Business will constantly seek to avoid or fix. With so many variables and stakeholders, this is to be expected. These challenges often fall into the following areas: 

• Keeping costs down: particularly in an inflationary environment, supply chain managers will be looking for ways to keep costs down. They will need to balance passing on costs to customers, while seeking savings from suppliers & efficiencies 
• Changing customer demands: As customer needs change, supply chains will need to shift outputs to match. This is easier said than done, with some products requiring years of lead time for design or to source new suppliers. A rigorous and ongoing planning process can help mitigate these challenges 
• Supply chain capacity: The throughput of your supply chain is limited to the amount of capacity available at the time you need it. You can offset this challenge by warehousing inventory to better match supply/demand, but this comes with its own costs and risks 
• Sourcing: Finding the right inputs at the right price & location, while considering environmental impacts, can be difficult. For example, sourcing enough organic cotton to constantly feed your global demand for t-shirts is hard enough – made harder by ensuring the cotton is readily accessible, compliant with legislation and customer expectations, and delivered for the right price 
• Making it all work: modern supply chains are a miracle of organisation & globalisation, with an infinite number of opportunities for errors to occur. Supply chain mangers need inputs to arrive on time, factories to output on time, and for delivery to occur exactly when promised or else risk the entire chain collapsing (along with a negative customer review if any aspect of this chain fails and impacts the customer experience!) 

How can a Blockchain supply chain help your business?  

There are advantages of Blockchain in extracting more of the benefits of a well-oiled supply chain while managing the challenges and risks.  

“Blockchain’s strength in transparency and security makes it an ideal tool to enhance your Business’s insight into your supply chain and improve accordingly – particularly true for the parts of your supply chain delivered by partners,” says Jeffrey von Drehnen, Project Lead in the Sydney Office. 

Improved transparency: Blockchain creates a secure record of information, accessible by anyone you decide should be able to access it. This technology can be used to track the movement of supplies through your supply chain, enhancing your Business’s visibility of what is happening on the ground 

Increased efficiency: with increased transparency comes an opportunity to make your supply chain more efficient.  

Reduced fraud: As the information stored on Blockchain is secure, it can make it more difficult for fraud and theft to occur 

Smart contracts: using self-executing contracts can help with the management of your supply chain, automating the more routine elements 

Environmental certifications: tamper-proof certifications of the provenance of goods and the steps they have taken through the supply chain. Have confidence in your own supply chain and prove to customers where the cotton came from, where it was turned into fabric and eventually manufactured into a shirt 

Lower costs: Along with savings from improved efficiencies, there is an opportunity for some industries to remove intermediaries throughout this process, resulting in reduced costs