Understanding Blockchain Distributed Ledger Tech (Part 3)
Supply Chain Management is an important way to track goods across departments in real-time, which can be a huge advantage. In spite of this, there are numerous supply chain challenges that are confronted with these management systems due to the daily increase in complexities involved.
Imagine if, every time there was a change of ownership of a particular product, the transaction could be documented, creating an everlasting history of product movements, from production to the point of sale. This will definitely reduce time delays, added costs, and human error that plague transactions today, and it will help protect fraudulent acts in the management of goods.
As discussed from the beginning of these series, the blockchain technology opens opportunities for unlocking many capabilities with the use of the smart contracts. Smart contracts, being self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code that exist across a distributed, decentralized network of computers (referred to as nodes), allows trusted transactions and agreements to be carried out among two or more unknown parties without the need for middlemen, or a central authority.
The blockchain technology unlocks capabilities for individuals and cooperates bodies to transparently track all types of transactions including those that occur across the supply chain.
Most times, supply chain managers experience increasing challenges, making it difficult to keep up with an effective supply chain approaches. Below, we detail some of the biggest supply chain challenges which include:
Partners’ Relationship Management
The first factor to a successful supply chain relationship management is the measure of a supply chain partner's performance. In an environment, where tracking capacity becomes controlled, where unfavorable regulations are prevailing, the ability to maintain a good partner-relationships goes a long way in building and a maintaining an efficient supply chain.
To understand your supply chain partners' strengths is the area where you're likely to find mutual benefits. It is important to create, understand and follow mutually agreed upon standards based on trust, to better understand current performance and opportunities for improvement. Having two different methods for measuring and communicating performance and results wastes time and effort. Trust the system that was put in place for consistent results and better supplier/partner relationships.
Using smart contracts to build the system of interaction between you and your partners, you enjoy the “trustless” property of the blockchain technology in bridging the trust gap.
Another very important aspect of supply chain management is providing the right product in the right quantity to the right place and the right time. Research shows that the majority of the production flaws caused by information asymmetry are in many cases due to the breakage of the link between the top-level managements and the customers.
The blockchain solves this problem by improving Customer experience management (CEM). Companies like IBM and Civic are creatively working on systems to store customer identity information on the blockchain, with that data secured in an encrypted form that customers can disclose as they choose.
Asset Tracking And Transfer Of Title
In the logistics chain, all party’s incessant consensus with other parties. These actors usually use completely different information tracking systems, leading to significant challenges for the optimization of the shipment process.
Currently, each party in the chain purchases goods, adds value and sells these goods to the next actor in the chain. The related transfer of ownership is often still recorded on paper and fraud remains a persistent risk. A suitable blockchain solution for the tracking of goods along the supply chain address the key challenges and significantly reduces costs.
Automotive Supplier Payments
Immutability of the blockchain technology allows the transfer of funds anywhere in the world without any fear of manipulation. Unlike the traditional banking methods, the peer-to-peer system allows direct transfer between payer and payee. Also, the rapid payment confirmation of the blockchain makes the transfer of funds within minutes, compared to days for automated clearing house payments. Bitcoin transfers specifically also offer far lesser fees.
A very good example is a manufacturing company that pays with cryptocurrency is the Australian vehicle manufacturer, Tomcar. Tomcar uses bitcoin to pay suppliers. Since the use of cryptocurrency for payment, one of the significant benefits experienced is cost reduction. While bitcoin is borderless by nature, some national governments see it as a way for companies to boycott the use of fiat currencies and a way for them the companies to make an investment. This makes governments impose taxes on some of the companies dealing in cryptocurrencies.
Majority of the renowned companies of the world are utilizing the advantages of the blockchain in solving problems of supply chain management. One of the major milestones achieved so far, is how Walmart is utilizing the blockchain in their food safety solutions. The partnership between Walmart and IBM harnesses the development software based on the blockchain technology in tracking products through its supply chain, from the farm to the consumer.
Another company worthy of emulation is Stratumn. Stratumn is known to have developed a data synchronization system that runs trusted workflows, which synchronize data gathered from multiple sources while generating an audit trail that can be used to ensure data integrity and regulatory compliance. The shipping solution developed by Stratuum is a trusted workflow based on the implementation of the blockchain. The developed system allows shipping partners to increase the interoperability between all parties, leading to cost reductions and efficient traceability of goods.