We’ve been hearing the term “Blockchain” for quite some time now, and most of us are used to associating it with cryptocurrencies. Cryptocurrencies are what have helped bring Blockchain technology under the spotlight; however, decentralized currencies and finance are only a fraction of what Blockchain technology is capable of.
Blockchain technology has the potential to revolutionize a wide range of industries. A number of companies around the world have already begun experimenting with this technology, especially in the supply chain sector. In this article, we’re going to take a look at the benefits and challenges of Blockchain in the supply chain industry. So, without further ado, let’s dive into it!
What is Blockchain?
In simple terms, the Blockchain is a decentralized, public, and unchangeable database that enables real-time transaction processing and tracking across a network of enterprises. The application of Blockchain technology is not restricted to monetary transactions and cryptocurrency only; in fact, it can also be used to track actual assets. For instance, real estate, automobiles, insurance, and several other commodities can all be tracked using Blockchain. Most importantly, it also enables you to track intangible assets such as copyrights, voting records, certifications, patents, and trademarks while retaining their accuracy and legitimacy.
Technically, the term "Blockchain" refers to an immutable database that is distributed across a network of computers. All the data sent over the network is organized into blocks, which store the data until they are completely full. When a block is full, it is closed and linked to the next block that stores the upcoming data, and this process keeps on going to store new information in the Blockchain. From the very first to the very last block, the blocks are linked together like a chain. The beauty of Blockchain technology is that it allows a transaction/record to be added to the database only after the consensus of all the nodes in the network, and once it’s in the database, it cannot be altered.
Unlike traditional networks, Blockchain networks are:
Immutable: Their database cannot be changed by anyone.
Decentralized: The entire network isn’t governed by any central authority.
Secure: All data in the network is secured with the help of cryptography.
Transparent: All data on the network can be accessed by anyone.
Fast: The speed and power of the network grow as more people use it.
Benefits Of Using Blockchain In Supply Chain:
Given the nature of Blockchain technology, it holds a lot of promise for all kinds of industries. Experts believe that its greatest impact will be felt in the supply chain industry. Based on the analysis, the market catering to the supply chain's Blockchain requirements will hold a value of $9.8bn by 2025. Let's take a look at some of the most prominent benefits of Blockchain in the supply chain sector to analyze why businesses from all over the world are actively adopting this technology.
1- Improved Planning And Forecasting
One of the biggest challenges in the supply chain industry is making accurate forecasts of demand and supply. Blockchain technology can potentially solve this problem. Since blockchain networks consist of multiple nodes, information gets distributed across multiple points. This greatly reduces the chances of data inaccuracy due to a point of failure somewhere in the network. As a result, a decentralized network can significantly improve our ability to make accurate forecasts.
Blockchain will also enable companies to perform data analysis on past data more easily. This will allow companies to gain valuable insight that can further help them streamline their processes. If you want to learn how companies can get valuable business insights from data, make sure to check our detailed article on Data Mining.
2- Faster Delivery
Shipping physical goods across borders is a very time-consuming task. Blockchain technology has the potential to reduce delivery times. As a result, Blockchain technology not only helps businesses save time but also helps reduce international delivery costs.
Traditional shipping methods involve multiple parties checking and updating the information of physical goods as they are transported. Blockchain can simplify this process with the help of smart contracts. Smart contracts will enable shipping companies to track and update goods information automatically without the need for human interference. This can result in a lot of time and manpower being saved.
3- Enhanced transparency and traceability
Another major benefit of Blockchain technology in the supply chain industry is better transparency. A decentralized network where shipping information is being updated automatically will give customers a greater sense of confidence about their products’ location and status. With the help of IoT devices, every item's entire shipping route can be checked in real-time. This can reduce the number of parcels being lost, and it will also encourage more people to conduct cross-border trades.
4- Better partner coordination
Transparency and access to updated information at all times can help improve partner coordination. As we've mentioned already, there are a lot of parties involved in international supply chains. A decentralized network where everyone can get access to up-to-date information will allow various parties to work with one another with greater efficiency.
Blockchains can introduce decentralized ledgers on which all information about a shipment is logged automatically. All relevant parties can have access to this ledger but cannot make changes to it without everyone's consent. This creates a transparent way of sharing information that builds trust and also improves the entire workflow.
5- Less Paperwork
When so many parties are involved in an activity, a lot of redundant and time-consuming tasks tend to exist. Blockchain can help automate a lot of things that go on in supply chain management. This reduces the need for red tape and also makes coordination with entities such as banks easier. Less paperwork means lesser time taken, and this results in lowered costs along with a reduction in the number of people involved in any process.
Challenges of Implementing Blockchain in Supply Chain Systems
While Blockchain holds a lot of promise, it’s not something that can be implemented overnight. There are a number of obstacles that will slow down the eventual adoption of Blockchain technology in the supply chain department. Some of these challenges include:
Upfront Costs: In order to properly implement Blockchain technology in the supply chain industry, investment is going to be necessary. Implementing Blockchain will require infrastructure as well as a variety of devices as well. All of this can be expensive initially. However, the cost of implementing Blockchain is expected to go down in the coming years as the technology progresses.
Steep Learning Curve: Blockchain is still a new technology for a lot of people. This means it'll take time for people to get the hang of it. And since Blockchain can get complicated, professionals and managers will take time to learn the ropes.
Scaling: One of the biggest challenges of Blockchain is scaling. As a network grows, problems occur with storage, transaction processing, and energy consumption as well. Scaling Blockchain can become expensive and complicated. However, there is constant work going on in the Blockchain industry to resolve this issue. For instance, Layer 2 technology can be used to address the scalability issue in Blockchain networks.
Blockchain technology has an array of benefits and challenges. If we weigh them side by side, the benefits easily outweigh the challenges. This means that Blockchain is definitely worth exploring in the coming years. Blockchain technology has already been advancing at a rapid pace, and at the rate at which it’s being explored in the supply chain sector, we can expect to see it at scale in the near future. If you are operating in the supply chain sector and still haven't incorporated Blockchain into your business, it's high time you take the initiative and adopt this technology before your competitors leave you behind. This is where we can help.
Here at IIInigence, we stand proud as the best Blockchain Development agency in the USA, offering a wide range of services, including Blockchain consultancy as well as cryptocurrency, smart contract, dApp, Decentralized Marketplace, and Metaverse development. We have been into Blockchain development for 10 years, and we have successfully completed several massive projects in diverse sectors, including insurance, supply chain, real estate, gaming, etc. You can check out our portfolio and testimonials to get a better idea of our expertise as well as the quality of our work. Simply contact us today, and schedule a call with one of our experts to see how we can help you fulfill your goals.