How can blockchain optimize your supply chain

Blockchain is not just for cryptocurrency. The technology can make Supply chain management more transparent, efficient, and secure. Here’s how.

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By Neil Mann

Verified Expert In Finance

Neil is an expert in business transformation and management consulting with over 20 years of experience. He has worked across financial services, hospitality, and fast-moving consumer products sectors. He created and implemented digital ledger technologies at Kearney, Rio Tinto, and the global mining group. He is also a board adviser for LogChain – a digital supply chains logistics platform.


Blockchain Supply Chain Management Consulting Management Consultants

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No tool has inherent good or bad qualities. Blockchain is a technology that enables speculative Crypto markets. It’s important to differentiate between this and the business solutions enabled by its digital ledger architecture. This article will explain how enterprise-grade applications built using the distributed ledger structure of blockchain can help businesses manage data more efficiently, reduce operational risks, reduce costs, and resolve supply chain problems.

The cryptocurrency markets are now perceived as the epitome of risk due to their volatile prices, Ponzi Schemes, and persistent hacking of digital assets, including non-fungible Tokens (NFTs). Blockchain is a powerful innovation that can be used to power a variety of platforms in various industries, from healthcare to financial services. McKinsey & Company stated as early as 2018 that blockchain was the most valuable technology in terms of increasing productivity. Stanford University Graduate School of Business and other sources have also continued to testify to its potential.

The blockchain holds particular promise in logistics, an area that is ripe for digital transformation. The global supply chain crisis in 2021-22 revealed the increasing complexity as companies, producers, logistics experts, and delivery services struggled to communicate and provide visibility from end-to-end. Customers’ expectations of transparency, dependability and service are increasing. For more than 20 years, I have been advising companies about using technology to transform business models, operations, and customer experiences. I think Blockchain technology could help solve some of these problems.

Why use blockchain for supply chain management?

In order to meet the challenges of today’s supply chains, companies need to consolidate all their disparate logistics data and processes on a single platform. This allows them to aggregate, analyze, validate, and display information as orders are processed, and inventory is packaged and prepared. These platforms can be more efficient and cost-effective the more they are granular, comprehensive, and integrated.

Most firms have historically invested in database management systems. These use powerful software and cloud computing to analyze and integrate huge sets of data. There are limitations to the efficiency and reliability of a database in managing and sharing so much detailed information. Even companies that use cloud-based databases must still rely on analog tools such as telephones, printers, and fax machines in order to connect every node of their global distribution chain. Errors and latency are accepted as part of the norm.

Blockchain doesn’t have these limitations. Blockchain is, at its core, a decentralized system of information management. As I will explain in a moment, it is similar to a database but has a different structure and distinct functions. Blockchain’s digital ledger provides a level of granularity and certainty that traditional solutions cannot. Because all data is managed transparently in a distributed network of computers, collaboration and trust are easier to achieve.

Blockchain: What is the difference? Databases: Understanding Key Features

Let’s look at its most powerful features to understand when and why blockchain is better than traditional databases.

Transparency : Databases are based on a client/server architecture. They store information in files and tables in a logical central server and give users limited access to update, create, or delete the data. Blockchain runs on a decentralized network protocol and uses digital “blocks,” which can be compared to pages in a book. In a blockchain that is public, all participants have access to the same data at the same moment. A private blockchain will segment the data to satisfy the needs of different customers.

Both types of blockchain distribute data across many nodes instead of storing it centrally, as in a database. Cloud-based databases can also distribute data to more than one node. However, each node must be manually created. Blockchain node creation is a part of the network formation, so more seamless.

Traceability: Blockchain is a structure that only allows appends. New blocks are cryptographically connected to the existing blocks in chronological order. It creates a natural audit trail. The hash value stored in the timestamped block allows a user to prove that a particular document existed in a specific version at a given time and to verify who was involved in every transaction. For example, the Singapore-based startup LogChain, where I have served as a board adviser since 2020, helps chemical companies reengineer their supply chains by using blockchain to create records that track each container of potentially hazardous substances at every stage of its journey.

(Security & Immutability): The data in a blockchain cannot be changed or deleted without the consent of all parties. It takes a lot of work to alter, change, or reverse the record. This means the record is also encrypted from end to end in the network. This provides greater security than a database against fraud and unauthorized activities. A logistics platform based on blockchain can be used to establish a product’s origin and track its journey throughout a global supply chain. This is especially useful when it comes time to satisfy standards for ethical or sustainability sourcing or pass enhanced customs checks.

Efficiency: Blockchain’s structure, which manages a distributed ledger through a computer network, eliminates the need for central administrators and can create efficiencies. It’s not necessary to reconcile databases located in various locations, which can make clearing and settlement for financial instruments much quicker. smart contracts can be used to automate certain transactions like insurance payouts.

Even for those who are familiar with e-commerce and enterprise resource planning, the structure of blockchain can be difficult to understand. It is easy to see why despite the many use cases proposed, adoption by businesses has been low.


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