Securing the Supply Chain of Tomorrow with Blockchain and Smart Contracts
Securing the Supply Chain of Tomorrow with Blockchain and Smart Contracts
Blockchain technology offers significant inventory and asset management opportunities for supply chain, allowing businesses to control their supply chains through digital protocols and help mitigate fears of cargo theft due to supply chain congestion. Blockchain, an open-sourced technology, is a decentralized peer-to-peer network that enables the creation of ‘smart contracts’ between parties.
The concept may appear complex, but let’s break it down into bite-sized functions:
Supply Chain Management (SCM) is the process of collecting, storing, tracking and calculating inventory and creating a flow of goods through manufacturing systems. SCM is divided into three major functions:
Planning – An SCM company needs to plan and forecast inventory levels to improve capacity planning.
Collaboration – Companies need to collaborate with suppliers in order to create value for the customer. This requires communicating with other parties through negotiation and providing information about what is needed for each part of the process. A ‘smart contract’ is an agreement between two parties: one party pays a certain amount every time something is needed from another party; the other party has agreed to that amount of money when something has been delivered from them.
Essentially, this means that an SCM business could develop its own marketplace where they could price items under specified conditions; these prices would then be recorded on the blockchain where anyone can see them and negotiate with each other for future deliveries in exchange for those prices.
Smart Contracts – Blockchain technology allows companies to use smart contracts between two parties without needing any central or third party involvement or authority whatsoever. On top of this, they can also be self-executing – meaning that if one part fails or becomes broken, it won’t affect any other part. The blockchain also allows companies to monitor all transactions in real-time without having to store data locally on their own systems or on external services like AWS (Amazon Web Services).
A recent example is an agreement between Uber drivers (suppliers) and Uber customers to split their fares equally after each trip in an effort to lower their costs; this was done using ‘smart contracts’. This can dramatically reduce costs by removing intermediaries such as banks or collecting payment through escrow services. It will also allow companies to innovate on products and services — including supply chains — in ways that were not previously possible or cheap enough due to transportation limitations, legal restraints or geographic constraints.
Despite this, today’s supply chains are still mostly centralized and only partially supported by public ledgers; this is surprising given how popular smart contracts have been in recent years. However, blockchain promises huge change here due to its ability to bring transparency into supply chains across different businesses (even across industries) which will allow supply chain managers greater control over everything from inventory levels to production processes and logistics handling in general.
Securing the Supply Chain with Blockchain
Blockchain uses cryptography (encryption) to ensure that no one can alter or add to the information recorded on the ledger. This means that transactions cannot be reversed and there is no possibility of fraud or hacking. It is designed to increase transparency and trust in supply chains so they can be more efficient and fair. This can improve the transparency of products and services across borders and allow buyers to get better value for their money.
Another use case for blockchain technology is improving the authenticity of products that are made by third parties – often referred to as “fake products” – with no brand identity or trademark. Blockchain also allows parts of supply chains that were previously difficult or impossible to track such as tracking ‘black market goods’ such as stolen luxury items and electronics.
This source of authenticity process involves verifying that the product/goods were made by a specific manufacturer and not by an impostor. Once this is done, all parties involved can go back into their system and verify that the product/goods have been produced by this manufacturer and therefore received good credit from customers worldwide (which should be true because they purchased from that manufacturer). In other words: companies can keep track of each step in the supply chain from start to finish. Smart contract information can be used by insurance companies, businesses, and governments to verify that goods were purchased, determine authenticity, and verify supply chain activity. In agriculture, blockchain can be used to track food from farm to plate.
Blockchain technology can save large and small businesses a lot of money, but it also has ramifications for how we organize our economy in general. For instance: Why do you require several transportation hubs or warehouses? If you use shipping containers or several warehouses, your supply chain system could be developed using blockchain technology, which can now be governed by an open-source network without the need for “middlemen.”
Blockchains have been around for years but have recently been taking off because they offer additional benefits such as increased security and transparency from an organization’s point of view when managing supply chains. Having said this, there’s still work to do before they completely replace existing supply chain systems and processes in many industries — particularly in more advanced markets where regulations may be more stringent than what they are in less advanced countries.
One thing is certain: the future of blockchain technology and smart contracts in the supply chain industry is at a crossroads. The tech is gaining many more adopters, and it’s becoming more widely apparent that its potential as an approach to improving supply chain security and operations is unarguable.
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