Although blockchain has been thought of by many as “something related to cryptocurrency and Bitcoin,” the technology has some of its most compelling promise in enabling good supply chain practices. It has the potential to bring radical transparency, efficiency, security, and cost reduction to supply chain and logistics activities, from managing contracts, tracking goods and services, and handling payments.
The blockchain market will likely enjoy robust growth over the next five years, according to market research analysts. “Rising applications across different verticals are likely to accelerate revenue creation for the market participants,” according to recent research from Market Research Future (MRFR). “Governments are getting increasingly aware of the advantages of the technology which is anticipated to revolutionize the growth trajectory of the blockchain technology market over the next few years.” MRFR anticipates that global blockchain technology will exhibit a compound annual growth rate (CAGR) of 66.4% between 2018 to 2023, representing a value of $7.128 billion by 2023.
Supply chain activies will likely be a large percentage of that activity. Marketsandmarkets predicts that the blockchain supply chain market size will grow from $145.0 million in 2018 to $3.314.6 billion by 2023, at a CAGR of 87.0% during the period.
The analyst summed it up:
Blockchain is finding increased application to automate contract execution in the supply chain management, eliminating the need for intermediaries. This has facilitated manufacturers, suppliers, and customers to build a trusted relationship and streamline complex supply chain operations. The application of smart contract is expected surge with the availability of enterprise-ready solutions to overcome the existing limitations of contracts in terms of privacy, scalability, auditability, confidentiality, and performance.
Consulting firm McKinsey & Co. points to a handful of supply chain activities that have a solid potential to be renovated by blockchain:
- Replacing slow, manual processes. Paper-based processes still reign supreme, especially at the lower tiers of the supply chain.
- Strengthening traceability. Increasingly, government agencies and even customers want provenance information about the products they buy. Further, being able to trace products through the lifecycle could allow OEMs to reduce damage done by the need to recall products and the ever-present threat of counterfeit products.
- Reducing supply-chain IT transaction costs. In the future, as blockchain evolves, the transaction costs that currently exist may be mitigated.
The infographic below from the APQC and Supply Chain Management Review looks at the current state of blockchain in the supply chain. Take a look and let us know where your organization stands in the adoption and application of the technology in the comments section below.
— Hailey Lynne McKeefry, Editor in Chief, EBN