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Why Blockchain for the Supply Chain

Manufacturers across industries, and perhaps most especially high-tech and electronics manufacturers, are trying to manage hyper-complex, global supply chains. These massive networks involve the production, transportation, and fulfillment of products among widespread suppliers, manufacturing sites, distribution centers, e-tailers, and retailers. With goods touching so many parties, companies often suffer from data silos that fragment operations and limit visibility upstream or downstream, ultimately creating supply and demand imbalances that significantly impact global business and revenue growth.

Today, Blockchain technology offers a way to break down these silos with complete transparency and data flow between every point in the supply chain. As Forbes’ John Giodani defines it :

Blockchain is a public register in which transactions between [users] belonging to the same network are stored in a secure, verifiable and permanent way. The data relating to the exchanges are saved inside cryptographic blocks, connected in a hierarchical manner to each other.

While blockchain was originally created to verify the exchange of cryptocurrency like Bitcoin, manufacturers, consumer packaged goods (CPG) brands, and retailers can now leverage the same technology to connect global supply chains with a complete ledger of goods movement, inventory, and transactions from source to shelf, and back. This helps drive visibility, trust and accountability among everyone in the value chain.

Image courtesy; Pixabay

Image courtesy; Pixabay

Gain visibility from source to shelf

Most companies today lack end-to-end visibility across their supply chains, especially when it comes to inventory levels and demand across various channels. The problem is not a lack of data, as tons of data are collected at each point. However, the information is housed in disparate databases and spreadsheets or written down on paper documents. This leads to disconnects that make demand forecasting, manufacturing planning, and replenishment planning difficult or even impossible. Organizations end up with inaccurate replenishment, excess inventory, out-of-stock items, and, inevitably, lost sales.

Instead, blockchain technology connects every part of the supply chain with a record of every product movement and transaction. It establishes a centralized data repository that is visible and accessible to everyone within the network—from suppliers and production sites, to distribution and retail partners. Since the data flows seamlessly and in real time, manufacturers can optimize manufacturing planning and store-level forecasting. They can ensure that the right amount of stock is available to satisfy demand with limited excess, thereby eliminating lost sales, minimizing carrying costs and increasing profitability.

Establish trust and accountability across the supply chain

When supply chain data and records are fragmented, it breeds distrust and inefficiencies as different sectors try to validate each other’s work and activities. For instance, it may be hard to get proof of delivery from smaller freight forwarders. Manufacturers have to go back and manually review and reconcile invoices, warehouse inventories and dispatch records. Given the large number of products moving across the supply chain for any given company, this adds up to extensive time spent and additional, unnecessary work.

Blockchain technology streamlines the level of effort because it provides a clear ledger of all the different transactions within a supply chain—what was manufactured, stored, shipped and delivered. Thus, it establishes trust and accountability for everyone within the network with visible, immutable, digitized proof of what happened and what is going on both upstream and downstream in the supply chain.

With the ability to solve tough challenges like data silos and inaccurate replenishment, Blockchain is set to radically transform the supply chain industry. According to the 2018 MHI Annual Industry Report, adoption of Blockchain in supply chains currently stands at five percent, but is projected to rise to 54% over the next five years. Adopters can trust that they will have an undisputable ledger of data and complete, real-time visibility to support demand-driven (rather than reactive) planning and forecasting for optimized stock levels and transparency at every point in the supply chain.

When do you think blockchain will be realized in your supply chain? What are your biggest hopes and concerns? Let us know in the comments section below. 

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