Blockchain in Supply Chain Management with Usage Cases and Future Perspectives:
This real-world stress test for global supply chain management came in the form of the COVID-19 pandemic. This article opened with the importance of supply chains to an org’s performance and also found that a lack of resilience, lack of visibility and ineffectiveness at responding can make a difference. Indeed blockchain — now known for its ease of tracking documents down and providing higher data integrity — becomes one of the most promising ways to address these challenges.
A Very Brief Overview of the Current Supply Chain Landscape: People used to receive deliveries almost instantly until 2020. And then, when the pandemic disrupted the global logistics system, those mundane goods — toilet paper, electronics, home office equipment — were delayed or not made available. It shifted how we thought about it. Organisations and consumers alike are turning to technology to adapt supply chains and address system obstacles. But technology alone will not eliminate the complexity of these global supply chains. Some of these long-term threats include geopolitical risks, cybercrime, inflation, droughts limiting shipping lanes, product scarcity and the rapidly spreading consequences of climate change. And as a result, many companies are reassessing lean and just-in-time strategies, rethinking their sourcing and distribution systems. For now, they are also concentrating on predictive resilience.
Supply chain leaders are more than ever focused on three strategic drivers:
Predicting supply-chain risk – Streamlining ESG reporting from end to end supply chain through end-to-end traceability for ESG reporting. – Trustful multi-stakeholder environment with mutual trust between the stakeholders and trust between them and with various multi-stakeholder stakeholders. So, these driving forces improve brand trust and transparency of the multi-stakeholder ecosystem and simplify and clarify the company in each element, which acts both, making the company easier and transparent with each one. This enables enterprises to improve the capacity to verify provenance verification, track it, attest to the authenticity, mitigate non-compliance, increase compliance, and build brand trust. This development requires blockchain. It is a key to this progression, and blockchain is a key to how the progress is made. Through a shared, tamper-evident ledger, blockchain allows participants in the system — who would not naturally trust each other — to record, validate and access transactions reliably, over complex networks. Companies have always tried to minimize risk with their redundancy. Though redundancy is still valid, blockchain enables providers of services to identify weaknesses and act quickly. Already in many resource intensive industries there are blockchain is being used to create transparency and measure Scope 3 emissions. Beyond all that, there are myriad disparate actors embedded in the global supply chains. Blockchain ensures that trust in the information is built up by using the original source of it. It is also effective for transparency problems that destroy trust.
How Blockchain Helps: At an essential level, the supply chain is a web of businesses that add value by every point along its entirety. Every step leads to a series of information, goods, services and money flow. A permissioned blockchain can log and confirm these transactions in a single, immutable ledger that can reach a single truth source accessible for all approved mediators. Blockchain’s ability to enhance risk prediction that increases visibility, data accuracy, transparency, accountability, confidence and data security as well as efficiency to enable a greater international supply chain security, as well as greater transparency, are more than just an enabler of supply chain strengthening. It can also be integrated with other technologies, such as IoT devices, AI, smart contracts, etc., to also create increasingly dependable, automated, reliable solutions. Many blockchain applications can be used to establish better supply chain controls in Supply Chain Management.
Blockchain delivers great benefits without existing ERP and legacy systems, that are already in effect, being replaced. Instead, blockchain could operate as a kind of extra layer for increasing transparency and efficiency of operations.
Key benefits include:
Reduced Risk: The transaction throughput of blockchain has long been a challenge. To improve on this, a number of mature solutions have been developed that address these shortcomings:Enhanced Layer 1 chains with better consensus models or sharding. Layer 1s that favor speed over decentralization. Layer 2 networks and sidechains that are designed to consolidate transactions for greater scalability. While these approaches have different tradeoffs, they are now robust enough for a wide range of enterprise-scale use cases.
Security: Just two years into the blockchain space, we witness an even more robust physical security. Building trust has improved with the emergence of standardized smart contracts, common security frameworks and bug bounty programs. In addition third party smart contract auditors help organizations before deployment to run the code on-chain. These developments have reduced risks and facilitated widespread Web3 adoption.
Developer Tools: Web3 development tools are quick. However, cloud providers are starting to provide blockchain infrastructure services, and more and more SDKs, libraries, and IDEs assist enterprise development. And they remove access barriers and facilitate acceleration of adoption.
Financial applications: Cryptocurrencies are being adopted by consumers and institutions. And of course digital assets offer improved settlement options, speed of cross-border transactions along the path providing financial services to the many millions. Decentralized finance (DeFi), too, is a trend for disaffected users.
Digital Assets: The blockchain would enable physical and digital assets such as real estate, art and intellectual property to be tokenized: everything that links us to others and the digital realm, from physical property to digital properties. Tokenization raises liquidity, decreases cost and enables attributes like fractional ownership and programmable access rights. There has been a lot of expansion as a result of that growth and most businesses use NFT-driven loyalty and rewards programs to keep their customer connected.
Enterprise Blockchain: Private enterprise blockchains work in a controlled environment where no one participant can dominate. The three main advantages – immutability, security, and trust – are balanced. There are no costs associated with data governance. For the field, its applications include secure supply chain verification, data sharing (e.g., medical records), and improved control of government data.
Blockchain application to supply chains: the most important challenges. This brings us to the second big challenge facing organizations with the implementation of technology on their side:
Interoperability: With the rise of blockchain systems, we need a set of universal standards for cross-chain interoperability. Current “bridge” solutions allow better interoperability, in the short run, but inevitably involve trade-offs relating to trust, security and resource requirements. Organizations must research all that and agree on acceptable risk and performance per each single risk category.
Scalability: Limitations on public blockchains include: CPU, bandwidth, energy, storage. Private blockchain projects, while more uncontrolled, require organizations to anticipate use and select the right consensus tools. The companies shall choose a Layer 1, Layer 2, or a permissioned network depending on the need.
Security and Privacy: Security/Privacy Issues Blockchain architecture is challenged with risk based concerns such as confidentiality, integrity, consensus and smart contracts. By involving IT and cyber security leaders early in the planning process, organizations will gain the initial trust and understanding of the risks, acceptance of good security practice, and adoption of good security strategy but also develop the understanding of risks, implement best security practices, and introduce effective security strategies.
Stakeholder Buy-In: The embrace of blockchain in global supply chains is still in its infancy. That means leaders have to talk to the C-suite along a business value axis, set industry standards and invest in know-how. In order to understand benefits, costs, and inform decision making, inter-partner collaboration is imperative.
