Blockchain is much more than a traditional database. It is really a high throughput, decentralized ledger that can’t be edited or changed. It can be applied to any situation where transactions, data, assets, or processes need to be tracked. Its immutability provides an inherent high level of security and trust. Blockchain is a game-changer because if all parties can trust the data, the whole process becomes faster, more efficient, and less costly.
When it comes to corporations that depend on supply chain business models, blockchain technology can significantly reduce or eliminate many real-world problems that ultimately cost companies a lot of money:
- Limited visibility – Difficulty simply knowing where something is at any point; where it originated or if there is a delay or damage to a shipment.
- Data disparities – Manual reconciliations that are time-consuming and labor-intensive but necessary to identify discrepancies.
- Siloed systems – Multiple information systems, inter- and intracompany, that do not communicate.
- Lack of trust – Global markets involve multiple players working together with a lack of visibility, data mistakes, and disconnected systems, all of which equates to no trust.
- Financial drain – It often seems the capital expenditures are endless in the constant pursuit of a reliable supply chain, due to the number of risks and unknowns.
Here’s how blockchain technology reduces supply chain risk and provides visibility, addressing the problems above and ultimately saving companies significant money:
- Improving efficiency throughout the supply chain. With immutable data that can be trusted and seen by all parties, companies can make better, quicker decisions, improving efficiency. These decisions can also become more predictable with Artificial Intelligence and Machine Learning, reducing costs and labor hours related to bad or inaccurate data.
- Reducing or eliminating intermediaries. Brokers and others who essentially check and verify products or transactions are key parts of current supply chains, but with blockchain these “middlemen” can often be reduced or eliminated. Smart contracts reduce potential disputes, costly audits and repetitive reporting that may be required to achieve contract milestones.
- Enhancing visibility for inventory management. With blockchain technology, the data is 100% reliable so inventory management is no longer a labor intensive, manual process. This streamlines both operations and financial processes when audits are needed.
Simply put, blockchain creates trust, in situations where parties may not otherwise have any basis to trust each other’s data. When data is shared amongst stakeholders, and everyone accepts that it cannot be altered, then all involved have reduced needs to verify and audit, saving significant time and money.