What is blockchain's role in supply chain?

By Sean Galea-Pace
What is blockchain and how is it influential in the supply chain? Let’s find out. Blockchain is essentially, as the name suggests, a chain of blocks...

What is blockchain and how is it influential in the supply chain? Let’s find out.

Blockchain is essentially, as the name suggests, a chain of blocks. However, instead of a physical chain, there’s digital information (the block) stored in a public database (the chain). When a block stores new data, it is added to the blockchain. In order for this to be done successfully, four things must happen:

  1. A transaction must occur - After making an online purchase, a block will group together thousands of transactions so that an individual’s purchase will be packaged in the block along with other users’ transaction information as well.

  2. That transaction must be verified - Following a purchase, a network of computers checks over each transaction to ensure it happened in the way a customer said it did. The network confirms the purchase, including the time, amount and participants of a transaction in a matter of seconds.

  3. That transaction must be stored in a block - Following verification, the transaction gets the go ahead. The transaction’s details are all stored in a block and will join thousands of similar transactions like it.

  4. That block must be given a hash - Once all of the block’s transactions have been verified, it must be given a unique, identifying code called a hash. Once hashed, the block can be added to the blockchain.


How is blockchain influential in the supply chain?

There are several key ways in which blockchain is useful in the supply chain. These are:

  • Provenance tracking - Large organisations have complex supply chains. This means it is much harder to keep track of all records for multinational companies. This lack of transparency can affect organisations significantly. In a blockchain-based supply chain management, record keeping and provenance tracking is made easier as product information is accessed by embedding sensors and RFID tags.

  • Cost reduction - Real-time tracking of a product in the supply chain through the help of blockchain can reduce the overall cost of moving items in a supply chain. Following a survey of supply chain workers by the Digital Supply Chain Institute, over one third of people cited reduction of costs as the topmost benefit of application of blockchain in supply chain management.  

  • Establishing trust - Developing trust in complex supply chains with large numbers of participants is key to smooth operations. For example, if a manufacturer shares its products with suppliers, the manufacturer should be able to depend on that supplier to follow factory safety standards.

How are companies leveraging blockchain into their operations today?

In the food and beverage industry, it’s vital to have a solid record to trace each product to its source for safety purposes. For example, Walmart uses blockchain for visibility of the pork it sources from China and blockchain records exactly where each piece of meat comes from and where it is processed, stored and its sell-by date. The transparency of blockchain is also vital as it will let consumers know that they are supporting organisations who share similar values of environmental stewardship and sustainable manufacturing. 

To read our full article in May’s magazine and find out which companies are active players in blockchain, click here!

For more information on procurement, supply chain and logistics topics - please take a look at the latest edition of Supply Chain Digital magazine.

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