Supply chain has become a cumbersome process. It can take days for payments to be finalised between manufacturer-supplier and customer-vendor. Nowadays, contracts are carefully vetted by legal professionals and sometimes even bankers. This can end up delaying the process even further and adding to the overall cost.
It has been observed that companies often find it hard to trace a product or part to a supplier and this makes it virtually impossible to eliminate defects. With third parties involved in the chain, the entire process becomes lengthy. Regardless of the industry, supply chains have numerous problems, thereby preventing them from working well.
There is a silver lining, however. Blockchain technology could be just what the supply chain industry needs. This tech drives cryptocurrencies, like Bitcoin and Ethereum, but there is more to it than meets the eye.
Understanding blockchain technology
Blockchain is primarily used to hold and exchange money. Its popularity has surged because it is hackproof and there is no middleman. However, this technology can be exploited for more than payments. It can be used for any type of tracking, agreement and exchange. Companies can use blockchain for self-executing supply contracts as well automated cold chain management.
Blockchain is a distributed, digital ledger that records all transactions in blocks. These blocks are present in numerous copies across multiple computers that are known as nodes. What makes the ledger safe and secure is that each new block is linked to the previous block in such a manner that it cannot be tampered with.
Blockchain does not depend on an external, independent entity, such as a bank, to keep it secure, and nodes are constantly updated as new transactions take place. All transactions in the blockchain are anonymous, but there are records of payment date, amount and time.
Blockchain in supply chain
What makes blockchain ideal for supply chain payments is that you can use it to transfer funds to any corner of the world. It does away with traditional banking methods, with transfers being executed directly between the payer and payee.
It represents a quick and secure method to pay suppliers, and all transactions are completed within minutes. So, your vendor or supplier does not have to wait for days to receive payments. It is also more cost-effective compared to traditional banks, and this helps in cost savings.
Blockchain technology can also be utilised to determine the product status at each stage of production. The blocks formed cannot be altered or changed, and are permanent in nature. Hence, the technology can be used to trace any product to its source, and any problem in the product can be addressed quickly and effectively.
The bottom line
Blockchain has the ability to transform and streamline supply chains. Organisations that have realised the potential of this technology are using smart contracts to eliminate delays and waste. This, in turn, is making their supply chain more secure from start to finish.
Steve has over 28 years of success as CPO, MD and Procurement BPO leader in a range of industries. Steve is COO at Odesma, responsible for Odesma’s delivery capability & infrastructure.