The Application of Blockchain Technology in Supply Chain Management and Traceability

Supply chain management (SCM) is the process of managing the complete production process, from the procurement of raw materials to the delivery of the finished good or service to the customer. Additionally, it manages the transfer of resources, data, and money related to an item or service.

Despite the fact that the terms supply chain and logistics are sometimes used interchangeably, logistics is but one component of the supply chain. In order to centrally govern the supply chain, traditional supply chain management systems entail processes including planning, sourcing, manufacturing, delivering, and after-sales service.

Having stated that, the process starts with determining how to satisfy client wants and choosing suppliers to assemble the product’s basic materials.

The next stage is to decide whether the manufacturer will handle delivery themselves or outsource it. After a product is delivered, a network will provide after-sales services, including managing product returns and repairs, among other things. These services are essential for ensuring that customers are satisfied.

Drawbacks In Traditional Supply Chain Management

1. Poor visibility across the entire supply chain.

2. Absence of actual data updates.

3. More projected delays.

4. Unable to adjust to changing market conditions or less responsive.

5. A bigger inventory

6. Increased COGS.

Modern SCM systems, on the other hand, manage everything from the production of goods and services, to warehousing, inventory management, order fulfillment, information tracking, and product/service delivery, to after-sales services, through the use of software. For example, Amazon uses a variety of robotic and automated technologies to pick and pack orders, stack products, and store them. Additionally, the business has started using electric drones to deliver products weighing less than five pounds in a few parts of the United States.

Benefits of Blockchain Technology

Blockchain enables businesses to conduct transactions directly and without the involvement of a third party, increasing the efficiency of global supply chains. Additionally, it makes it easier for financial and logistical services to be more integrated, enhancing stakeholder data collaboration.

Sourcing and Manufacturing

Over the past ten years, traceability throughout the supply chain has grown crucial. Knowing the source of every component, being aware of the quantity and quality of products, and being able to identify a supplier in the event of a faulty product are all crucial for a company’s day-to-day operations and the entire supply chain (Zhou et al. 2022).

However, tracing components or goods back to their source in a traditional manner is a highly challenging, expensive, and time-consuming procedure. All of this information can be obtained using blockchain technology, which also ensures that no one can falsify it. Everybody in the supply chain has real-time access to and tracking of all the information about suppliers, goods, or components.

Inventory Management

Companies have experienced a rise in stockout risk and a decline in service quality as a result, which has led to a loss in revenue (e.g., emergency orders to backup suppliers, contract penalties, and potential loss of customers). Companies frequently increase the number of units they keep on hand to lessen the effects of these problems, but doing so runs the danger of holding too much inventory (and, thus, greater carrying costs) or, worse, of worsening the supply chain’s bullwhip impact.

Supply chain partners can enable the automatic execution of payments and orders using this technology. Transactions can only be modified by parties that write legal transactions, and once they are recorded, they cannot be erased. This offers a precise and transparent end-to-end picture of the information about the products, such as their location, amount, quality, and ownership, to all supply chain participants.

Reverse Logistics and Product Returns

Blockchain technology, like what happens in the forward network, can be utilized to manage the reverse supply chain through tracking, visibility, and accuracy of information. Due to the integrity and immutability of its data, blockchain can be applied to the resale marketplace, confirming the legitimacy of things offered on second-hand markets and increasing buyer trust. Walmart has officially filed a new patent for a blockchain ledger that will track things sold to customers. The technology would allow a customer to register the purchase of an item and subsequently select a resale price, operating as a digital marketplace.

Customers can obtain information on the recycled material used in their laptops as well as their origin. AbbVie has just joined the MediLedger consortium in a blockchain project that allows members to track and verify product validity, as previously stated in Section 4.1.1. Another use for this project is to address the essential issue of sellable returns in the pharmaceutical industry. Furthermore with a closed blockchain system, only manufacturers can affix unique IDs to items. Companies may also verify who touched what medicine and when at any moment. As a result, objects in proper condition can still be resold in complete security.

Distribution and Delivery

The effective management of a company’s distribution system is one of the main obstacles to success. Due to blockchain’s potential to manage and monitor. All types of shipments and transactions along the supply chain, accelerate paperwork, and ensure confidence. The transportation and shipping industry has recently demonstrated a rising interest in technology.

In logistics, blockchain can be used to detect and stop fraud. The most important procedures in this situation are usually transportation and ownership changes. Fraudsters can tamper with documents or present false identification. This is when picking up commodities or introducing fake goods. The “Intel Connected Logistics Platform” from Intel enables users to follow shipments and keep tabs on the state of their goods. This includes stock levels and temperature.

For businesses delivering fragile goods or goods with specific temperature requirements. This platform might be quite helpful. Conflicts between carriers and shippers can be significantly decreased. Both parties have access to real-time information regarding the sent product.

How can Blockchain Improve Supply Chain Tradeability?

One of the distinct features of blockchain technology is its tradability. The tokenization of assets on blockchain networks ensures asset tradability. Tokenization converts a physical object, such as a product, into a digital asset, with the system retaining one token for each product that may trade in the market.

One can accomplish Tokenization by separating an asset into shares that digitally represent ownership. Because these tokens are tradeable, users can transfer ownership without transferring physical goods. Furthermore, automated smart contract payments aid in the appropriate licensing of software, services, and products.

Blockchain provides consensus. This means that there is no disagreement over transactions in the chain by design. Because every business utilizes the same ledger version. The chain has the unique capacity to track ownership records for physical assets such as real estate and digital assets.

You may be wondering why businesses choose asset tokenization over direct payment in fiat. One reason is that smart contracts enable peer-to-peer payment. It accelerates the transfer of funds and reduces the time required to recompense businesses for goods or services they provide.

Furthermore, token payment prevents fraudsters from stealing from organizations by taking advantage of chargeback situations. When a payment is made, money is sent to the business’s blockchain wallet account, and no permission for  unauthorized withdrawals