However, despite the rapid
growth in this already huge industry, there has not been much groundbreaking
innovation since the introduction of the shipping container in 1956. Manual,
paper-based processes are still common in many areas of supply chain
distribution. These outdated processes often lead to inefficiencies as the
supply chain is slowed down by the large and complex network of point-to-point
It has become clear that
these old methods and technologies are no longer adequate for the intricate and
geographically diverse supply cycles of today.
There was once a time when
the majority of commerce was conducted locally, and the management of supply
chains was relatively simple. The industry has since outgrown and outpaced the
technologies used to manage them. This has unfortunately introduced several
inefficiencies into the current systems.
Despite the development
of supply chain management
companies still lack visibility and insight into the progress of their products
at any given point in time. This is due mainly to the analog gaps that exist
between systems and entities across regional boundaries. Although visibility
options are available, they are often proprietary and lack interoperability,
resulting in the creation of information silos. Printed documents, though they
may contain pertinent information, simply cannot contain the level of detailed
information necessary for full visibility and traceability.
Since the journey of the
product across the supply chain cannot be traced, it is almost impossible for
consumers to know the true value of their products.
In addition, at present, it
is extremely difficult to investigate illegal or unethical practices associated
with the supply chain. Counterfeiting, dishonest production practices, forced
labor, poor working conditions and other criminal activities can occur at
various points of the supply chain without detection.
A 2013 horse meat scandal, in which foods advertised
as beef were found to contain undeclared horse meat, revealed a major breakdown
in supply chain traceability and transparency. Although the scandal did not
present any health problems, it is not difficult to see how harmful ingredients
could slip into systems undetected.
To solve these problems,
blockchain solutions are now being explored by top
names in the industry in
an attempt to transform the supply chain and logistics industry. At its core,
blockchain technology is inherently transparent and immutable, two features
that are ideal for solving this industry’s current issues.
Public ledgers make it
possible to track products at every stage of the supply chain, from the raw
materials to the final product to be received by the consumer. This information
can then be made available and accessible to all relevant parties within
Also, once the transaction
data is recorded, it cannot be manipulated. Every transaction is recorded
across multiple copies of the ledger and verified by multiple nodes. The ledger
is not owned by any central authority, making it impossible for any one entity
to gain control and manipulate the data written on the blockchain. The end
result is a public record that is highly transparent, easily traceable and
extremely difficult to compromise.
Smart contracts can also be
utilized to significantly reduce, or even eliminate, the use of time-consuming
and costly paperwork. Predetermined arrangements can be programmed into the
contract, allowing businesses to execute complex, conditional-based actions
such as payments and the transfer of crucial information without the need for
intermediary agents. All contractual actions are synchronized and verified by
other participants across the network.
For instance, the food
industry, which accounts for the largest subset of the global supply chain
industry, can benefit by having crucial information recorded and digitally
tracked at all stages of the supply chain on a distributed ledger, recording
things like farming conditions, factory processing data, batch numbers, serial
numbers, expiration dates, storage temperatures and shipping data.
As a result, food
authenticity can be easily safeguarded and verified, therefore reducing
instances of food fraud. Additionally, the increased transparency and security
provided by the blockchain can decrease inaccuracies caused by manual
inspections, help retailers better manage the shelf life of products, cut costs
by reducing waste and increase consumer confidence in products.
Similar to the food industry,
any other industry that relies on a supply chain to produce their product can
greatly benefit by implementing a blockchain-based solution. The technology is
still very new and it may take some time before its full benefits are realized,
however, the results from successful
that blockchain technology is poised to bring a much-needed transformation to
the supply chain industry.