About two centuries ago, the market experienced a disruption like never before. An innovation that would revolutionize how business was going to be done for a long period of time to come. This idea that would change how we did business as we know it was the supply chain. The supply chain was disruptive because it would enhance the visibility and the control of goods and products through their transit from one point to another. The giant centralized system that one promised us heaven in regards to managing the flow of goods and products is now being rendered useless. This is as a result of how the supply chain has evolved becoming more complex. This increase I complexity has led to reduced accessibility of the now defunct systems and lowered transparency in its processes. This going against the very same value that made it so revolutionary and vital in the world of business.
Blockchain, however, gives us a new hope in supporting the current production and supply cycles. It will hopefully restore transparency to the supply chain increasing its impact on efficiency that ripples down to different industries. The supply chain refers to all parties that participate in the creation of goods and it extends all the way through its distribution. This represents the stages through which the good will go from being just raw materials and components in the build of a final product all the way to a finished product before our intended consumer. In today’s world, these supply chains have no geographical limit thanks to the internet and go through numerous stages making it near impossible to trace events through which they undergo.
This process makes it an improbable task for consumers of these products to establish the true value of the goods and services they purchase since it is institutionally impractical to do the verification. This lack of transparency subjects makes us as consumers to be price taker since whatever that we pay is not a true and verified representative of the costs that go into the production of these goods.
Other aspects that are bundled up in the supply chain are more difficult to estimate its impact. For example, it is very hard to estimate the environmental impact that the production of a particular good has on the planet due to a lack of transparency in the process. Problems spanning from this lack of transparency leads to a plethora of other illegal activities that are not new to the supply chain Such activities involve poor working conditions in the production of these goods, used of forced and child labor and the rise of cheaper and less quality of counterfeit goods. Moreover, revenue generated from this may even go to support organized crime syndicates or even go into funding terror-related activities. Ideally, if we had knowledge of what goes behind these activities, we would not support the manner in which these goods are produced or the illegal practices that the continued purchase of these goods supports.
With the promise of ensuring transparency within the network, the distributed ledger nature of the blockchain is the hope through which the current shortcomings of the supply chain will be remedied. Using the blockchain technology where the transfer of goods and services are keyed into the blockchain as transactions of the ledger would in turn help in the verification and the identification of the parties involved from its production. This would also make information regarding its pricing, location, quality, and date of the good available to anyone in the blockchain who would like to know. This and all information that pertains to the supply chain would be available increasing transparency and accountability.
Use of this technology would also preserve the integrity of the raw materials to be used in the production of the goods. Its public nature makes it easier to trace back the origin of the materials used. This blockchain technology would use the nature of its distributed but decentralized ledger making it to a very large degree impossible for any single entity within the network to manipulate the data on it according to their selfish interests achieving own personal gain. This nature backed up by cryptography makes the nature of the transactions impermeable to manipulation upholding the integrity of the ledger. This has resulted in some bold claims by experts saying that this nature makes the blockchain impossible to hack.
This, however, is just a pipe dream. There are strides being taken to make use of the supremacy of the blockchain in the administration and supervision of the supply chain. Global technology and innovation company, IBM, is one such party committed to making this dream a reality. It has already started rolling out a cloud secured service allowing customers to track and manage high-value items using the blockchain technology as they go through complex supply chains. This service is also used by a company by the name of every ledger. They are working to introduce transparency into the supply and production of diamonds through the use of the blockchain. This is in an effort to deal with the forced labor troubles in the diamond supply from Africa and verify if the returns from this trade indeed go into the funding of violent activities in Africa.
Furthermore, the Wall Street Journal also laid claim that over 40 leading financial institutions have recognized the opportunity in the use of blockchain technology and have started experiments using distributed ledger technology to securely track assets, improve the speeds of the transactions, mitigate challenges coming from fraud and reduce overall costs of business. In all these, we can see the tangible impact that the blockchain will have in ensuring transparency and accountability in the complex network of the supply chain.
This transformation will be from the nature of the system that disbands organizational silos leading to their unification and simplification of its processes. Increased efficiency in the order and tracking of a good’s manufacturing and logistical details. Reduced possibilities of accounting errors by creating a transparent and finite paper trail that make it easier for all transactions to be verified. This cannot happen without making it infinitely easier to identify fraud and as a key component to increase the scalability of future businesses. Use of the blockchain in the supply chain is evidently a game changer and a ticking time bomb waiting to explode and rebuild how we ever thought about the supply chain.