Blockchains in Supply Chain Management: A Deeper Look (Part 2)

Walmart, AmerisourceBergen,, UPS, FedEx, Maersk and many other global giants in the supply chain industry have begun exploring the blockchain to solve their supply challenges. From automation to efficiency and speed, the benefits of doing so have been immense. However, these benefits are not uniform in every field, and neither are the blockchain solutions being pursued.

Autonomy Through Smart Contracts

Smart contracts have been revolutionary and are transforming many industries including insurance and legal services. The supply chain industry is benefiting as well, with smart contracts making autonomy a reality. The supply and distribution industry has tedious and time-consuming processes that delay even the most minute activities for hours. For example, the movement of funds which must be legally authorized by various network participants takes longer than it has to. Smart contracts are changing the narrative, making these processes smooth and autonomous. Since smart contracts are self-executing, most tasks in the supply chain can be autonomous. The execution of a contract is predicated on the outcome of an event. For example, funds can be released from a supplier’s bank account to a manufacturer’s when the supplier receives the goods.

Real-time Tracking

The efficiency of any supply chain is greatly dependent on its ability to respond to changes in real time. A breakdown in the chain, such as if some of the goods in transit are harmed, can lead to losses arising from the supplier’s inability to meet demand. Unfortunately, the current systems in place are ill-prepared for such events. Blockchain-based solutions are, however, able to provide real-time tracking of goods from the producer to the final consumer. In the event that goods are harmed while in transit, the company expecting them can respond in real time by ordering more or seeking a substitute.

Eliminating Counterfeiting

In any supply chain, there is always the looming danger of counterfeits being introduced into the system, especially when goods are changing hands. In some industries, this is extremely dangerous and can cause loss of lives. One such industry is the pharmaceutical industry, which has seen a rise in the number of counterfeit drugs, especially in developing nations like those in Africa and Latin America. In 2010 alone, WHO estimated global fake drug sales to be a $75 billion business, and that number is rising every year.

Blockchain-based systems are helping to curb this toxic behavior through the use of bar codes on drugs in the supply chain. These codes are scanned and entered into a decentralized ledger which is immutable. As the drugs exchange hands, the codes are scanned again and recorded on the ledger. This gives authorized parties the ability to track the drugs as they move through the supply chain to the final consumer. Counterfeit drugs are thus made much easier to spot, and culprits much easier to apprehend. This could save the lives of millions around the world whose conditions are worsened by counterfeit drugs introduced into the system by unscrupulous businessmen with no regard to people’s well-being as long as they make money.

Transparency and Data Availability

The decentralized nature of the blockchain makes transparency a primary principle. While the importance of transparency in financial transactions on the blockchain has been highlighted and praised, its value in the supply chain is just as crucial. Transparency is fostered by the availability of data to all involved parties instantly. Any data recorded on a blockchain can be accessed by any user who is permissioned, which nurtures trust. The ability to track goods throughout the supply chain and investigate any anomalies also fosters trust within the ecosystem, which eventually leads to a more conducive business environment.

Cutting Costs

The streamlining of most processes will lead to cost-cutting for companies in the long run. Activities that delayed the entire process (such as having lawyers sign off on almost every little thing) are being replaced by smart contracts which will save the associated costs for companies. The bulky paperwork that was involved in the shipping process will also eventually become digitized, and the blockchain will be the primary platform where all information related to the supply chain will be found. The costs associated with this will also be spared.

The supply chain industry is experiencing a revolution. Archaic practices are being replaced by more efficient methods, and blockchain technology is at the heart of this revolution. While it’s still in a nascent stage, the benefits have already been demonstrated, and as more development and research is undertaken, the blockchain will become the driver of this crucial sector of the economy.


Stay tuned for the third and final part of this three-part series.

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