What is blockchain supply chain and how are organizations utilizing it?
Blockchain is the networked distributed ledger technology, and it is continuously gaining relevance in today’s global supply chains. Anant Kadiyala, Director of Blockchain and IoT Solutions and Oracle, wrote an article in Forbes about three benefits of blockchain supply chains.
Blockchains provide a jointly managed, tamper-resistant mechanism for recording validated information for their participants. Some of the benefits that blockchains bring to supply chains include:
- Supply chain risks are minimized, and operations are accelerated across multiple geographies through near-real-time nature.
- Supply chain partners can simplify their processes and workflows while generating better guarantees on performance and outcomes.
- Companies are able to adapt quickly to changing market conditions.
Companies already use blockchain to track supply chain anomalies and trace their origins. Other areas where blockchain can improve supply chains include:
- Regulatory compliance
- Supplier performance management
- Trade finance
Blockchain Supply Chain Benefit: Regulatory Compliance
Companies need to provide periodic reports that document their compliance with business and trade laws in order to comply with government regulations. In order to create these reports, they need a method to track and record the way products are acquired or produced. For example, a company would need to document when and how it got raw material from an approved forest or mine or how it manufactured products in specific compliant ways.
All of the information collected for these reports need to be presented in a government-mandated format. A company will need to show the validity of the records and have the ability to prove it.
The real-time visibility that blockchain offers helps cut down on the cumbersomeness and lag associated with compliance reporting. IoT-instrumented records that publish directly to the blockchain create an audit trail that lets companies create their own specific regulatory reports. This means that they won’t have to wait for suppliers to do it. Companies can also share records with parties outside of the network.
Blockchain Supply Chain Benefit: Supplier Performance Management
Large companies often attract suppliers based on metrics like contract fulfillment, quality, volume, price, sourcing, negative incidence rates, etc. It’s important to have a detailed, metrics-based view into the performance of the suppliers in the chain. However, today’s performance-tracking mechanisms take time and might allow unethical suppliers to game the system.
Blockchains offer validated transaction data and metadata about supply chain transaction, which lets companies track suppliers’ key performance indicators in real time. This mitigates manual reconciliations and their resulting delays. In addition, supply chain partners can further automate business processes by leveraging the blockchain’s smart contract layer. This lets engineers program in business logic, workflows, and incentives. These kinds of real-time performance measurements and rewards help ensure the quality of transactions, improve process efficiency, and foster more reliable supply chain partnerships.
Blockchain Supply Chain Benefit: Trade Finance
Anant points out that “the wheels of a global supply chain are greased by financing from banks and other institutions.” As part of the trade finance process, companies generate and share multiple copies/representations of relevant documentation. The complexity of this often leads to delays, duplications errors, time spent on reconciliations, or fraud.
However, blockchain can help supply chain partners expedite documentation turnaround times, reduce delays related to reconciliations, and eliminate duplication errors. They can also reduce disputes with suppliers and financers, avoid late penalties from customs agencies, and better manage freight detention and demurrage costs.
Still not sure if Blockchain is right for your organization? Check out our article Do You Need Blockchain? How to Decide.
For more information about how blockchain can transform your Supply Chain, check out the full article from Forbes below or visit the Oracle link to learn more about Oracle Blockchain Platform.