- Strengthening the traceability of goods
The distributed ledger system which is the main attribute of blockchain technology can be used to record the status of a product from production stage all the way to delivery to the consumer. The records are tamper proof, immutable and permanent and therefore makes it easy for the product to be traced to its source. Such records also make it easy for the manufacturer of a given product to identify the person who bought a product in an event of a product recall. Improving traceability mitigates the problem of high costs of production therefore adding value to a company’s supply chain.
- Automating processes
Many supply chain processes are done manually, and majority of them entail cumbersome paperwork. Accordingly, the entry of blockchain eliminates some paperwork used for such things as tracing of products, keeping of records, and those datasets are automated. In the end, it increases the speed of operations and makes the processes less costly.
- Cost reduction
Tracking of products within the supply chain reduces the cost of moving the products. When blockchain is applied in supply chain processes, the costs within the system are hopefully reduced while at the same time guaranteeing security of transactions. Furthermore, blockchain eliminates middlemen and intermediaries that add markup at every stage. At the same time, this technology will be useful in reducing fraud and eliminating product duplication which in the long run leads to financial gains.
With digital currencies now in wider acceptance, it is just a matter of time before customers and suppliers appreciate the role that this technology plays in payments. With that, payments will be made by different individuals in the supply chain using cryptocurrencies rather than relying on the current methods of payment. This will be a huge stride towards efficiency and elimination of risk of losing products due to lack of proper recordkeeping mechanisms.
- Build trust
Building trust in the supply chain where many participants are involved is often difficult but necessary for the smooth running of operations. For example, the manufacturer should be able to depend on the records of the products he shares with the suppliers. This is also the case when it comes to compliance with regulatory frameworks. The immutability of blockchain records will play a vital role in making sure that tampering of records is eliminated and trust is built as a result of accuracy presented by these records. The copies of the shared ledger offer finality and hold the same version of the truth which cannot be altered.
Although it might be too early to outline all the advantages of blockchain and how it will be used in the supply chain, it is without a doubt that it will solve issues which are experienced in this sector currently.