Over the past few years, blockchain has been a topic of widespread conversation. The potential of blockchain technology is vast, and it can assist in bringing the logistics business to a new level while also making supply chains more sustainable and transparent.
According to its boosters, blockchain technology boosts the efficacy and profitability of most (if not all) firms or perhaps upends business as we know it. Businesses that disregard blockchain technology do so at their risk, warn early adopters.
A few years ago, most of the conversation among tech aficionados was on the blockchain; however, now technology is making its way into the economy. The World Economic Forum views blockchain technology as a tool that can assist improve the state of the global economy by repairing global supply lines that have been damaged by COVID-19.
The patterns observed in the market are likewise heading in that direction. According to estimates provided by MarketsAndMarkets, the market for blockchain-based supply chain solutions was only worth $253 million in the year 2020, but it is expected to reach the level of $3.3 billion by the year 2026. The entire supply chain business is going to be completely disrupted by this.
Acquiring a comprehension of the blockchain technology
Blockchain is a system that is built on the internet that is highly regarded for its capacity to publicly validate, record, and disseminate transactions in immutable, encrypted ledgers. This ability is what makes blockchain so valuable. The technology was developed to facilitate transactions with bitcoin, a form of digital currency that is decentralized and functions without the intervention of a central bank. In its most basic form, blockchain technology offers a platform that can be utilized to generate and disseminate the ledger, also known as the record, of every bitcoin transaction to thousands, or perhaps millions, of computers that are connected to networks in different regions of the world.
Because both the transactions and the ledgers are encrypted, blockchain technology provides a higher level of protection than the traditional banking model. Additionally, the technology’s ability to transmit data instantly over the internet eliminates the two- to three-day clearing process that banks require, along with the fees that go along with it when moving money from one account to another. The name “blockchain” comes from the “blocks” of authenticated and unchangeable transactions and how they connect in chronological sequence to form a chain. This is how the term “blockchain” came to be (exhibit). Because of this, we use the word “blockchain.”
How does the blockchain function?
We will not go into great detail on the technical aspects; rather, we will focus on the most important aspects. The concept of blockchain is encapsulated in its name, which describes the technology as a” chain of blocks” containing information (transactions). The data in each block in the chain is protected by a hash function, and each block in the chain contains data about the block that came before it in the chain.
The term “distributed registry” refers to a system where all nodes in a network have equal access to the same data. That is to say, it’s impossible to make covert changes to data stored in a blockchain network. The blockchain’s decentralized ledger structure ensures that all transactions inside the network are safe to conduct, negating the need for a central authority to oversee such matters.
The words “intermediary,” “regulator,” and “security” stand out as particularly relevant to the logistics industry; these features of blockchain ensure that corruption and human error are mitigated along the supply chain. Constructing a payment system independent of banks and government is also possible. What steps need to be taken to accomplish this? Smart contracts allow for this to happen.
Autonomous and time-synced programs and smart contracts are the future of electronic commerce (without human involvement). They implement the blockchain principle, albeit with caveats. This method can be used to automate the exchange of information and paperwork between counterparties, as well as settlements and other business-critical processes.
The auditing and consulting firm Deloitte has released a paper detailing the four primary logistics industry concerns that blockchain technology can address:
- · Bad administration
- · Weak capacity to track down sources
- · inability to comply
- · Flexibility issues
Supply chain blockchain value
Most supply networks run without blockchain technology. IT and supply chain are thrilled about the technology. It has inspired several publications and spurred IT players and start-ups to launch interesting trial projects, including the following:
- Walmart tested an app that traces Chinese pork and US products to confirm transactions and record keeping.
- Maersk and IBM are using blockchain technology to facilitate cross-border transactions.
- BHP is replacing spreadsheets for tracking internal and external samples with blockchain.
- Provenance, a UK start-up, just raised $800,000 to trace food using blockchain. It piloted tuna tracing throughout Southeast Asia.
The authors are unaware of any large-scale supply chain applications, prompting the question: Can blockchain technology provide value?
As most practitioners know, many modern supply chains contain good data they can move across tiers in near real-time. To analyze the value of blockchain for supply chain, we looked at three areas:
- Eliminating manual processes: Although supply chains can manage enormous, complicated data sets, many of their procedures are slow and rely exclusively on paper, as in the shipping industry.
- Traceability improvement: Regulatory and consumer demand for provenance information is changing. Improving traceability reduces the high costs of quality concerns like recalls, reputational harm, or income loss from black- or gray-market items. Simplifying a complex supply base creates value (see sidebar, “A complex supply chain of unknown parties”).
- Cost-cutting supply-chain IT transactions: This benefit is still speculative. Bitcoin pays people to validate blocks and transactions and requires block proposers to pay a fee. Supply networks’ magnitude makes such a cost unaffordable. A single automaker would issue 10 billion call-offs to tier-one suppliers in 90 days.
Supply chains move billions of transactions and data in real-time. Many supply chains have problems with soiled, disparately formatted, hard-to-access, or hard-to-visualize or analyze massive data.
Well-managed central databases with robust data management, supply-chain visualization, and analytical prowess are scalable today.