How blockchain can add traceability and transparency to supply chains

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As the understanding and adoption of blockchain technology have grown, organizations continue to find new ways to utilize this innovative resource. Blockchain no longer serves solely as a cryptocurrency buzzword, with industries from healthcare and finance to agriculture and beyond using it to find real solutions to some of their most longstanding challenges.

The world of supply chain has also seen its share of advancement through blockchain innovations, with some organizations setting off in the early phases of exploration while others are in the process of conducting pilot programs or developing their own applications.

Blockchain can make a massive impact in supply chain, but before we understand that, we first need to understand how the two interact.

What is blockchain?

A blockchain is a decentralized ledger where every party involved has the same visibility into every transaction that takes place. It is a system that automates trust by verifying the credibility of all transactions for the whole community to see.

You can think of a blockchain network as being similar to a Google Doc, specifically in terms of its decentralized nature. A locally saved Word doc is centralized, in that updates are made one at a time and the document is then passed along to the next user to view, update, and forward once again.

A Google Doc, on the other hand, allows every permitted user to view and make updates in real time. Everyone has the same visibility and is able to verify updates as they occur. This decentralized concept is one of the key factors that set blockchain apart from other technologies.

What is supply chain?

A supply chain is an end-to-end network that extends from a company to its end user and everywhere in between. There are many different elements that make up a supply chain, from suppliers and manufacturers to transportation partners and so on.

Some supply chains are more complex than others, but all supply chains consist of many steps that take place with the ultimate goal of putting products in the hands of consumers. Even functions like marketing, finance, and customer service are included in the scope of a supply chain.

The main goal of a supply chain – apart from providing consumers with products – is to do so in a way that reduces costs and improves efficiency in the production and distribution processes. And this is where blockchain can truly make a difference.

Blockchain in cryptocurrency vs. Blockchain in supply chain

Blockchain’s origins tie closely to the cryptocurrency space – specifically to the birth of bitcoin in 2009. Within the context of crypto, blockchain allows an unlimited amount of anonymous parties to transact privately and securely without the need for a third-party intermediary.

The objective in supply chain is a little different. With supply chain, the primary goal of blockchain is to enable a specific number of known parties to achieve universal shared visibility and to protect their business operations while promoting optimal performance.

Here are a few ways blockchain can make that happen.

Total traceability and transparency

Many supply chains currently make use of ERP platforms in order to track the flows of inventory and finances, but these systems are highly limited in terms of visibility. What one party sees often will not mirror what another party sees, and delayed updates to the necessary information can lead to inaccuracies, delays, and errors within the network.

Blockchain can eliminate many of these blind spots by providing a shared, universal vision of the current reality. It can provide a chronological string of blocks (or records), each encrypted and distributed to all members of the network who maintain their own copies of the blockchain. Each party is now able to review the status of a given transaction, pinpoint any errors that may have taken place, and hold the right parties accountable as needed.

The availability of this shared data increases traceability for more accurate end-to-end tracking throughout the supply chain. Organizations can digitize physical assets and create a decentralized, immutable record of all transactions and of every step from production through delivery.

Increased efficiency

Supply chains are robust, complex organisms involving hundreds or thousands of different elements working together, from suppliers to customers and countless steps in between. Delays at any point in the supply chain can lead to a disruption of inventory, out-of-stock products, and a loss of sales.

For instance, say Gadget A consists of Part 1 and Part 2, while Gadget B consists of Part 1 and Part 3. If the production of Gadget B were to be held up by a disruption to the production of Part 3, it would make sense to temporarily allocate the supply of Part 1 toward Gadget A until the issue was resolved. But if each of these products and parts are manufactured by different entities lacking visibility into one another’s inventory, it is much more challenging to arrive at this decision – if it happens at all.

Blockchain can provide the visibility needed to facilitate this rapid decision-making. It can also enable smart contracts to automatically trigger actions when certain business conditions are met, without requiring any human signoff or initiation.

infographic on blockchain in u.s. .supply chains


Reduced threat of counterfeiting

It might seem like an outdated concern, but counterfeiting still represents a serious threat to the revenue and reputations of modern businesses around the world. In the European luxury goods market alone, about 10% of all items are counterfeit, representing approximately $28 billion in lost value per year.

For many years, incomplete data and disjointed networks made it difficult to trace and authenticate products – both in the supply chain and in the marketplace. Any work that did take place to ensure authenticity required significant amounts of time and money, not to mention the need for tedious manual documentation.

Blockchain technology allows brands and customers to verify the authenticity of products by providing a tamperproof, end-to-end look at product information. Within the blockchain, parties can view the origins, locations, and ownership of raw materials and products at every stage of the supply chain.

Unique cryptographic identifiers known as smart tags also allow suppliers and manufacturers to track and confirm the provenance and location of each item. These identifiers often take the form of a QR code or RFID. End users can even use these tags to view a product’s path through the supply chain to see how it ended up in their hands.

Smarter financing

Financing processes within the supply chain are traditionally very time-intensive and often prone to errors. Blockchain can enable banks to make better lending decisions by verifying transactions between suppliers and retailers without having to conduct a physical audit or a financial review.

Including lending records in the blockchain alongside relevant data pertaining to invoicing, payment, and the movement of goods can make transactions more cost-effective, easier to audit, and less risky.

Make the most of blockchain technology with Compute North

Blockchain represents an opportunity to create a complete, transparent, and tamperproof record of information as it flows throughout supply chains, enabling more efficient product delivery, increased traceability, smarter financing, and more.

Compute North owns and operates state-of-the-art colocation facilities designed to help you make the most of blockchain technology. We have pioneered the concept of the TIER 0TM data center – an innovative concept aimed at providing organizations with an alternative to the more expensive, more traditional solutions available both here in the U.S. and abroad. Each of our campuses is constructed in a strategic location across the U.S. to allow users to focus solely on ROI and less on logistics.

Our blockchain hosting services can allow you to:

  • Reduce your CapEx while making your OpEx predictable and affordable
  • Alleviate the need to staff, operate and maintain your own infrastructure
  • Mitigate risk and scale faster in reliable, U.S.-based facilities

TIER 0™ facilities offer an ideal solution for non-mission critical applications such as cryptocurrency mining, blockchain, image rendering, machine learning, and other edge computing applications where redundancy is built in and latency is not a key driver. We offer fully managed services to oversee all aspects of your operation with hands-on, professional support.

Benefits of our blockchain hosting services include:

  • Cost-competitive infrastructure powered by renewable energy
  • Secure environment to keep your hardware and your data safe
  • Core infrastructure with power, space, ambient air cooling, internet access, physical racks, and security
  • And more

Contact us to learn more.

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