There are many new technologies revolutionizing the way the supply chain functions, from artificial intelligence to automation. However, there’s one cutting-edge technology that’s only just starting to impact the supply chain, but which promises to be a game changer: blockchain. Originally developed for the cryptocurrency space, blockchain technology is often described as a “decentralized ledger,” which publicly records all transactions and information. While its applications are still new, blockchain in supply chain management has the potential to improve transparency, boost product traceability, and prevent fraud.
In this post, we’ll explore how blockchain works, its potential in the supply chain space, and how businesses can leverage blockchain to improve their operations.
What is Blockchain Technology?
Blockchain technology is innovative and transformative, and it’s ranked the third most disruptive technology, behind only machine learning and AI. It was initially developed for use in the financial sector, specifically in the cryptocurrency space. In layman’s terms, blockchain functions as a secure, visible source of data that (in most cases) can’t be altered. All transactions that occur on the blockchain are recorded on what’s called a ledger, which is visible to the public.
One of the unique qualities of blockchain is its decentralized nature: it records transactions across multiple computers (also called “nodes”) which ensures the data is secure, transparent, and resistant to tampering and fraud. Each record (or “block”) is linked to the previous one, which creates a train that traces all interactions in a sequence.
In recent months, the use of blockchain has begun to expand outside of the cryptocurrency space. In 2024, the blockchain in the supply chain management market was valued at less than one billion dollars, but by the year 2029, the market size is expected to grow by more than six-fold. As supply chain businesses are starting to discover, several key characteristics of blockchain make it particularly valuable for supply chain management:
- Transparency: Blockchain is a shared ledger accessible to authorized parties, which means that every stakeholder in the supply chain can view and verify data in real-time. This openness improves transparency, reduces the chance of data manipulation, and can increase trust between supply chain stakeholders.
- Security: Blockchain technology is typically considered very secure, due to the interconnected nature of the “blocks,” and features such as encryption. However, there have been instances where hackers have accessed online cryptocurrency “wallets,” or have exploited gaps in the system. For example, in 2016, hackers were able to leverage a gap in the blockchain to steal millions of dollars in cryptocurrency. Despite cases like these, blockchain is generally considered to be “tamper proof” and extremely difficult to alter.
- Decentralization: Unlike traditional databases managed by a single organization, blockchain data is stored in a decentralized fashion. This means that no single entity has full control over the data, which enhances resilience and promotes greater stakeholder trust.
Blockchain’s distinctive features make it a promising solution for supply chains, and for solving many long-standing challenges in supply chain management.
Challenges in Traditional Supply Chain Management
To understand the implications of blockchain in supply chain management, it’s important to discuss the current challenges today’s supply chains are facing. Supply chains are complex networks with numerous stakeholders, from suppliers to retailers. Despite technological advancements, many of today’s supply chains still rely on traditional, fragmented systems that are outdated.
Here are some of the primary issues conventional supply chains face:
- Inefficiencies: Many supply chains today still rely on outdated systems which are prone to errors, and duplication, and which can lead to delays. For example, verifying documents, checking inventory, and coordinating logistics can take up significant time and resources.
- Transparency issues: In traditional supply chains, it can be difficult to track products across each stage of their journey. Information is often siloed within individual organizations, making it challenging for stakeholders to get a comprehensive view of the entire supply chain.
- Risk of fraud: In particular industries (such as luxury goods, pharmaceuticals, and electronics) counterfeiting is a significant issue. One survey found that more than one-quarter of organizations experience supply chain fraud, waste, or abuse. Fraudulent actors can take advantage of gaps in systems or manual processes to introduce counterfeit or substandard goods.
These are just some of the challenges that are common in traditional supply chain methods, and they underscore the need for a more robust, transparent, and efficient solution.
How Can Blockchain Benefit Supply Chain Management?
Blockchain in supply chain management is uniquely suited to solve many of the key issues that are present in this space today by providing a secure, transparent, and decentralized ledger that all stakeholders can access. Here’s how blockchain addresses the challenges of transparency, traceability, cost inefficiency, and fraud in supply chains:
1. Enhanced transparency and visibility
One of the biggest benefits of blockchain in supply chain management is that it creates a shared, immutable ledger, which is accessible to all authorized participants. This allows every party in the supply chain (from suppliers to retailers) to view a single, verifiable version of the truth, which is visible in real time.
This means that with blockchain, stakeholders can track the product journey at every stage, and get a full picture of the supply chain.
2. Improved traceability and product authentication
Each transaction recorded on the blockchain is traceable, which creates a reliable source of information. Every product’s journey, from origin to destination, is recorded in real-time, providing a clear trail that can quickly be accessed. This can become particularly relevant during recalls, quality checks, or audits, for example.
In this same manner, blockchain can also help verify product authenticity, by providing proof of product origin and quality. This traceability helps prevent fraud and enhances accountability.
3. Cost reduction and efficiency gains
Blockchain technology plays a role in streamlining processes and automating tasks, which can offer significant cost savings and efficiency gains for supply chains. For example, manual processes like paperwork verification, inventory checks, and reconciliations can be time-consuming and error-prone. With blockchain, these processes can be automated in several ways, including through smart contracts, which are self-executing contracts with pre-defined terms and conditions. This automation can help reduce paperwork, accelerate workflows, and decrease operational costs.
4. Integration with existing systems
Blockchain is an advanced, next-generation technology, and,, it will smoothly integrate with other supply chain technologies shortly. For example, when used with Internet of Things (IoT) technology, AI, and machine learning, blockchain can further enhance real-time insights, demand forecasts, traceability, and other supply chain management systems and practices.
Blockchain in supply chain management is addressing some of the industry’s most pressing challenges and needs. By embracing blockchain, companies have the opportunity to build supply chains that are transparent, secure, and robust.
Stay Ahead of the Technology Curve with StockIQ
Today’s supply chains are rapidly changing, and new technologies are overhauling the way supply chain businesses operate. If you’re looking to improve your supply chain by using the latest technological advancements, StockIQ is here to help. StockIQ is supply chain management software that allows you to control inventory, simplify ordering, and improve forecasting with ease, and it is constantly deploying cutting-edge systems and technologies.
Find out how you can improve your supply chain operations with StockIQ by contacting us today or requesting a StockIQ demo.
