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Blockchain Tracker: Blockchain’s Impact On The Supply Chain Industry

As the supply chain industry is one of the oldest businesses, it can sometimes be viewed as stodgy.

While the industry has been around for well over a century, the term “supply chain management” wasn’t coined until the 1980s.

CIO defines supply chain management as “the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service and deliver it to customers. The following are five basic components of supply chain management: plan, source, manufacture, deliver and return.”

From concept through production and delivery to the customer, there are several steps involved in the supply chain process to manage. The ability to effectively manage the supply chain has become increasingly fragmented, complex in nature and geographically challenging.

The standard way of managing a supply chain has evolved over the last few decades from pencil and paper to digitalized ways of tracking products throughout the production lifecycle. With today’s fast-moving consumer and diverse growing economy, it may be time to rethink the current processes for supply chain management and figure out in what ways it can be improved.

One way many are discussing is to implement a blockchain technology system to help facilitate the supply chain process by providing a heightened visibility and increased efficiency. We sat down with Paul Brody, global innovation leader, blockchain, at EY to learn more about how blockchain technology can be an asset to the supply chain management process.

As far as taking steps toward implementing blockchain into the supply chain industry, Brody shares how the technology could see future integration: “Blockchain and supply chain management are an especially good fit because of the distributed and multi-party nature of the business. In complex supply chains, you have multiple parties who need to collaborate but don’t want to always share all their information. Historically, they have managed this by sending messages to each other on a one-to-one basis, but that results in lots of islands of information. With blockchain, we can get universal visibility and synchronization of data without having to compromise on security and privacy.”

That visibility and syncing up of data for supply chains is likely to significantly move the ball for manufacturers looking for ways to enhance the overall production process.

Brody commented on how blockchain technology would play a role in supply chain productivity and profitability: “In almost any manufacturing and distribution-driven industry, the supply chain is how value is moved and created through the network. Blockchains are one of the best opportunities ever to replace expensive physical goods with reliable information. Accurate shared information should lead to more accurate forecasts, better plans and, throughout the industry, lower costs and less waste.”

He added, “In many manufacturing industries, the supply chain can represent 50 to 80 percent of the industry’s real costs, so even modest improvements can mean huge gains in profitability.”

While blockchain technology seems like a perfect fit for the supply chain industry, it’s not without its problematic issues. If implemented, there are certain problems that would likely arise.

“We believe blockchain can solve two big problems in the industry,” Brody explained. “The first is reliable, shared information on everything from inventory levels to production across multiple levels in the supply chain. Secondly, blockchains are good at moving value as well as information. Using smart contracts and integration with financial services, we can link payments with delivery and have a huge positive impact on working capital requirements.”

With the sharing of various pieces of information across multiple sources, there are likely security concerns that arise for the supply chain executives choosing to move forward with implementation. Brody said, “With private blockchains, you have shared information and private information mixed together in a shared governance model. Companies need to think carefully about who can see what information as they architect their blockchain.”

Many companies are starting to experiment with integrating blockchain technology into their supply chains. While Walmart is using it to monitor produce in its stores, both IBM and Microsoft are making the push for blockchain into use for supply chains. Industry experts are also discussing how blockchain may be the solution to a lot of today’s supply chain demands.

“Across our portfolio,” Brody said, “we see supply chain management as one of the fastest areas of industrial adoption of blockchain technology. Though most companies are starting with private blockchains, we believe that we will eventually see widespread adoption of shared industry blockchains, which should lead to even bigger, economy-wide benefits.”

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