Blockchain can be an intimidating term for anyone who has not learned much about it, but it is an important developing technology to understand in supply chain. Typically, blockchain is going to make one think of cryptocurrency, as blockchain facilitates the entire existence of cryptocurrencies such as Bitcoin. What is critical to understand is that blockchain in supply chains can achieve elevations for businesses.
First, a blockchain is a database that continuously adds “blocks” of data in a chain to constantly be building. The way this is achieved is through an initial block, the genesis block, housing the initial set a data and its own unique hash. A hash is a randomly generated value that is unique to that specific block. Every block after that will include the data being stored, its own hash, and the hash of the previous block to create the “chain” of blocks of data. Any type of data can really be stored in the database from shipment information to transcripts to customer account data. As new data is created to build the next block, that block gets added to the end of the chain and is tied to the previous block through the unique hash. As a security measure, data changed in any previous block would break any of the subsequent chains unless approved by the parties involved.
Uses and Benefits of Blockchain
Blockchains are decentralized in the sense that all users have access to the database and the data is transparent to all users. This not only establishes integrity in the database, but builds greater trust among those partnering to use the blockchain. The blockchain also creates greater efficiency and security. The Maersk example is an excellent way of how blockchain can be leveraged to improve efficiency. Maersk intends to use blockchain to provide real-time information for its large volume of shipments across the world. This not only would greatly reduce the time and effort being put into tracking this information, but also adds a new layer of security. The blockchain is tamper-proof as it would take an incredible amount of computing power to change one piece of data in a block without disrupting every other block in the chain since every block after the change would also need altered. This means that security of blockchains is very mature and any attempt to manipulate data would be immediately noticed. It is estimated that blockchains would be transformative to business and potentially save millions to billions of dollars.
Every new technology does have drawbacks though. Blockchain is relatively new and there are different standards to how it should be constructed. Blockchain is also a ledger that is still developing and will likely continue to evolve over the years. Finally, blockchain would require old records to be entered into the chain in order to allow for the database to have more integrity. An example would be new academic records utilizing blockchain leaving older professionals at a disadvantage if their information were delayed in getting uploaded.
Supply Chain Implications
As industry professionals, a vast number of benefits to utilizing a blockchain in supply chains can be seen. The example of Maersk above is one major way that supply chain could be transformed and revolutionized by the technology. International shipments end up having a lot of parties involved from the supplier, the transportation company, a broker, and the customer (to name a few) and coordinating communication between all these groups can be very manual and quite difficult. Leveraging a blockchain could greatly improve the transparency and efficiency of tracking international shipments, which would allow for workers to dedicate more time to value-added initiatives.
Another example would be how Walmart is able to use blockchain to track the origins of materials or products. Having data integrity and knowing where every raw material comes from would be a key data point and also aid in ensuring ethical, sustainable operations. This can also be used with suppliers for consignment and vendor-managed inventory processes.
As we see above, blockchain has the ability to optimize the industry in a way we have not yet witnessed. For example, utilizing blockchain in supply chains can allow for customers and suppliers to share information of inventory management through a database of the highest integrity. How can blockchain make your business more successful?
Krauth, O. (2018, February 9). 5 companies using blockchain to drive their supply chain. TechRepublic. https://www.techrepublic.com/article/5-companies-using-blockchain-to-drive-their-supply-chain/.
Technologies with Potential to Transform Business and Business Education: Blockchain. AACSB Business Education Intelligence. (2019, May). https://www.aacsb.edu/-/media/aacsb/publications/research-reports/blockchain%20brief_final.ashxla=en&hash=FCFE1A43EFE1EFD5EF1A54D901801B2686133DDE#:~:text=Blockchain%20is%20a%20database%20technology,significant%20shifts%20in%20higher%20education.