How Supply Chain Management is Redefining Using Blockchain
The supply chain industry is on the brink of a transformation. Innovative startups are building platform-driven solutions that are all poised to disrupt this space by harnessing the power of IoT and blockchain technologies.
Blockchain technology enables the creation of an indelible ledger of assets and transactions that is time-stamped, secure and tamper-proof, allowing a wide range of stakeholders to communicate in near real-time. Peer-to-peer transactions of all kinds (invoices, payments, shipments) become more visible and easy to track. And information from different sources (end consumers, sales channels, suppliers, contract manufacturers and underlying systems) can be consolidated and digitized for more uniform communication across the network.
Because the logistics industry is characterized by fragmentation and huge inefficiencies that drive up costs and negatively impact supply chain reliability and resilience, savings in this area yield significantly higher margins. Blockchain technologies provide significant cost and resource benefits for businesses across industry sectors. In fact, 86% of tech-savvy executives surveyed by Deloitte said they believe there is great business potential in blockchain technology.
In this article, we will trace three key ways blockchain is helping to redefine Supply Chain Management as we know it and the benefits it brings.
Accelerates creditor and debtor processes
43% of the large companies say it is a big struggle to achieve efficient invoice processing. Processing a single invoice in 2019 cost businesses upwards of Rs 1,000 and took an average of 8.6 days. Vendors and suppliers made up of small and medium-sized businesses must bear the burden of longer wait times, and resolve disputes through human error or discrepancies that creep in during these largely manual processes.
Blockchain technologies eliminate the need for paper exchanges, reduce the costs associated with optical character recognition and reduce errors and delays associated with the generation, processing, verification and storage of documents. For example, payment processing is easier and dispute resolution is far faster when organizations can authenticate transactions via a real-time 4-way matching of Purchase Order (PO), Advance Shipment Notice (ASN), Sales Invoice (SI) and Goods Received Note (GRN) without waiting on manual verification. This helps resolve disputes faster, saves operational costs and benefits the supplier and supplier ecosystem, leading to an overall strengthening of relationships across key players.
Improved visibility into contract manufacturing
One of the best-selling cars in India in its segment, the Renault Kwid is a case study for Make in India, with 97% of its parts sourced locally. Only some critical engine components such as fuel injectors and knock sensors are imported, with Indian OEMs and contract manufacturers supplying the bulk of the parts required for assembly. In a price-sensitive market like India, optimizing each step of the supply chain can mean the difference between success and failure. Manufacturers across industries are turning to blockchain to realize these benefits and minimize losses that occur during contract manufacturing.
While outsourcing manufacturing processes to manufacturers and procuring large quantities of metal body parts, manufacturers can reduce the time and resources they use and track the raw material across multiple stages of material conversion. And instead of using cumbersome excel sheets, today’s platforms make it easy for personnel to digitally track the movement of raw materials, finished goods and packaging as they move from authorized suppliers to contract jobs. Blockchain platforms are equipped with intelligent dashboards that funnel data from various sources in real time and visualize it so that decision makers have better end-to-end visibility.
Seamless collaboration for cross-border logistics
Container shipping has brought the world closer, allowing companies to trade across national borders, but there are many modern challenges that plague the maritime transport industry and prevent the free flow of goods and products. Many factors are involved in handling a single shipment, including freight forwarders, customs and port authorities, and more. Documentation continues to be both manual and digital, paper requirements are strict, and intermediary costs are high.
Adopting blockchain technologies to digitize paperwork will save as much as 44% in time according to a UN estimate in the context of Asia-Pacific trade. In addition, the availability of data on shipment location, condition and movement of goods in near real time will increase visibility for importers and exporters in their supply chains and help them make better informed decisions in sales, marketing, logistics and other areas. .
Conclusion
In the past, skeptics have raised valid and important questions about blockchain technologies for businesses. Start-ups have been working hard to solve these real-world problems by experimenting with new toolkits and technology stacks. And today, as both the technology and the market mature, there are many more successful pilots and proofs of concept across industry sectors. If you’re still on the fence about adopting blockchain to improve your supply chain, you may want to reconsider your decision as the ecosystem evolves and opens up new, more robust opportunities for everyone.
This article was written by Vaideeswaran Sethuraman, Founder and CEO at Param.Network – a multi-tier supply chain technology orchestration platform.
