Blockchain Technology: The Solution to Our Broken Global Supply Chain
Is blockchain the missing link?
We’ve debunked myths about blockchain, and we’ve also talked about blockchain-as-a-service. Today, we’re tackling the impact of blockchain technology on one of the most persistent problems of the past five years: our broken global supply chain. Blockchain can be instrumental in solving one of the most outdated and complicated areas of business and commerce.
Let’s dive right in.
What is the global supply chain?
The supply chain refers to all the phases involved in manufacturing and delivering a product or service. When you add the term global to the definition, you are talking about the same process when it crosses borders and happens in more than one geographical territory. For example, if a company sources raw materials in Turkey, creates the product in Greece and sells it in Europe, that is a part of the global supply chain.
Supply chain challenges
The supply chain is comprised of many volatile links. If one link breaks or is unstable, the whole chain gets affected. From the economy, weather and politics to health and changing trends, the supply chain has been through a lot in the past couple of years.
The implications of the war between Russia and Ukraine and the trade war between China and the U.S. have shifted the supply chain landscape. From shortages to energy and food supplies to a disruption in the imports of IT hardware, the global trade cycle has been heavily affected by the clash of these two heavyweights.
Talking of the war implications, the reduced gas supply from Russia has caused prices to soar, while European companies are forced to search for alternative energy sources. This is an excellent example of how the supply chain can break down following one single event. The dependency on Russia’s energy exports has essentially paralysed entire sectors, affecting consumers and the cost of living in most major economies.
Cost of labour
The rising cost of living is causing people to seek higher salaries. Bus and truck drivers, dock workers, and freight workers have been on strike over the past 12 months, impacting the manufacturing and delivery process worldwide. The communication between the workforce, companies and the economy is asynchronous. By the time people absorb inflation and react, the economy is already in trouble.
Visibility and disclosure of information
When a chain of information spans different stakeholders, countries and timezones, you can understand how hard it is to harmonize and streamline communications. How do you ensure that every single party can view and access information simultaneously, at the necessary degree of detail and access?
How can blockchain technology help the global supply chain?
Amidst the difficulty and complexity of the supply chain workings comes blockchain technology, one of the most hopeful solutions we’ve seen in a while. The nature of this technology makes it possible to address some of the most critical challenges faced by the supply chain.
Real-time information feed
Using blockchain, the supply chain finally gets its own information centre - a place where information can be easily accessed, updated in real-time, and visible to everyone interested. Here are the benefits of a live information feed:
- Trace products from production to delivery to sale every step of the way
- See transactions in detail, creating a history and audit trail
- Bullet-proof flow of information, inventory, and finance
- Allow different stakeholders to collaborate faster, easier and more efficiently
- Getting things done faster means less costs
- Automating the process translates to fewer human errors
- Reduction of intermediaries reduces the risk of fraud
Reduce paperwork and administrative costs
According to an article by the New York Times, “A single container could require stamps and approvals from as many as 30 people, including customs, tax officials and health authorities…While the containers themselves can be loaded on a ship in a matter of minutes, a container can be held up in port for days because a piece of paper goes missing, while the goods inside spoil. The cost of moving and keeping track of all this paperwork often equals the cost of physically moving the container around the world.”
As the article very clearly states, paperwork can delay or hold the entire workflow to a standstill. By putting everything in the “hands” of the blockchain digital record-keeping technology, you automate the process and ensure nothing gets lost along the way.
The global supply chain will constantly be challenged by factors and elements that are beyond our capacity to predict or control. What we can do, is create the foundation and environment to handle these challenges. The blockchain is unequivocally the most efficient breed of technology we have to date. The more the technology grows and matures, the more holes it will be able to close and address.