Supply chain management is one of the greatest challenges facing today’s global business. These companies spend enormous amounts of resources researching inefficiencies and identifying areas where costs can be cut.
Forward-thinking companies are now exploring blockchain as a technology that could potentially revolutionize the supply chain as we know it. Analysts predict that blockchain technology will be able to improve the modern supply chain structure by increasing the trust, efficiency and transparency of the supply chain.
Supply chain executives are increasingly realizing that the future of the supply chain could lie in blockchain solutions. In 2019, a survey conducted by PwC found that 24% of industrial manufacturing CEOs are planning, piloting, or implementing blockchain technology. Then, in 2020, Deloitte’s global blockchain survey found that 55% of executives and practitioners surveyed viewed blockchain as a top priority. In 2021, Business Wire reported that the supply chain blockchain market is projected to grow from $ 253 million in 2020 to over $ 3 billion by 2026.
Blockchain is often equated with cryptocurrency, but in fact, blockchain technology has many uses beyond its function as a virtual currency platform. To understand how blockchain meets a need in the supply chain, it is first necessary to understand how blockchain works.
A blockchain is a chain of encrypted blocks of data. Let’s break this down: the “blocks” of the blockchain can be designed like a file of information (the “data”), and that information is locked so that only those with the key can access the information (the “encryption”) .
Many files (or blocks) are linked one after the other to form a “chain”. Each file (or block) of data contains the following types of information – a timestamp to indicate when it was created, historical information about the blocks that precede it in the chain, and information that is new to that block. All blocks together form the blockchain.
Computers, laptops, servers or other computer devices connected to the Internet are required to access the blockchain. When these devices are connected together, they are called “nodes” on the blockchain. The nodes store the blockchain (and the users of the nodes can be anyone in the world, as with unauthorized blockchains, or can be restricted to certain users, as with approved blockchains, which will be explained in more detail in a future article in this “Blockchain in Supply Chain” ” Series).
Storing the blockchain across the nodes creates a kind of distributed ledger, which is a system in which data is stored and shared across multiple locations, countries, or institutions. A distributed ledger can be compared to a traditional database in which all digital data is stored in one central location. With blockchain, the different nodes typically store identical data.
To add a new block of data to the blockchain, a node must send a transaction request with the new data to other nodes in the blockchain network, which triggers the creation of a block. Before the new block is added to the chain, a selected number of nodes must first agree that the addition of the new block to the blockchain is valid. When validating the new block, the nodes confirm that the block is correctly formatted and that it does not contain duplicate transactions. After the block is validated, the encrypted block is added to the string of existing blocks and stored by the other nodes on the blockchain network.
Since blockchain is encrypted and in a distributed ledger format, the data on the blockchain are practically not hackable, which gives trust and confidence in the data stored on the blockchain.
Although we no longer know if blockchain will revolutionize the supply chain, as we know if Bitcoin will be the currency of the future, several well-known companies are testing blockchain solutions and studying blockchain applications for their supply chains. By 2023, it is projected that 30% of manufacturing companies with sales of more than $ 5 billion will be using blockchain technologies. To name a few:
- Blockchain company Everledger has partnered with IBM to develop a blockchain solution to ensure diamonds are sourced ethically. Everledger has also ventured into other industries by developing blockchain solutions for the fashion industry, electronics manufacturers, and electric vehicle manufacturers.
- Walmart, Carrefour, Nestle and Dole have partnered with IBM on an experimental block chain system that tracks food products through their respective supply chains.
- Amazon provides managed blockchain solutions for the supply chain and other business applications that integrate Hyperledger Fabric, an umbrella for blockchain management tools developed by the Linux Foundation.
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