Blockchain in Supply Chain-Challenges, Benefits & Use-Cases

In the ever-changing landscape of today’s global marketplace, the significance of efficient supply chain management cannot be overstated. It serves as a vital driver for businesses aiming to achieve success by optimizing their operations, curtailing expenses, and delivering an unparalleled level of customer satisfaction.

Furthermore, effective supply chain management empowers companies to adapt swiftly and efficiently to shifting market dynamics, thus proactively addressing the potential risks and setbacks that may arise.

Having said that, the recent disruptions caused by the pandemic and war conflicts have precipitated a significant imbalance between supply and demand, exerting a profound impact on global supply chain technology. However, these tumultuous circumstances have also underscored the imperative for companies to adopt technology-driven solutions for managing their supply chains.

As enterprises become more vigilant in the face of an unpredictable future, it comes as no surprise that blockchain in supply chain management has the potential to optimize their supply chain operations.

According to Marketsandmarkets, the market size of the global Blockchain Supply Chain industry was valued at approximately $253 million in the year 2020. Based on current trends, it is projected to reach a revenue of about $3,272 million by the close of 2026, reflecting a robust compound annual growth rate (CAGR) of 53.2% during the period from 2022 to 2027.

In this article, we shall embark on a comprehensive exploration of the blockchain for scm, delving into its current state and subsequently examining the transformative potential of Blockchain technology.

Without further ado, let’s commence by providing a concise definition of Supply Chain Management (SCM).

What is Supply Chain Management?

Supply Chain Management (SCM), in simple terms, refers to the systematic management of the entire flow of goods, resources, services, and information involved in the transformation of raw materials into a final product that reaches the end customer.

Fundamentally, the supply chain process encompasses seven vital components: Planning, Information, Source, Inventory, Production, Location, Transportation, and Return of Goods. These components form the foundational infrastructure of any organization and play a pivotal role in driving its present and future success, holding considerable significance within the business landscape.

Nevertheless, traditional supply chains encounter various challenges in delivering an optimal and trustworthy ecosystem, primarily due to escalating security threats and evolving consumer demands. In the subsequent section of this article, we shall delve into a few of these challenges in the legacy supply chain.

What Are the Challenges Associated with the Conventional Supply Chain? 

The conventional supply chain models encounter challenges in meeting customer demands and ensuring security, leading to difficulties in delivering expected levels of efficiency and trust. 

Additionally, the global supply chain industries have been severely impacted by the ongoing pandemic, resulting in disruptions at regional, national, and global levels. Consequently, the supply chain market is grappling with an array of complexities that encompass a multitude of factors.

1. Shortages in Material and Labor Supply

During 2020-21, widespread layoffs and the disruptive impact of quarantine measures introduced significant volatility to the global market. Thereby, leaders are currently confronted not only with challenges related to effective delegation but also with the formidable task of securing qualified professionals to fill key roles in procurement and supply chain operations.

The Institute of Supply Chain Management has published a report indicating that the scarcity and elevated costs of essential resources, encompassing both human capital and materials, are pervasive. These scarcities and resulting complexities have given rise to shortages within the industry, thereby highlighting the compelling need to incorporate next-generation technologies into supply chain management practices.

2. Port Crowding & Congestion

In the recent two years 2021-2022, the global shipping industry has grappled with prolonged waiting periods for vessels arriving at ports worldwide. 

Notably, in October 2021, an accumulation of more than 50 container ships was observed just outside the ports of Los Angeles and Long Beach, as they awaited the unloading of cargo originating from China. 

Such congestion, particularly at overseas ports, results in significant delays as ships strive to access their intended cargo. These bottlenecks, occurring at both ends of the supply chain, contribute to extended import-export timelines, consequently disrupting domestic supply chains.

Although port congestion is not a new phenomenon, the National Customers Brokers & Forwarders Association of America (NCBFAA) anticipates that 2022 will witness continued lengthy waiting periods and supply chain disruptions. Consequently, there is a growing recognition of the need for enhanced utilization of blockchain & latest technologies in supply chain management as a response to these challenges.

3. Escalating Freight Costs 

The year 2021 witnessed a substantial expansion in intermodal transport, accompanied by a significant surge in spot prices. Notably, the prices of reefer, van, and flatbed transportation experienced notable increases, with growth rates reaching 25%, 18%, and 27% respectively. 

In addition to land-based transportation, the costs of air and sea freight have also soared, presenting formidable obstacles for companies seeking to efficiently transport goods in large volumes. 

For this reason, businesses have been compelled to allocate resources towards advanced logistics and blockchain-powered supply chain solutions, to identify and implement cost-effective solutions.

4. Lack of A Unified Database 

Despite the increasingly interconnected global landscape, numerous organizations persist in maintaining isolated databases, confining access exclusively within their own confines. 

This approach entails supply chain businesses creating separate records, and sharing information solely upon specific requests. Unfortunately, this fragmented system gives rise to communication gaps between any two parties involved. 

By failing to establish a unified framework for data sharing, organizations inadvertently provide exploiters with an edge, underscoring the pressing need for a more cohesive and collaborative approach to bridge these communication gaps and enhance overall system integrity.

5. Undue Costs 

The duplication of efforts and the fragmentation of databases across teams result in undue costs as resources are allocated redundantly toward gathering repetitive information. This unfortunate consequence places a significant burden on organizational finances. 

Moreover, the sheer volume of paperwork involved in managing pallets and other returnable packaging continues to astound industry experts. Numerous businesses still rely on separate Excel sheets for every supplier, customer, and returnable transport item (RTI) type, leading to a dearth of accurate information and operational inefficiencies. 

These inefficiencies not only hinder productivity but also contribute to increased costs. Addressing these challenges requires a strategic shift towards integrating databases, streamlining information flow, and adopting more efficient systems to enhance accuracy and operational effectiveness.

6. Insufficient traceability of assets

Asset traceability proves to be a significant challenge within the realm of supply chain management. While organizations have implemented advanced equipment and processes to monitor internal activities diligently, the same level of scrutiny is lacking when it comes to tracking product status during delivery. 

This absence of a comprehensive tracing method facilitates opportunities for malicious actors to substitute genuine products with deceptive counterfeits. Such a gap in asset visibility not only compromises product authenticity but also exposes vulnerabilities that can be exploited. 

To address this issue effectively, it becomes imperative for organizations to establish robust tracking mechanisms throughout the supply chain, ensuring the ability to trace and verify product status at every stage, thereby mitigating the risk of counterfeiting and enhancing overall asset traceability.

7. Prolonged Quality Analysis Process 

The presence of a protracted and costly quality analysis process emerges as a challenge within the existing supply chain management (SCM) framework. Due to discontinuities in the current SCM process, determining the precise point at which product quality has been compromised or replaced becomes a time-consuming and resource-intensive endeavor. 

Moreover, the centralized structure of company processes exposes them to various risks, including code of conduct violations and fraudulent activities. This underscores the urgent need for an effective risk management process in supply chain systems. 

By implementing robust risk management measures, organizations can mitigate these challenges, enhancing the efficiency and integrity of their supply chain operations while safeguarding against potential risks and threats.

Due to challenges within the supply chain and heightened market competition, a growing number of firms have demonstrated a keen interest in exploring the implementation of blockchain technology. 

These organizations are dedicating substantial resources to comprehend the fundamental principles of blockchain and its transformative potential across various sectors such as agriculture, healthcare, education, fashion, real estate, fintech, etc.

Blockchain in Supply Chain

A blockchain-enabled supply chain presents an innovative solution to address a wide array of challenges. Within a conventional supply chain, various processes encompassing raw material procurement, manufacturing, financing, and more are involved, often occurring across multiple transactions.

In a blockchain-based supply chain, these transactions are meticulously recorded across distinct blocks, which are subsequently distributed across a network of computer systems within the blockchain. This decentralized architecture ensures high availability and transparency of information.

Each transaction occurring within the supply chain is securely stored on the blockchain and instantly reflected in real-time, transforming all stakeholders into active participants in every transaction.

Advantages of Incorporating Blockchain in Supply Chain 

Let’s explore the myriad advantages of integrating blockchain in supply chain management.

1. Supply Chain Management 

With its inherent qualities of transparency, traceability, speed, and consensus, blockchain technology provides a valuable framework for effectively managing supply chains. Using blockchain capabilities for seamless information-sharing and processing, blockchain harmonizes communication systems across the supply chain onto a unified platform.

Furthermore, a Harvard Business Review study reveals that blockchain holds the potential to mitigate the risks associated with various supply chain disruptions arising from behavioral uncertainties, fraud risks, data loss, manual errors, transactional and operational risks, as well as informational asymmetries. 

Consequently, adopting blockchain can significantly enhance the monitoring and management of supply chains, offering improved visibility and control over critical processes.

2. Improving Product Recall 

The implementation of blockchain technology within supply chains offers substantial benefits in terms of traceability and transparency, leading to improved regulation of product recalls. 

By leveraging blockchain’s inherent capabilities, supply chains gain an enhanced ability to identify and locate affected products throughout the recall process. Consequently, the recall procedure becomes more cost-effective and time-efficient, resulting in streamlined operations and improved outcomes.

3. Streamline Cross-border Transactions 

The adoption of blockchain technology enables cross-border transactions, granting businesses the ability to bypass intermediaries. This not only expedites processes but also yields significant cost savings by eliminating superfluous expenses associated with intermediary stages.

4. Ensuring the authenticity and reliability of products

The assurance of product quality and reliability relies on establishing their provenance. Blockchain technology enables comprehensive traceability throughout the supply chain, ensuring accurate verification of goods’ origin. Consequently, it serves as a powerful tool in combating counterfeiting by enabling swift verification of suspected goods’ provenance. 

A study conducted by the OECD revealed that counterfeit and pirated products accounted for 3.3% of global trade and 6.8% of total EU imports in 2016. These figures underscore the urgent need to address counterfeiting, a challenge that can be effectively tackled through the adoption of blockchain technology.

In addition, blockchain technology provides robust authentication controls for every transaction, effectively preventing documentation fraud by enabling the verification of certifications and official documents.

5. Logistics 

The integration of smart contracts within blockchain technology offers the ability to autonomously verify, record, and coordinate transactions without the need for third-party intermediaries. Considering this, blockchain implementation addresses a key complexity challenge faced by global supply chains. 

Notably, logistics companies such as DHL are actively considering the adoption of blockchain technology for transport and logistic software development to enhance their operational processes.

6. Keeping Ethical Standards 

In today’s market, consumers exhibit a heightened awareness of their expectations regarding the ethical standards upheld by the businesses they engage with for their product needs. A substantial 60% of consumers actively seek brands that align with their own values of sustainability and purpose, often conducting thorough research into a company’s environmental, social, and governance (ESG) practices before making a purchase.

As a result, consumers demand assurance that the products they invest in are not associated with unethical production and delivery processes. With the implementation of blockchain traceability, consumers gain access to vital information about the provenance of their products, enabling them to understand the manufacturing and shipping practices involved. This transparency empowers consumers to make informed decisions aligned with their ethical preferences.

7. Accelerating supplier payments through blockchain

Blockchain technology revolutionizes the traceability of transactions, encompassing a crucial aspect: supplier payments. Leveraging the automated control facilitated by smart contracts, blockchain streamlines the payment process for suppliers, minimizing the need for intermediary intervention once predefined standards are met. It has resulted in supplier payments being expedited, enhancing efficiency and reducing operational complexities.

8. Enhancing Food Safety 

The food industry is actively exploring the potential of blockchain technology to enhance the safety and integrity of the food supply chain. A notable example is Walmart’s collaboration with IBM, where blockchain is being innovatively utilized to track the origin and condition of pork supply from China. 

Harnessing blockchain’s enhanced traceability capabilities, the food supply chain can effectively address critical challenges, including preventing tampering with provenance information, mitigating contamination risks during processing and distribution, and reducing spoilage incidents between distributors and retailers. This adoption of blockchain technology in the food industry fosters a more regulated and efficient process that prioritizes food safety.

9. Post-sale Services 

The digitalization of product information through blockchain technology enhances the trustworthiness and management of post-sale services, including warranties and maintenance. By verifying the product’s digital identity, buyers can initiate the warranty period automatically, ensuring transparency and reliability. 

Furthermore, the unique digital identity of products enables second-hand buyers to confidently investigate their history and authenticity, thereby establishing a higher level of trust in the second-hand trade market. The integration of blockchain in post-sale services offers improved accountability and credibility, benefiting both buyers and sellers in the process.

Now that we know what are the advantages of blockchain in the supply chain, let us concentrate on some real-world use cases of blockchain in the supply chain.

Use-cases of Blockchain in Supply Chain 

Many brands across various industries are currently capitalizing on the advantages derived from the synergistic integration of blockchain and supply chain management, establishing the groundwork for blockchain-based supply chain management systems. Presented below are several prominent instances that exemplify the practical applications of blockchain within the supply chain domain.

Food Supply Chain- Leading companies such as Nestle, Unilever, and Walmart prioritize product safety:

The complexity of food supply chains is further compounded by the perishable nature of food products. However, the unmatched traceability offered by blockchain technology presents an opportunity to support public health, save lives, and streamline operations. 

The World Health Organization (WHO) reports that approximately 600 million people, nearly 1 in 10 individuals globally, suffer from illnesses caused by consuming contaminated food each year. Shockingly, this results in approximately 420,000 fatalities annually, leading to a significant loss of 33 million healthy life years (DALYs).

Existing regulations mandate food business operators to adhere to a “one step back – one step forward” approach. Retailers, for instance, must have knowledge of their immediate suppliers (one step back) and direct buyers (one step forward) in the supply chain. However, given the highly fragmented nature of food supply chains and the reliance on separate software systems by different companies, sellers often lack visibility into the origins of their products. Consequently, in the event of a foodborne disease outbreak, identifying the source of contamination can be a daunting and sometimes impossible task.

To establish end-to-end traceability, enabling a comprehensive “from farm to plate” approach and improving food safety, ten prominent food producers and retailers, including Nestle, Unilever, and Walmart, have joined forces with IBM to develop the Food Trust network. Powered by HyperLedger Fabric, this collaborative initiative has garnered participation from over 80 companies, paving the way for enhanced transparency and efficiency in the food industry.

The accelerating adoption of blockchain in the food supply chain sector creates a compelling opportunity for enterprises to forge strategic partnerships with proficient blockchain development companies. By doing so, companies can explore and uncover a wide array of potential use cases, leveraging the convergence of technology and processes to drive transformative innovation and enhance operational efficiency.

CropChains: Pioneering Food Chains and Agrichain Innovation

Our company, Debut Infotech, has developed an innovative solution for the food and agriculture supply chain called Cropchains. This robust and intuitive blockchain-based platform is specifically designed to address the unique challenges faced by agriculture supply chains, spanning a diverse range of products from tea and coffee to wheat, rice, cocoa, wine, quinoa, and more. 

Cropchains empower businesses with 100% traceability, providing transparency from farm to shelf. Leveraging blockchain technology, we ensure tamper-proof data integrity, safeguarding the authenticity and quality of the products throughout the supply chain. With this blockchain & IoT-Powered solution, stakeholders can confidently track and verify every step of the journey, enhancing trust, accountability, and efficiency in the food and agriculture industry.

Hong Kong emerges as a frontrunner in blockchain-powered logistics

China and Hong Kong are making significant investments in the blockchain logistics industry, aiming to establish themselves as leaders in the field. Despite the termination of Maersk’s blockchain-based supply chain platform, industry builders remain optimistic about the potential of blockchain applications in global trade.

Hong Kong-based Global Shipping Business Network (GSBN), a non-profit consortium focused on blockchain trade applications, is particularly bullish on blockchain’s long-term value as a critical logistics tool. GSBN currently operates one of the world’s largest Blockchain platforms, serving as an alternative to Maersk’s TradeLens tool. This platform utilizes a permissioned blockchain with robust data governance, ensuring that only authorized parties can contribute to and access shipping-related data.

Since its launch in 2021, GSBN has successfully onboarded major shipping partners such as Cosco, Orient Overseas Container Line, and Hapag-Lloyd, along with partnerships with terminal operators like Hutchison Ports, SPG Qingdao Port, PSA International, Shanghai International Port Group, and Cosco Shipping Ports. Notably, German-based Hapag-Lloyd and Singaporean-based PSA International are the only members not based in mainland China or Hong Kong.

Despite previous projects by industry giants like Maersk being terminated, GSBN’s CEO, Bertrand Chen, remains confident in the untapped potential of blockchain technology. Chen believes that the widespread adoption of blockchain may take another decade to materialize, suggesting that the industry is still in the early stages of leveraging its full capabilities.

SkyCell leverages blockchain technology to secure the transportation of pharmaceuticals

SkyCell has harnessed the power of blockchain technology to develop intelligent refrigerated containers integrated with IoT sensors, revolutionizing the pharmaceutical supply chain. These advanced containers enable real-time monitoring of the drugs’ geolocation, as well as the temperature and humidity levels at any location worldwide. By leveraging blockchain, the solution securely records and stores these vital parameters, while also serving as an immutable repository for all logistics documents associated with each container.

During the challenging circumstances of the pandemic, one of SkyCell’s clients utilized this innovative solution to transport medicines from Brussels to Mumbai. 

Given the frequent flight cancellations at the transfer point, the medications had to be stored at the airport until alternative routes became available. This delay posed a significant risk, particularly due to fluctuating outside temperatures ranging from +41°F to +111°F. However, by leveraging the SkyCell solution, the temperature inside the containers remained consistently maintained between +37°F and +55°F. 

Following this, the medicines arrived in India in a safe and usable condition, a fact corroborated and confirmed by the blockchain records. The implementation of this technology not only averted financial losses for the company but also ensured the secure delivery of vital medications, safeguarding the well-being of those who relied upon them.

Brilliant Earth: Ethical Diamond Tracking

Brilliant Earth, a prominent retailer specializing in ethically sourced diamonds, has embraced blockchain technology to enhance transparency and accountability in its supply chain. By integrating blockchain into its operations, the brand can securely trace and verify the origins of its diamonds, providing customers with assurance of its responsible practices. Through a blockchain-enabled database, Brilliant Earth effectively tracks the complete journey of its diamonds across the supply chain. 

Moreover, the technology enables the secure storage and retrieval of essential supporting documents, including invoices and certifications, further bolstering transparency and confidence in the diamond sourcing process. This strategic implementation showcases Brilliant Earth’s commitment to ethical practices and strengthens its position as a trusted provider of responsibly sourced diamonds.

Bumble Bee Seafoods: Enhancing Food Origins Transparency for Consumers

Driven by its commitment to offer consumers greater transparency regarding the origins of their food, it has embraced blockchain technology to track the entire journey of tuna, from ocean to local retailers. 

By leveraging this innovative technology, consumers can conveniently access comprehensive information about the origin and history of Bumble Bee Seafood’s tuna products through their smartphones. This is made possible by scanning the QR codes provided on the packaging of tuna steaks. This initiative empowers consumers with valuable insights and enhances their confidence in the quality and authenticity of the seafood they consume.

Having established an understanding of the use cases of blockchain in the supply chain, let us now focus the discussion on the profound key consideration for implementing blockchain in the supply chain business.

Key Factors to Consider When Implementing Blockchain into Your Supply Chain Business  

The implementation of blockchain technology in supply chain management presents a set of challenges and considerations that require careful attention. Below, we highlight the most crucial factors to bear in mind when embarking on this endeavor.

Incorporating with Legacy Systems 

The integration of blockchain technology in supply chain management poses a substantial challenge in terms of harmonizing it with pre-existing systems. This endeavor entails a complex process that often necessitates significant modifications to established workflows and operational processes.

Interoperability

Another crucial aspect to address during the implementation of blockchain in supply chain management is interoperability. As various companies may employ different blockchain solutions, ensuring seamless collaboration and efficiency within the supply chain necessitates the ability of these solutions to interoperate with one another. By facilitating interoperability, organizations can overcome potential barriers and achieve a cohesive and streamlined supply chain ecosystem.

Adhere to relevant regulations

The utilization of blockchain in supply chain management necessitates adherence to regulatory requirements, thereby underscoring the significance of ensuring that any implemented blockchain solutions align with pertinent regulations. By diligently complying with regulatory frameworks, organizations can effectively mitigate risks and ensure adherence to legal obligations within their supply chain operations.

Data Security & Privacy 

The aspect of blockchain data privacy and security is a critical consideration when implementing in supply chain management. Given the sensitivity of supply chain data, it becomes imperative to establish stringent measures that guarantee access only to authorized parties. Furthermore, safeguarding the data against potential threats such as hacking and other cyber-attacks is of paramount importance.

Effectively addressing these challenges and considerations plays a pivotal role in ensuring the successful implementation of blockchain technology in supply chain management. By proactively tackling the supply chain issues, organizations can enhance their prospects of leveraging the transformative potential of blockchain and achieving seamless integration within their supply chain operations.

Are you contemplating a similar venture or seeking guidance on incorporating blockchain into your business?

At Debut Infotech, we have leveraged our expertise to offer blockchain development services and assist a diverse range of enterprises, from small and medium-sized enterprises to Fortune 500+ companies, in successfully integrating blockchain and its associated technologies into their operational frameworks. 

Our team of experts is available for a consultation, ready to offer valuable insights and we help you integrate blockchain into your legacy supply chain operations to make it more trackable and transparent, thereby mitigating the inefficiencies and enhancing authenticity.