The COVID-19 pandemic revealed many weak points in the global economy. Arguably, the disruption of global supply chains has been the most discussed issue for multinational corporations. Some critics argue the overreliance on outmoded technologies may contribute to unnecessary inefficiencies in these intricate systems.
While enterprise resource planning (ERP) remains the standard software in supply chain management, many businesses are getting interested in blockchain technology. No, we don’t mean that supply chain managers are now becoming Bitcoin miners! Instead, executives are thinking of using Bitcoin’s consensus mechanism and public ledger to organize their supply chains.
There are still many questions about how blockchain fits into global supply systems, but most economists believe it offers many attractive features.
How Could Blockchain “Disrupt” Global Supply Chains…In A Positive Way!
Today, blockchain technology is intertwined with decentralized finance and cryptocurrencies. Although this system has proven successful for projects like Bitcoin, that doesn’t mean blockchain is only applicable in finance.
Blockchain tech can produce a trustworthy public ledger in a decentralized fashion. A “block” on this chain signifies a transaction, each of which forms a tamper-proof record. Advanced features like smart contracts could automate transactions on the blockchain, and NFTs could create wholly unique “digital fingerprints.”
Unlike centralized systems, there’s no single point of failure with a decentralized blockchain network. Everyone involved in the supply chain could verify transactions on the blockchain, which dramatically improves visibility and makes pinpointing potential recalls far easier.
Plus, since blockchain ledgers are immutable, bad actors can’t tamper with record-keeping. Each block on a blockchain refers to the one before it. So, if someone were to try to re-write one transaction, they would need to keep creating false transactions on all the network’s blocks. Other participants on the decentralized network would quickly recognize this malicious attack and eliminate it through the validation process.
This validation system is why cryptocurrencies like Bitcoin have proven so difficult to “take out.” Not only would hackers need a ton of computing power and know-how to overwrite Bitcoin transactions, but other network participants could also quickly screen out false transactions thanks to the system’s incentive structure, immutable ledger, and decentralized organization.
Speaking of incentives, most current blockchain experiments in the supply chain sector use digital tokens to signify transactions, pay network fees, and incentivize participation. For instance, the prominent cryptocurrency VeChain aims to enhance visibility on supply chains using a distributed ledger. The VeChain team uses its VET token to send values through its system.
So, If Blockchain Is So Great, Why Isn’t It The Standard For Supply Chains?
Although blockchain-based projects for supply chains sound fantastic, please remember this is a paradigm-shifting technology. True, Bitcoin has been around for over a decade, but it will take time for supply chain managers to comprehend the intricacies of how this technology works.
However, considering companies like IBM and Walmart already see the potential of blockchain, it’s likely this technology will become a central feature in supply chain management. It may take a few years to test blockchain systems, but they will likely serve a crucial role in supply chain management.