The Blockchain and Your Supply Chain: Worlds Apart or Perfect Partners?

Manufacturing supply chain integrations take many forms. Here’s why decentralized options are worth considering.
You’re no slouch when it comes to back-end logistics. You can squeeze extra space out of warehouses with the best of them, and you’re highly proficient at solving unique supply chain problems that might cripple lesser enterprises. Unfortunately, all of that raw talent only goes so far.

Now that your organization is trying to grow, it’s critical that your supply chain takes on new depth. You don’t enjoy the scale discounts that your larger competitors take for granted, and your current operating model is unlikely to make up for the difference while you’re struggling to expand. Could moving to the blockchain be the edge that your supply chain needs?

A Quick Blockchain Primer

The blockchain is a type of distributed public ledger. In practice, this means that no one person controls the record.

Blockchains use complex mathematical formulas to create proposed ledger transaction entries according to a specific format. Then, networked computers confirm that every record satisfies the format before adding it to the ledger and letting their peers know about the change. This ensures that everyone has the same dependable record.

Many blockchain implementations are associated with cryptocurrencies, such as the well-known Ethereum network. In these setups, the programming rules are further used to guarantee fairness for those who want to hold or trade their cryptocurrencies.

Using Blockchains for Business

Blockchain technology also makes it possible for anyone to create something called a “smart contract.” In other words, multiple parties can agree to transactions where the software won’t release payment until all of the specified terms have been satisfied. Much like conventional financial escrow, smart contracts help enforce the performance of agreements, yet they don’t require third-party oversight or extra fees.
Mike Doty, the CEO of Ark, All-In-One Blockchain solution, states that blockchain-based smart contracts are revolutionizing B2B companies. “Blockchain is addressing authentication, expediency and security challenges that have plagued digital contracts since the early days of the Internet. It is improving trust and solving business challenges in ways we never anticipated a decade ago.”

Having a public ledger is a huge benefit of using the blockchain for business. Parties that use smart contracts gain unprecedented protections: If someone tries to renege, they won’t get paid because of how the contract works. The other party can also prove noncompliance easily in legal proceedings.

New Supply Chain Implications

Why are blockchain technologies so ideal for supply chain logistics? Most companies are moving towards RFIDs, QR codes and other machine-scannable item tracking methods. This makes it relatively straightforward to institute robust automation practices. For example, a company that supplies parts to global clients might use the blockchain to get paid immediately upon receipt of its goods. If it’s seeking parts, it might use the blockchain to advertise new fulfillment contracts and requests for proposal opportunities.

In the logistics arena, speed and consistency are everything.

The ability to create solely digital business arrangements does far more than just eliminate paperwork. It also grants you the power to cut through the “trust tax” that you incur in the process of finding, vetting and working with new suppliers.

The whole idea behind blockchain technology is to decentralize access to currency and commerce. Using smart contracts makes sense for the manufacturing industry because it also decentralizes access to the scale-driven cost advantages that your larger competitors enjoy.

You’re in a constant race to expand faster than the next firm. Being able to access partners from all over the world without increasing your overhead or falling prey to economies of scale is like opening the door to unimaginable business advantages. Using the blockchain to power your supply chain might be the key that differentiates you from the pack.