In any given organization, supply chain managers are always the quickest to embrace innovative technologies. Implementing innovative technologies can have a direct effect on a company’s growth. Consequently, many of the world largest companies are currently looking into or are already using blockchain in their operations. Here are a few reasons why.
Cheap Transactions and Real-Time Settlement
Routine cross-border payments drain firms of $1.6 trillion per annum in the form of system-wide costs. Clearly, efficient financial flow in the supply chain carries growth effects to any business. Firms considering blockchain for their supply chain should expect tangible and substantial rewards in the form of the company growth. Failure to incorporate blockchain technology in a world that’s becoming increasingly decentralized could come at a great cost. Currently, well-known firms such as IBM, are considering leveraging blockchain for faster transaction settlement. Also, peer-to-peer payment processing powered by smart contracts guarantees automatic execution of a transaction.
In 2015, Lumber Liquidators, a hardwood flooring retailer, violated California’s health and safety regulations. According to reports, the firm allegedly laminated flooring products from China, which supposedly contained formaldehyde 20 times California’s standard.
Since product supply chain auditing is essential, blockchain technology can help clear systems for auditing. As a result, the firm and auditors can identify inefficiencies. In addition, the blockchain can identify inefficiencies with no disruption to the supply chain processes.
Improved Shipping Data
Recently, IBM and Maersk announced a joint venture to apply blockchain technology in global trade. For a multinational shipping company such as Maersk, there is no underestimating the impact of shipping accuracy. Most consumers worry about when they’ll be receiving their products. As a result, shipping firms greatly rely on transmitting real-time data. With blockchain’s distributed ledger system providing a uniform record to all players, shipping time will be greatly reduced.
In 2013, Weatherford International Ltd was fined $100 million (the largest-ever) fine for non-compliance. Reportedly, the firm was shipping products to countries sanctioned by the US governments, such as Cuba and Syria. However, blockchain can be used to identify non-compliance which can cost the firm a huge amount of money in fines. Ignoring the costs of non-compliance can result in using massive amounts of money on legal fees and fines. With blockchain, supply chain managers can have more data to look into the activities of suppliers, thereby avoiding steep punitive costs.
Reducing Human Error
People are important to the supply chain. However, these people face some problems such as ineffective communication. Since making manual entries is inherent in the supply chain process, the system is prone to human error. With the supply chain on the blockchain, firms can reduce their reliance on humans and instead rely on automated data entry for record-keeping, inventory tracking, and transactions. As a result, the supply chain is more efficient, faster and affordable.
Other benefits of blockchain-based supply chain management include improved transparency, increased accountability among suppliers, and an immutable ledger for manifests, among others.