Why Blockchain Will Play a Starring Role in the Supply Chain of the Future

With everything from our smartphones to our money going online, it’s hard to ignore the influence blockchain has on our society. By 2030, experts expect the technology to boost global economies by $1.76 trillion. But with exponentially increased demand for products in all industries, it’s hard to understand how.

All of our processes are going digital, and blockchain is behind it all. From manufacturing to healthcare to even our defense sector, we’re finding quicker ways to transfer information along the global supply chain. The technology is developing quickly, and there’s no better time to get informed about its future. Continue reading for a closer look at how blockchain is solving inherent supply chain issues.

What is blockchain technology?

With blockchain tech starting to assimilate into the fabric of our society, it’s imperative that we understand what it is and how it works.

Set up as a form of public ledger, blockchains replace intermediaries for transferring information. The digital ledger uses a variety of methods to streamline transfers and increase their securities.

Blockchains are set up as a network of encrypted blocks that connect to each other. When information is added to the ledger (e.g. a transaction), it’s embedded into its block along with a few other aspects:
• A unique, cryptographic key
• The crypto key from the block before it
• Proof of work or stake

Each of these aspects plays a role in protecting the information contained within the block. In addition, everyone who contributes to the information on the blockchain has a copy of the ledger. With difficult-to-break measures and transparency on the public level, blockchains are nearly impossible to alter.

How does blockchain technology affect our society?

As stated above, blockchains act as a digital public ledger. This cuts out intermediaries that could potentially alter or slow down information transfers.

The most widely known use for this is seen in cryptocurrency. Purchases made in Bitcoin or other digital currencies bypass middlemen such as banks or credit card companies for quicker and safer transactions. Not only is the transaction sent immediately, but because these intermediaries are skipped, customers don’t experience transaction fees.

Although this is a huge improvement to the customer experience, this isn’t the limit to blockchain’s influence on how we transfer information. We’re seeing the technology affect:
• How we interact with our everyday objects
• Transparency within our governments
• Critical analysis in our healthcare systems
• Supply chain efficiency in nearly every industry

With the world so reliant on the global supply chain, we’re finding major issues with trust, timing, and communication. Blockchain integrated into the supply chain offers several benefits to solve these issues.

How do smart contracts work?

Smart contracts work by reading the statements that are written into the code on a blockchain. When the conditions have been met that suffice what initially had been detailed and then written into the blockchain, a digital action takes place between various different computers, the transaction occurs, and the blockchain is then updated to confirm that said event has happened.

Once the transaction has taken place and the blockchain has been updated, it can’t be reverted.

IBM notes: “Within a smart contract, there can be as many stipulations as needed to satisfy the participants that the task will be completed satisfactorily. To establish the terms, participants must determine how transactions and their data are represented on the blockchain, agree on the “if/when... then...” rules that govern those transactions, explore all possible exceptions, and define a framework for resolving disputes.”

The benefits of contracting using blockchain

It should come as no surprise that the first port of call when analyzing the benefits of blockchain contracts is that of speed and efficiency—thanks to the fact that once conditions are met, the contract is executed and finalized. There’s no waiting for signatures on dotted lines, but instead an immediately published, automated document.

Furthermore, thanks to the automation, there’s no room for human error, which can often occur when manually signing documents and can add unnecessary back and forth.

Once you’ve removed the need for intermediaries to take care of your transactions, you can also remove the costs associated with them handling it, alongside the time delays connected within the transfer of documents between different parties for signature.

You have full oversight of the agreement, yet it’s stored within an encrypted blockchain; at no point can it be altered for personal gain. From the point at which the first document and stipulation are uploaded, participants have access to view, and will continue to do so.

Blockchain in manufacturing

One of the most prominent benefits to supply chain issues comes with integrating blockchain technology into manufacturing facilities. Because most facilities must manage material suppliers, processing and development, outsourced work, and shipping, there are several points of contention that can affect production.

By using smart contracts, which are an immutable agreement within the blockchain between two or more entities, manufacturing companies can ensure that the materials they purchase are up to their standards. Smart contracts allow companies to trace the origin of their materials and accurately pay for what they need.

Blockchain’s decentralized nature also makes it difficult for companies to sell products fraudulently or under the table. Any movement of materials or products is saved on the public ledger, allowing everyone involved to see where things are going. Any transfer that goes against the rules of trade is immediately noted, which increases trust between companies.

PwC highlights what blockchain can do within the manufacturing industry. From sourcing raw materials to delivering the finished product, blockchain can increase transparency and trust at every stage of the industrial value chain. Pain points it could help address include:
• Supply chain monitoring for greater transparency
• Materials provenance and counterfeit detection
• Engineering design for long-duration, high-complexity products
• Identity management
• Asset tracking
• Quality assurance
• Regulatory compliance

Blockchain in healthcare

Now more than ever, we require our healthcare systems to work efficiently. However, with recent world events, the supply costs of hospitals have skyrocketed. Errors in the healthcare supply chain, unsurprisingly, could mean the difference between life or death.

Blockchain’s immediacy in information transfer keeps healthcare suppliers up to date on their product demand. The sooner producers know how much they need to make, the sooner the product can get to patients who need it.

This is also true when information transfer is integrated with healthcare equipment. When monitoring systems use IoT technology, vital patient information is collected and analyzed. This saves time and demand on hospital personnel, allowing them to focus on treating patients.

Blockchain is being used successfully within the healthcare sector to securely encrypt patient data and manage the outbreak of harmful diseases.

In Estonia, where blockchain technology began to be used in 2012 to help secure healthcare data, all of the country’s healthcare billing is handled on blockchain, 99 percent of all prescription information is online, and 95 percent of health information is ledger-based.

In the eight-year period between 2009 and 2017, the U.S. healthcare systems witnessed the data breach of more than 176 million patient records, and cyber criminals stole credit card details, general banking information, and health records. Because blockchain is able to keep a decentralized, incorruptible, and transparent log of patient data, it stands in the way of easy access by cyber criminals to patient data.

Blockchain in the defense sector

When working with products in the defense sector, it’s important to receive the highest quality to ensure that the products are used as intended. Malfunctioning equipment in this industry could have serious consequences. Historically, defense companies have had to purchase more than necessary to offset supply chain issues.

Blockchain may play its most important role in benefiting the defense supply chain. An immutable contract allows defense organizations to accurately receive the products they need. This not only hastens defense operations but also decreases the cost spent on materials.

Blockchains also prevent supply companies from distributing their products nefariously. Because the public ledger shows the movement of all materials involved, companies can’t undercut their products. This is especially important in this industry, where products can have major societal repercussions.

This technology not only improves the efficiency of this supply chain but also protects vital information attached to the movement of these materials. Blockchain’s decentralized nature makes it difficult for attackers to infiltrate systems. In addition, the ledger’s measure of security protects its information against those who would use it to benefit others outside the supply chain.

Did you know that, at present, without the help of blockchain, it’s estimated that intellectual property has, at best, a six-month advantage before it’s replicated by enemy forces? However, by encrypting the data sharing, blockchain can extend this time frame while also protecting supply chains and the information shared.

Why blockchain is better than traditional technologies

We’re finding that blockchain provides benefits in several aspects of our society. In both the private and public sectors, the technology is changing the way we transfer tech. However, with all this information going digital, it’s more important than ever to keep it protected.

We’ve detailed the key benefits of blockchain compared to traditional database technologies we’re accustomed to. The two most important elements of blockchain are:
• Immutability. Once data have been written, they can neither be deleted nor replaced.
• Transparency. Those with the right tools and know-how can verify the information, thanks to it being stored on a decentralized platform.

However, because it’s a fairly recent technology, expect the price of implementation to be higher than for other technologies, and the acquisition of talent to manage blockchain systems to be slightly more complex.

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