Blockchain Changes Supply Chain Management
Today, with the wide use of the internet and online shopping, we can enjoy the luxury of having ready-made high-quality products delivered to our doorsteps without stepping a foot out of the house. Many of us will not thinking about how the products we bought were made or where did they originate from. With that being said, it is still common knowledge that in order for a product to be placed on the shelf (online or offline), it requires a time consuming process, which includes manufacturing, logistic, storage and delivery, from a raw material supplier all the way to the retailer of the product, and finally at your door step. The process of connecting all the parties that provide you with the ready-made products is called the supply chain.
Companies haven’t updated the underlying technology used to manage the supply chain systems for decades, and with blockchain technology, companies can rebuild their approach to supply chain management at the ecosystem level, from a comprehensive global perspective. Some of the most pressing issues faced by the supply chain can be solved with blockchain technology as it provides a novel way to record, transfer and share data.
In essence, the blockchain is a unique database system created and maintained by participants in a decentralized network. It provides a secure and reliable architecture for communication of information and transactions that can be recorded digitally, for example, data and asset exchange between participants in the supply chain. With the decentralization of distributed ledgers, each stakeholder maintains a copy of the information in the blockchain, which prevents single points of failure or data loss, and the This also means that each participant in the network can check and verify the data in the blockchain, making it highly resistant to changes or tampering. This accurate and tamper-resistant record ensures data integrity and provides access to simplify regulatory compliance. Each participant is obliged to upload data to the blockchain and verify each other’s data, which is especially useful when issues regarding product prices or loss of product are raised, the blockchain will be able to update this information within minutes, instead of the traditional Electronic Data Interchange (EDI) system that sends information in batches rather than real-time.
With the transparency of data, products can be tracked throughout the entire process, from the procurement of raw materials to the final delivery, and this characteristics can help to improve many aspects of the supply chain. Logistics is an important aspect of supply chain management, during which products are transported, stored in warehouses and passed through customs. The entire process is often time consuming, expensive and complicated. In addition, as global trade involves dealing with foreign organizations, importers and exporters may have to deal with political consequences, international law and high tariffs. However, with the transparent nature of blockchain, exporters and customs official can use the database to verify the necessary documents regarding the products, making the process more efficient and cheaper.
The transparency that blockchain has also improved other aspects of the supply chain. If some products are defective, it can be easily traced back to the problem’s origin and appropriate measures can be implemented to swiftly solve the problem. The waste of resources from inefficient supply chain can also be identified, which is particularly common in the food industry, and relevant participants can implement targeted cost-saving measure. Similarly, companies can use the previously recorded data in the blockchain to make forecasts and other analytics to help them pin point various links within the supply chain to reduce spending and grow the business. They can also use the data to give more accurate delivery time prediction to the customers, as a way to raise customer satisfaction.
From the social aspect, retailers and other participants can ensure the quality of their products, increasing the trust between participants and maintain customer loyalty to the brand. For customers that are concerned with unethical supply chain managements, such as sweatshops or counterfeiting, companies can show them relevant social documents such as social awareness form or a worker’s union form.
Overall blockchain can help supply chain managers to simplify and reduce the cost of supply chain management, making it more efficient and reliable, and allowing more room for the company to grow or expand globally, and raising the overall satisfaction of the customers.
CyberVein has done some work relating to the supply chain of seafood products in the food industry. CyberVein developed a blockchain-based solution to a Chinese company in Ningbo province who is doing a seafood exchange platform for the fishermen and companies or restaurants in the food industry.
Traditionally, when fishing boats go out to sea (in this case the large long-distance fishing boats), they spend up to a month to half a year’s time out at sea, getting a full haul before coming back to the ports. A problem with this is that there is no communication methods out at sea, mobile phones have no signal and internet, only the captain of the boat has a communication device to contact the the people on the land, which was also extremely expensive to use. They would have to return to the ports, count the seafood they’ve caught and store them until they can find buyers. This has incurred huge work load and costs to the fishermen, and there also exists the problem that some seafood products are wasted due to lack of freshness and buyers. The company from Ningbo, partnered with a few companies, utilized the technology of satellite communication, which allowed the fishermen at sea to communicated with the people on the land at anytime, although the data prices is still fairly higher, but better than before. This has allow the seafood exchange platform to acquire the fish data from the fishing boats in real-time. Fishermen are able to register the fish data as soon as the fish was caught, and they are able to find buyers while they are still filling up their load or while returning to the docks, allowing immediate exchange of seafood products for money as soon as they dock at the ports. This has eliminated the time lag between the docking at the port and handing over the goods to the buyer, saving cost and time for both parties.
CyberVein has helped the company to build a blockchain database to store the seafood data as the fishermen are fishing, with the help of the platform company’s image recognition and GPS technologies. The seafood that have been caught on deck can be immediately registered by the image recognition technology, and the data is uploaded to the blockchain. This gives authenticity to the seafood data, as some fishermen might do fraud by providing the wrong information to the buyers through the traditional process. To that end, the GPS technology also register the region in which the seafood is caught, as the region of inhabitant of the fish may vary its price. There is also a time stamp for the seafood caught, because some seasonal seafood products’ prices can vary hugely depending on the time of the year. The companies or restaurants in the food industry, who have joined the exchange platform, can view the data on the blockchain and calculate the appropriate prices for the seafood product they want. All of this can be done while the fishermen are still fishing or on their way back. The blockchain technology has helped the fishermen and the buyers to build trust, achieving a fair price and simplified the process of exchange. In addition, the platform also offer storage services to the fishermen through third-party service providers for seafood products that aren’t sold off immediately, as well as logistics services to deliver the products to the buyers, and the method and time of storage and transportation data is also available to view on the blockchain.
Blockchain technology has help the platform to authenticate the different data available, and has built fundamental trust for thee buyers and fishermen. The cost for the platform to monitor the different processes within this supply chain has been reduced, and the platform has began to attract more buyers, thus growing the business.