However, companies involved in the process do not always want to share data with partners due to distrust. By incorporating blockchain technology, trustlessness can be minimized so it can play a major role in shaping future systems in this area. Its application has economic and operational benefits, but most companies in the supply chain have not yet recognized this due to their novelty and lack of existing case studies.
Nowadays, many people associate blockchain technology to cryptocurrencies, so it is worth clarifying that cryptocurrencies are actually based on this technology, but the scope of blockchain use is much wider. Blockchain is a decentralized database that differs from traditional databases in that the information is not stored on a central server but on a distributed network.
The information stored in the blockchain which is located on computer nodes of the distributed network that are constantly communicating with each other to preserve the correct data. Their operation is provided by an immutable, tamper-proof software. The change in the database is copied, checked, and updated by all nodes in the network. This will make a public ledger available to everyone.
Each time a new transaction is initiated, a block is created with the details of the transactions, which are forwarded to all nodes. Each block contains a timestamp and a reference to the previous block in the chain that is cryptographically secured. Once the transaction is authenticated, the block is linked to the previous block, creating a chain called the blockchain. From here, the block contains unchangeable data.
In other words, a blockchain is a consensual, distributed digital ledger that contains completely transparent data which is visible to everyone and cannot be changed afterwards.For this reason, it is particularly worthwhile to apply in areas where credibility, transparency and reliability play a key role, such as the banking sector, shipping or supply chains.
The role of blockchain technology in the supply chain
In most cases, today’s supply chains operate without blockchain technology. The application of technology, on the other hand, can take their efficiency to a new level.
As most professionals know, many of today’s supply chains have good data that they can communicate at real-time speeds at the levels of the supply chain. To assess the value of blockchain technology in the world of the supply chain, we examine five different areas where it creates added value:
Each partner is responsible for uploading their product information. Digital collection of accurate data improves accountability and trust between partners. Blockchain technology can show product updates in minutes. It builds communication between partners. It creates a simplified process that ensures compliance with quality standards so the seller can better control the production of the product from A to Z.
Blockchain technology is made up of cryptographically secured blocks. These blocks are interconnected, preventing subsequent data modifications, which further enhances security.
- Advanced operations
Digitization of data results in less administrative work and more consistent data tracking. The data entered about the product is in one place, so communication and operations are extremely simplified. The blockchain is global and scalable. This means that technology can support global partnerships and communications in minutes. This makes it an ideal solution for a globalizing economy.
The blockchain is not just a storage technology. It offers complex solutions for analyzing uploaded data. It can help you make predictions based on historical data and allow users to pinpoint supply chain gaps. These data analyzes prove invaluable to companies looking to minimize supply chain costs.
- Cost effectiveness
It minimizes the potential for human error, reduces transaction costs, and can help increase supply chain cost-effectiveness by eliminating third-party intermediaries.
The application of technology in the supply chain holds many opportunities where breakthrough successes can be achieved with its proper use. In fact, one of the main challenges for businesses is that they don’t understand the basics of the blockchain and its role in technology. Stakeholder engagement and further empirical research using supply chain data, as well as simulating the effects of the blockchain on the supply chain, can simulate and accelerate its adoption in supply chain and logistics operations.
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