Once a product exchanges hands, it generates transactional information. Blockchain technology stores and keeps track of the transactional logs by timestamping each transaction and storing them in the transactional ledgers or blocks. These transactional ledgers or blocks are interlocked in a chain and are distributed with each of the parties involved in the transaction; this technology is named Blockchain Technology. The main emphasis in Blockchain technology is on data integrity or the uniqueness of data. Data integrity is achieved in the Blockchain Process with the help of computer-generated timestamping on the transactional records, which are then stored in the transactional ledgers.
Supply Chain Management System
Supply Chain Management System consists of procuring the raw materials, labor, and other resources; skills, machinery, and tools are applied to these raw materials to produce the final products; and then sending these final products to the business customers.
Problems Facing by the Conventional Supply Chain Management System
The conventional supply chain management system faces many. The problems and issues a typical SCM system faces include:
Hurdles in Proper Inventory Traceability
The conventional supply chain management system lacks proper and effective inventory traceability. Often the inventory is misplaced and untraceable in the traditional SCM system.
Lack of Properly Timestamped Information Database
The conventional SCM system is ineffective in keeping proper track of products as no automated timestamped information database of the products is effectively available in the traditional SCM.
Defective Inventory Assessment System
The conventional SCM system is inefficient in assessing the proper quality of the inventories. This inefficiency in the traditional system of SCM risks inventory management and control processes.
Unexpected Inventory Management Costs
Inventory management costs in the conventional SCM system are highly volatile and usually much higher than the calculated budgets. This is because of the ineffective and inefficient traditional inventory-related information management system.
Blockchain Technology is Revolutionizing the Conventional Supply Chain Management System
The most modern blockchain technology revolutionizes the conventional supply chain management system in many ways. Some of the factors involved include but are not limited to:
Introduction of Smart Contracts and RFID in SCM
Radio Frequency Identification (RFID) is the system that helps automatically identify objects. The RFID technology is once combined with blockchain technology; it helps initiate smart contracts. A smart contract is a blockchain system-generated agreement between the parties involved in the exchange of products. Once RFID and smart contracts work under the blockchain umbrella, the identification and traceability of the inventory become accurate and efficient.
Receiving Signals from the Inventory and Managing this Information in the Blockchain Ledger
The phenomenon of associating common objects with the internet network is known as the Internet of Things (IoT). IoT phenomenon can also be applied to the supply chain inventories. Once the sensors are associated with the stock or inventories are linked with the internet network to generate different information signals, this helps better gather the inventory-related details. This signaled information received from inventory sensors is then stored in blockchain-based transactional ledgers. These transactional ledgers are distributed with each involved party while each record’s data integrity and privacy are ensured.
Benefits of the Use of Blockchain Technology in the Supply Chain Management System
The information and transactional logs saved and interlocked in the blockchain system ensure several potential benefits to a typical supply chain management system. These potential benefits to SCM include:
Better Traceability of Inventory is Possible
Better inventory traceability is possible with the effective and efficient implementation of Blockchain technology as inventory movement is timestamped as the inventory crosses each phase.
Application of Live Tracking System
The live tracking system can effectively be applied to the inventories during transportation and exchanging of hands in the supply chain process. Live movement record of the stock is continuously stored in the blockchain’s transactional ledger.
Highly Efficient Supply Chain Process
The supply chain process becomes highly efficient once blockchain technology is applied. With minimal economic and physical resources, more significant cost reduction is possible once blockchain is applied to SCM.
The supply chain process becomes much more productive once blockchain technology is associated with the SCM. Once blockchain is applied to the SCM, most of the processes involved in the supply chain work in an automated way. This increases organizational and departmental productivity and reduces wasted time and resources.