Modern supply chains are often complex systems. Companies have many suppliers, and suppliers have networks of their own suppliers.
Many supply chains have become global, which has brought additional complexities to management. They are related to the remoteness of the delivery regions and the time difference, as well as the difference in the business approaches and standards of the suppliers.
What else complicates the delivery process:
The above-mentioned factors determine several requirements to supply chains. They must be reliable, flexible, sustainable. All processes must happen quickly and be transparent.
Logistics companies are faced with the challenges of:
The increase in the number of supply chain participants and operations has led to an increased need for document exchange. So three problems have arisen:
Using blockchain-based systems will help solve all these problems.
Blockchain is a continuous, sequential chain of blocks containing information. It is a type of distributed ledger, a networked technology for storing information.
Key features of the technology:
Thus, blockchain development allows for reliable storage of information about the movement of goods along the supply chain and events occurring with them. As well as a legally significant confirmation of the completed transactions (transfer of ownership and/or risks).
The second uses smart contracts. It is a computer algorithm the goal of which is to generate, control, and provide information about the ownership of something. Smart contracts reduce the transaction costs in the supply chain that go with the relationship of economic agents. It also reduces the risks of committing errors in documents and increases the speed of their transmission.
Every day millions of contracts are signed in the world just for the transport of goods. Reducing the transaction time by even one minute on a national, regional, or multinational company scale can lead to enormous savings.
The main challenges of implementing projects using blockchain technology are:
To begin with, it would be reasonable to implement blockchain within a large corporation or at the level of several companies. For example, in existing supply chain management systems (alternatively, in an ERP system).
Walmart uses blockchain to trace mangoes, pork, and greens from the farm to the store shelf. With blockchain, it takes two seconds, whereas without blockchain it takes more than six days. Going forward, the largest chain retailer in North America plans to move its entire food supply chain to the Food Trust blockchain, developed by IBM.
Unilever uses Provenance blockchain to manage its tea supply chain. More than 10,000 farmers, banks, retailers, and transportation companies are participating in the project.
Nestle is using the Food Trust blockchain to manage the supply chain of food ingredients, such as mashed potatoes, milk, and palm oil. So, the company wants to show customers what their products are made of.
SkyCell has developed shipping containers for medical shipments that require strict temperature regimes. Containers have IoT sensors connected to a blockchain in the cloud.
The largest maritime carrier Maersk, together with IBM, has launched the TradeLens logistics system based on the Hyperledger Fabric blockchain. Their purpose is to track shipping freight traffic and the exchange of customs and financial information between participants in the supply chain.
GSBN is implementing a similar project — a direct competitor of Maersk with a comparable market share.
Tally sticks have created a blockchain platform that can process invoices and payments in real-time. This potentially allows it to become the underlying platform for the over $1 trillion invoice factoring industry.
Blockshipping is building a global container platform to manage operational payments between supply chain participants as well as real-time container tracking.
Project Trade (a joint project between HSBC, Deutsche Bank, Nordea, KBC, Natixis, Rabobank, UniCredit, Santander, and Societe Generale) has built partnerships with TradeLens and Tradeshift to digitize the document flow of shipping cargo and offer comprehensive services to global trade process participants.
Visa has launched a blockchain-based payment service, B2B Connect. With this solution, banks and other organizations will be able to identify counterparties and financial transactions within seconds instead of two to five days.
The general rule when using blockchain is similar to any business innovation – don’t adopt the technology just because it’s trendy right now. The effect of the implementation should be obvious and quantifiable.
It makes sense to use blockchain for the traceability of products and components, to simplify the flow of documents in large systems within large corporations or specific industries. The effect can also be significant in transportation. Especially when integrating blockchain-based systems with payment services.
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