Blockchain ensures trust, vital cog in wheel for logistics sector where data should be shared between parties. Data ownership is shared under Blockchain-powered surroundings. In this challenging environment, Blockchain is turning out to be a facilitator for the supply chain industry, says Srinivas Mahankali, Chief Business Officer, Blockedge Technologies.
After being tested by the crises like Covid-19 and the ongoing Ukraine-Russia war, the supply chain sector has started investing heavily in emerging technologies – Blockchain, being one of the latest to make a sweeping impact across the industries, is steadily emerging as a disruptor in this sector.
Traditionally, the sector faced delays, disruptions, poor inventory tracking, discrepancies in payment and invoicing, lack of speed and efficiency in deliveries. With increased digitalization and automation, there is an increased flow of data, which the sector finds hard to manage and process. Traceability is another challenge, as the sector is becoming more complex with multiple players and locations. Similarly, payment transfer is also a worry. The customer demands for efficiency, agility, accountability, and performance are equally peaking, especially with the surge in e-commerce.
In this challenging environment, Blockchain is turning out to be a facilitator for the supply chain industry. This encrypted distributed digital ledger records every transaction in a transparent manner. A transaction or block is chained across a ledger, shared through a network connected to thousands of computers. And every transaction should be confirmed by each participant or the `node’, making the data transparent and secure. These features can address the existing and growing concerns of the logistics sector, which is still marked by human errors, high amount of paperwork, high administrative costs, chances of fraud and delays.
Primarily, Blockchain ensures trust, which is a vital cog in wheel for the logistics sector where data should be shared between the parties. Unlike in the traditional environment, data ownership is shared under blockchain-powered surroundings. It also means every participant has a full copy of the shared and immutable ledger, offering a single source of truth with transparency coupled with a consensus mechanism powered agile approval process. Similarly, smart contracts do not need human interference and thus delay is avoided.
Blockchain enhances transparency and traceability, the two vital elements in the supply chain. End-to-end transparency is assured through a single source of truth as data is integrated from all the participants. Blockchain is proving to be beneficial in smarter inventory management, higher security, enhanced efficiency, and reliability.
Since every transaction is visible to each participant as per their access control permissions, the chances of fraud can be limited to a great extent, while offering privacy and confidentiality to the sensitive data. Another advantage is the prevention of fakes in value chain through real-time tracking that helps solve the problems in a quicker and transparent manner. But a major gain of Blockchain adoption will be reduction in process complexity as it can eliminate intermediaries, cut down paper work, reduce clutter, and increase automation. Smart contracts will help automating processes such as payments, transfer of ownership, settlement of tariffs and cargo checks. This means improved efficiency in operation. It can improve compliance as data is sent on a real-time basis. It can reduce transaction and reconciliation costs, as there is consensus on validation in the distributed network.
A recent study by Zion market research showed that the global market for Blockchain technology in supply chain management would reach $3153.7 million by 2028, from $262.9 million of 2021. It will witness CAGR of 51.3 per cent. At present, the industry is slowly warming up to the idea: there is still a lack of knowledge and awareness about Blockchain potential.