The Role of Blockchain in Supply Chain Management: Enhancing Security and Traceability
The Blockchain, both as a concept and as an implementable technology, have circled the public discourse more than plenty already, but that does not take away from its still exciting future and the potential improvements it could bring to several corners of business and commerce. If anything, a step slightly away from the zeitgeist allows us to avoid some of the more radical speculation and zero in on some more immediate and feasible solutions to pressing problems. With its notable strengths in security and traceability, the blockchain is a perfect candidate to help with one issue that has become common knowledge in the previous few years: supply chain management.
Supply Chains and a Crisis
2020 and the subsequent years have given us an overwhelming amount of information to digest. On top of social, political, and medical data and discourses, there were the introductory details of what goes on behind the scenes of their favorite stores and shops. In an Amazon Prime equipped world, many people were blissfully unaware of just how it was that packages could be delivered in a matter of hours, overnight, or at all. Now, the fundamentals are part of everybody’s vocabulary: the supply chain.
After the worst supply chain crisis in history, and especially as more of the public has become critically aware, a pressing issue is that of making sure these kinds of failures never happen again. With further globalization of digital markets, supply chain management doesn’t just need to be water tight—it needs to be more efficient than ever before. These are not trivial goals to achieve, and they will require clever and powerful tools to revolutionize the process. Fortunately, on at least two of the fronts, our favorite decentralized ledger has a lot to offer.
Check here for a quick brush up on what the blockchain is and how it works, but for now recall that it is a consensually shared, replicated, and synchronized ledger keeping track of transactions and other important information. Part of the magic of the security of the blockchain is its decentralization. There is no single point of control, so there is no single point of attack to target (or to worry about).
Advanced cryptographic methods also keep the information stored on the blockchain particularly safe, which is only strengthened by the decentralization once again. If some vulnerability were to be exploited by some clever or computationally exhaustive attack, there is little-to-no chance of compromising the entire ledger.
Finally, the blockchain is immutable. Everybody checking everybody’s work is the foundation of the blockchain, which makes falsification practically impossible on the blockchain. This means a malicious manipulation of the blockchain would not go unnoticed.
Bolstering the security of the supply chain is an important effort, and it’s one that sometimes goes overlooked. Supply chain attacks, for example, are ways a malicious actor might attack the security of a company by going through a vendor of some sort. Maybe the company’s immediate network is rock solid, but they get some piece of software from a third party that has let their guard down. Attackers can target this third party and funnel malicious material into the company through the supply chain. It’s an elaborate attack, but it’s one that works precisely because current supply chain iterations have these vulnerabilities. The immutability and decentralized nature of the blockchain can do a lot of work towards blocking these sorts of attacks, and many other similar malicious acts.
Another key benefit of the blockchain is the traceability factor. Because of the distributed ledger and because of the immutable record, all participants of the blockchain should have a good eye on every step of the supply chain. On one hand, this allows for more precise tracing of products and other items that move through the supply chain. A black box supply chain infrastructure is a box of problems waiting to happen, from order fulfillment issues to larger efficiency and flow problems. Whether it be customers, clients, or management itself, having this precise tracking capability is a problem solver on many fronts.
On the other hand, traceability plays a big role in transparency, an issue that becomes more and more pressing each and every day. From recent supply chain issues to geopolitical and environmental tensions, consumers are more concerned with the behind-the-scenes of a company than ever before. Fair and safe sourcing and supply chain practices have become an important part of brand image, and the blockchain’s transparency is a feature that can help show customers and consumers that the supply chain is being handled efficiently and responsibly. Alternatively, it grants a better look and a better ability for criticism if a company is acting irresponsibly or harmfully. Whether it’s a bottom-line thing or a bottom-of-the-heart thing, transparency just isn’t something that companies can forgo anymore—and it’s for the better.
Transparency and security are clear and recurring benefits that come up when discussing blockchain technology and, when it comes to the supply chain, they’re benefits that would be put to good use. The modern iteration of supply chain management has as much to do with efficiency as it does with the court of public opinion. Fortunately, the blockchain can handle both.
Living Pono is dedicated to communicating business management concepts with Hawaiian values. Founded by Kevin May, an established and successful leader and mentor, Living Pono is your destination to learn about how to live your life righteously and how that can have positive effects in your career. If you have any questions, please leave a comment below or contact us here. Also, join our mailing list below, so you can be alerted when a new article is released.
Finally, consider following the Living Pono Podcast to listen to episodes about living righteously, business management concepts, and interviews with business leaders.