Blockchain seems like the new buzzword, but it has actually been around for about a decade. Its growth has been leisurely yet steady. But transformational technologies often start slow and gain momentum as companies realize practical applications. Think about the internet. Though it can trace its earliest roots to the 1960s, the World Wide Web as we know it didn’t achieve widespread adoption until the 1990s and early 2000s. Right now, Blockchain is on the threshold of a similar revolution and is set to transform industries.
One of Blockchain’s newest horizons is the supply chain industry. According to MHI’s 2018 Annual Industry report, although adoption of Blockchain within the supply chain is only at six percent today, “it is projected to reach 54 percent over the next five years, and 71 percent in the years beyond.” With projections like that, can supply chain executives afford to ignore its potential?
The growth of Blockchain
First developed in 2009 as a ledger for the cryptocurrency Bitcoin, Blockchain is an immutable and transparent ledger of transactions. An anonymous person—some speculate a group of people—under the name Satoshi Nakamoto outlined the theory behind Blockchain in a 2008 white paper titled, “Bitcoin: A Peer-to-Peer Electronic Cash System.”
Other consensus algorithms sprouted from Nakamoto’s initial premise, leading to Blockchain’s growing popularity. Today, Blockchain is behind over 2,000 cryptocurrencies and is impacting a wealth of other industries far beyond crypto applications.
How does Blockchain work?
A transaction is made and recorded in a digital block. These blocks log transactional information, such as date, time, cost, location and the parties involved. Each block is assigned a unique cryptographic signature. When the next transaction occurs, a block records new transactional information, but also incorporates the original information of the previous block, linking the two together. The chain continues so on and so forth. The process forms a chain of historic, traceable information, providing the provenance and current status of a transactional series.
Authorized network users can access the chain in real time through any internet server, creating a transparent and decentralized process. No silos. No tampering. And because the Blockchain assigns a unique digital cryptographic signature to each transaction, it creates a clear and unchangeable audit path.
How does Blockchain benefit supply chain management?
Today’s supply chains involve parties stretching across the globe—from suppliers, production facilities, to warehousing, transportation, and retailers. More often than not, each one will use different enterprise resource planning (ERP) and supply chain management software to manage their own value chains. Unfortunately, these systems typically can’t “speak” with one another, creating disconnects that make it hard to properly forecast demand, plan production and deliver adequate replenishment to market.
Blockchain creates a more holistic supply chain, with improved accountability and information exchange. This presents a number of advantages:
Blockchain technology has the ability to positively impact numerous industries. For supply chain management, the possible efficiency improvements, cost savings, enhanced security, transparency and traceability will help brands and retailers not only keep up with market demand and scrutiny, but also foster greater trust between partner organizations and among the consumer market.
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