What you might not know is that blockchain isn’t just a Bitcoin thing. Across the globe, from corporations to start ups, experts are formulating and implementing new ways of using blockchain technology to improve the way we do things; and the same goes for supply chains. Below Finance Monthly hears form Lee Pruitt, the CEO of InstaSupply, on the ways blockchain can likely better supply chains for your business.
Managing a supply chain is an operational and logistical challenge for many businesses, and the more parties involved, the more complicated it is. The ‘links’ in the average chain can sometimes span hundreds of stages and dozens of locations. Keeping everything running smoothly and effectively whilst tracking unusual or anomalous events can be very difficult.
Blockchain technology – essentially, a distributed, unchangeable cryptographically secured ledger in which transactional data is stored and updated – may provide a way to improve transparency and operational efficiency. But it has to be used effectively.
Here’s how you can use blockchain technology to improve trust, maximise efficiency, and foster better vendor relationships.
Stronger audit trails
Blockchain technology serves as a repository of transaction history. Every time a payment is made, every party is registered and recorded in exacting detail.
This effectively means that every stage of the supply chain has a strong audit trail – and this is good for your business on several different levels. From a legal and ethical standpoint, it means that you can be assured that your suppliers aren’t party to any child labour or money laundering related activity. From a logistical perspective, it means you have end-to-end visibility into how physical items are sourced, delivered and stored.
Any efficiency or productivity gaps can be quickly identified and dealt with. Any items that go missing can easily be found. Delays will become rare, if not a thing of the past.
Blockchain technology means transparent and more efficient supply chains.
When supply chains aren’t fully optimised, it’s the end customer that is ultimately let down. Elon Musk recently described supply chains as ‘tricky’ – and revealed that Tesla’s new vehicles routinely miss their delivery deadlines.
Blockchain will increase trust among consumers, and among all players in the supply chain. Using shared public IDs and ratings, a clear picture of everyone’s goods and services will be readily available: if you want to consistently deliver value to your customers, they will reward you for it; if you’re looking for trustworthy suppliers, you’ll be able to select them based on clear, real time data.
The technology will also help reduce the instances of fraud – meaning your reputation and finances will be protected.
Blockchain technology will make the traditional invoice redundant. All purchase orders will be recorded and rendered fundamentally unalterable as blocks on the chain: accordingly, when suppliers approve the purchase order, they have essentially made a commitment to deliver the items/services for the agreed cost and only the agreed cost. An invoice could never be issued to ask for more.
Blockchain will also improve operational performance and the bottom line. Many businesses are looking for ways to integrate these new tech solutions into their daily operations, and they are right to do so. Trust, transparency, and efficiency are qualities that are not only valuable, but in increasingly short supply in current models. Blockchain offers to provide them in abundance.