A supply chain is a network of people and businesses involved in creating and distributing a particular product or serving a particular customer. Supply chains include suppliers of raw materials, facilities that process those materials into parts, assembly facilities, storage and shipping services, retail outlets and all other entities that make it materially possible for a business to deliver goods and services to its customers.
The Importance of Modern Global Supply Chains
Modern supply chains can span the entire world, allowing businesses to access a wider variety of parts, products, and materials at lower costs than they could when using a localized supply chain. As a result, these businesses can increase their profits and access business opportunities in new markets. Supply chains often source products from many different countries, meaning that they can be quite complex. As a result, a large industry has evolved around supply chain management, which is the practice of making supply chains as efficient as possible while reducing potential risks within them.
Blockchain and Supply Chains
For all of their advantages, global supply chains still have their share of challenges, some of which can be addressed using blockchain technology. One promising application of blockchain in supply chain management is in increasing supply chain transparency. The inherent complexity of global supply chains makes them quite opaque and prone to abuse. Using the shared ledgers facilitated by blockchain, however, businesses linked together in a supply chain can create permanent records relating to the sourcing and ownership of products, thus establishing a more transparent and efficient supply chain. This kind of record-keeping also requires fewer internal audits, allowing companies to allocate important resources to more useful tasks.
Use of blockchain technology for supply chain management could also help companies to reduce their administrative costs through the use of smart contracts. A smart contract system can help businesses to track products through their supply chains and automatically determine ownership rights. Smart contracts can also be established to release automated payments when goods are delivered, reducing the need for human administrators to handle payment processing.
A final important capability of blockchain for supply chain management is its ability to integrate with physical sensors to monitor shipping and storage conditions for sensitive products. Trucks transferring foodstuffs, for example, can be outfitted with sensors that monitor temperature conditions to ensure the goods are being transported under proper storage conditions. With such tracking capabilities, blockchain solutions allow businesses to verify the quality and treatment of the goods they are receiving.