Supply Chain and Logistics
In the previous module we covered the concept of smart contracts and decentralized applications. In this module, we will examine the use of blockchain in supply chain and logistics management. Topics will include how blockchain can be used to improve supply chain transparency, traceability, and security.
Supply Chain Management
Supply chain management is the coordination and management of activities involved in the production and delivery of products or services. It involves managing relationships with manufacturers, suppliers, distributors, and customers, because it comprises all steps involved in gathering raw resources, turning them into completed goods, and shipping them to clients. It is obvious to think that companies operating in this sector have the continuous need to make all parts of the chain work as efficiently as possible, in order to remain competitive. Additionally, they must continuously strive to reduce operating costs and respond to the growing demand for transparency from customers and partner companies.
Blockchain technology, thanks to its innovative characteristics, can be widely used to improve almost all processes involving supply chain management, and can also solve some problems that are occasionally encountered along the path that separates a good from the final customer. Blockchain technology allows for the creation of a shared digital ledger that records transactions and assets in a tamper-proof and decentralized manner, so it reduces the risk of fraud and errors. Many times, these risks are caused by excessive bureaucracy, too many ‘handovers’, or by the corruption of one or more entities involved in the supply chain process. For comprehensive traceability of a product, the data should be kept in a single database, which must be transparent, secure and immutable. In traditional supply chains, it can be challenging to follow a product’s journey from the manufacturer to the end consumer. This is where blockchain technology comes in handy, as it allows for tracking the source of raw materials, the movement of products throughout the supply chain, and their delivery to the final consumer, providing a complete and transparent overview of the entire process.
Currently, one of the links in the supply chain that is most interested in applying blockchain technology is logistics. Blockchain has gained attention as a solution to improve the efficiency and transparency of logistics operations, and is poised to revolutionize the market, bringing significant benefits to all the parties involved.
Logistics
Logistics refers to the management of the flow of goods, information, and resources from the point of origin to the point of consumption. The goal of logistics is to ensure that the right goods are in the right place at the right time and at the lowest possible cost, so it comprises all the activities involved in the planning, coordination, and execution of the storage, transportation, and delivery of goods and services. Maintaining efficient operations, lowering costs, and improving customer satisfaction all depend on effective logistics management.
By offering a safe and transparent platform for monitoring the movement of goods and data, blockchain technology has the potential to transform the logistics sector. Continuing from our previous discussion, a significant advantage of blockchain technology for logistics is the creation of a centralized source of truth, which is a decentralized and shared digital ledger that is accessible to all participants in the supply chain. As a result, the logistics process can be sped up because real-time shipment tracking is made possible and less manual interventions are required. The tracking of goods is a prime example: blockchain can also provide valuable information about the condition and handling of shipments, such as temperature, humidity, and other environmental factors. The risk of spoiling and damage can be decreased by using this information to make sure that the items are being transported in the appropriate context. Often, damage to goods during transit goes unreported or is inaccurately reported, resulting in the product arriving at the customer’s doorstep already damaged, without their knowledge. Companies that use blockchain technology to track their products have a competitive edge over those that do not, as they can provide customers with a more transparent and real-time tracking experience.
Smart contracts on a blockchain usually require communication with an oracle to access data or information from outside the blockchain. Oracles are entities that provide external data and information to smart contracts. The oracle serves as a link between the smart contract and the external data source, enabling it to access and utilise information that is not present on the blockchain, such as location, weather conditions, sudden changes in temperature of the product, and movement of shipments.
A famous blockchain project, called VeChain, is properly designed for supply chain management and logistics. VeChain technology uses complex chips to create a tamper-proof digital representation of physical goods. This makes it possible to track shipments in real-time and offers useful details about how things were treated and handled while in transit. This information is stored on the VeChain blockchain, providing a secure and transparent record of a product’s journey. VeChain has been adopted by a number of industries, including luxury goods, food and beverage, and logistics. Walmart is just one of these, as it has started using the services offered by VeChain for the traceability of their products: customers can obtain detailed information by scanning desired products, including the origin of the scanned products and the area where Walmart got them, the logistics procedure, a product inspection report, and many other data points.
Another link in the supply chain that is very interested in applying the blockchain in its mechanisms is that of Supply Chain Finance, which can be enhanced thanks to cryptocurrencies.
Supply Chain Finance
Supply chain finance refers to a set of financial tools and services that help to manage the flow of funds in a supply chain, from suppliers to buyers. By addressing cash flow problems that could occur during the production and distribution of commodities, supply chain finance aims to increase the supply chain’s overall health and efficiency. This is frequently accomplished by offering various financial services to different supply chain participants, such as suppliers, purchasers, and financial intermediaries.
Blockchain technology can provide numerous advantages to supply chain finance due to the secure and efficient nature of cryptocurrencies as a means of payment and settlement. Cryptocurrencies facilitate rapid and cost-effective settlement of transactions between supply chain participants by serving as a form of payment. One of the key benefits of using cryptocurrencies in supply chain finance is that they can eliminate the need for intermediaries, such as banks.A well-constructed blockchain can significantly lower costs and accelerate the settlement process, as transactions can be settled in real-time on a decentralized network. In addition, due to the fact that transactions are recorded on the blockchain in a safe and transparent manner, using cryptocurrencies can lower the risk of fraud, as there is no way to modify the transaction history, as unfortunately often happens in traditional payments networks. Last but not least, it is important to note that cryptocurrencies provide supply chain participants who may not have access to conventional banking services an opportunity to participate in the financial system.”
Now, let’s try to summarize the ways in which blockchain can be applied to supply chain finance:
- Efficiency: Blockchain can automate many of the manual and time-consuming processes involved in supply chain finance, reducing the risk of errors and speeding up the settlement process.
- Traceability: Blockchain can be used to track the flow of goods throughout the supply chain, allowing real-time delivery and payment tracking for all parties.
- Transparency: Blockchain provides a shared, decentralized ledger that records all transactions, creating a transparent and auditable record which is accessible to everyone.
- Security: Blockchain uses cryptographic algorithms to secure transactions, since once a record is added to the blockchain, it is almost impossible to change it. This reduces the risk of fraud. \
As the world becomes more interconnected, it is expected that supply chain finance will continue to develop and incorporate new technologies such as blockchain and cryptocurrencies to enhance the overall efficiency and stability of the global trade system.
Highlights
Blockchain technology can be widely used to improve almost all processes involving supply chain management, and can also solve some problems that are occasionally encountered along the path that separates a good from the final customer.
By offering a safe and transparent platform for monitoring the movement of goods and data, blockchain technology has the potential to transform the logistics sector. The process can be shipped up because real-time shipment tracking is made possible and less manual interventions are required.
Blockchain technology can also bring numerous benefits to supply chain finance, thanks to the fact that cryptocurrencies can provide a secure and efficient means of payment and settlement. They can eliminate the need for intermediaries, such as banks.
Conclusion
This part of the course is intended to help you understand how blockchain technology can make the whole supply chain process more efficient, from the traceability of goods to payments between the various parties that are involved in the mechanism. In the next module, we are going to cover the topic of digital identity and security, which is another important use case of blockchain.
Supply Chain and Logistics
In the previous module we covered the concept of smart contracts and decentralized applications. In this module, we will examine the use of blockchain in supply chain and logistics management. Topics will include how blockchain can be used to improve supply chain transparency, traceability, and security.
Supply Chain Management
Supply chain management is the coordination and management of activities involved in the production and delivery of products or services. It involves managing relationships with manufacturers, suppliers, distributors, and customers, because it comprises all steps involved in gathering raw resources, turning them into completed goods, and shipping them to clients. It is obvious to think that companies operating in this sector have the continuous need to make all parts of the chain work as efficiently as possible, in order to remain competitive. Additionally, they must continuously strive to reduce operating costs and respond to the growing demand for transparency from customers and partner companies.
Blockchain technology, thanks to its innovative characteristics, can be widely used to improve almost all processes involving supply chain management, and can also solve some problems that are occasionally encountered along the path that separates a good from the final customer. Blockchain technology allows for the creation of a shared digital ledger that records transactions and assets in a tamper-proof and decentralized manner, so it reduces the risk of fraud and errors. Many times, these risks are caused by excessive bureaucracy, too many ‘handovers’, or by the corruption of one or more entities involved in the supply chain process. For comprehensive traceability of a product, the data should be kept in a single database, which must be transparent, secure and immutable. In traditional supply chains, it can be challenging to follow a product’s journey from the manufacturer to the end consumer. This is where blockchain technology comes in handy, as it allows for tracking the source of raw materials, the movement of products throughout the supply chain, and their delivery to the final consumer, providing a complete and transparent overview of the entire process.
Currently, one of the links in the supply chain that is most interested in applying blockchain technology is logistics. Blockchain has gained attention as a solution to improve the efficiency and transparency of logistics operations, and is poised to revolutionize the market, bringing significant benefits to all the parties involved.
Logistics
Logistics refers to the management of the flow of goods, information, and resources from the point of origin to the point of consumption. The goal of logistics is to ensure that the right goods are in the right place at the right time and at the lowest possible cost, so it comprises all the activities involved in the planning, coordination, and execution of the storage, transportation, and delivery of goods and services. Maintaining efficient operations, lowering costs, and improving customer satisfaction all depend on effective logistics management.
By offering a safe and transparent platform for monitoring the movement of goods and data, blockchain technology has the potential to transform the logistics sector. Continuing from our previous discussion, a significant advantage of blockchain technology for logistics is the creation of a centralized source of truth, which is a decentralized and shared digital ledger that is accessible to all participants in the supply chain. As a result, the logistics process can be sped up because real-time shipment tracking is made possible and less manual interventions are required. The tracking of goods is a prime example: blockchain can also provide valuable information about the condition and handling of shipments, such as temperature, humidity, and other environmental factors. The risk of spoiling and damage can be decreased by using this information to make sure that the items are being transported in the appropriate context. Often, damage to goods during transit goes unreported or is inaccurately reported, resulting in the product arriving at the customer’s doorstep already damaged, without their knowledge. Companies that use blockchain technology to track their products have a competitive edge over those that do not, as they can provide customers with a more transparent and real-time tracking experience.
Smart contracts on a blockchain usually require communication with an oracle to access data or information from outside the blockchain. Oracles are entities that provide external data and information to smart contracts. The oracle serves as a link between the smart contract and the external data source, enabling it to access and utilise information that is not present on the blockchain, such as location, weather conditions, sudden changes in temperature of the product, and movement of shipments.
A famous blockchain project, called VeChain, is properly designed for supply chain management and logistics. VeChain technology uses complex chips to create a tamper-proof digital representation of physical goods. This makes it possible to track shipments in real-time and offers useful details about how things were treated and handled while in transit. This information is stored on the VeChain blockchain, providing a secure and transparent record of a product’s journey. VeChain has been adopted by a number of industries, including luxury goods, food and beverage, and logistics. Walmart is just one of these, as it has started using the services offered by VeChain for the traceability of their products: customers can obtain detailed information by scanning desired products, including the origin of the scanned products and the area where Walmart got them, the logistics procedure, a product inspection report, and many other data points.
Another link in the supply chain that is very interested in applying the blockchain in its mechanisms is that of Supply Chain Finance, which can be enhanced thanks to cryptocurrencies.
Supply Chain Finance
Supply chain finance refers to a set of financial tools and services that help to manage the flow of funds in a supply chain, from suppliers to buyers. By addressing cash flow problems that could occur during the production and distribution of commodities, supply chain finance aims to increase the supply chain’s overall health and efficiency. This is frequently accomplished by offering various financial services to different supply chain participants, such as suppliers, purchasers, and financial intermediaries.
Blockchain technology can provide numerous advantages to supply chain finance due to the secure and efficient nature of cryptocurrencies as a means of payment and settlement. Cryptocurrencies facilitate rapid and cost-effective settlement of transactions between supply chain participants by serving as a form of payment. One of the key benefits of using cryptocurrencies in supply chain finance is that they can eliminate the need for intermediaries, such as banks.A well-constructed blockchain can significantly lower costs and accelerate the settlement process, as transactions can be settled in real-time on a decentralized network. In addition, due to the fact that transactions are recorded on the blockchain in a safe and transparent manner, using cryptocurrencies can lower the risk of fraud, as there is no way to modify the transaction history, as unfortunately often happens in traditional payments networks. Last but not least, it is important to note that cryptocurrencies provide supply chain participants who may not have access to conventional banking services an opportunity to participate in the financial system.”
Now, let’s try to summarize the ways in which blockchain can be applied to supply chain finance:
- Efficiency: Blockchain can automate many of the manual and time-consuming processes involved in supply chain finance, reducing the risk of errors and speeding up the settlement process.
- Traceability: Blockchain can be used to track the flow of goods throughout the supply chain, allowing real-time delivery and payment tracking for all parties.
- Transparency: Blockchain provides a shared, decentralized ledger that records all transactions, creating a transparent and auditable record which is accessible to everyone.
- Security: Blockchain uses cryptographic algorithms to secure transactions, since once a record is added to the blockchain, it is almost impossible to change it. This reduces the risk of fraud. \
As the world becomes more interconnected, it is expected that supply chain finance will continue to develop and incorporate new technologies such as blockchain and cryptocurrencies to enhance the overall efficiency and stability of the global trade system.
Highlights
Blockchain technology can be widely used to improve almost all processes involving supply chain management, and can also solve some problems that are occasionally encountered along the path that separates a good from the final customer.
By offering a safe and transparent platform for monitoring the movement of goods and data, blockchain technology has the potential to transform the logistics sector. The process can be shipped up because real-time shipment tracking is made possible and less manual interventions are required.
Blockchain technology can also bring numerous benefits to supply chain finance, thanks to the fact that cryptocurrencies can provide a secure and efficient means of payment and settlement. They can eliminate the need for intermediaries, such as banks.
Conclusion
This part of the course is intended to help you understand how blockchain technology can make the whole supply chain process more efficient, from the traceability of goods to payments between the various parties that are involved in the mechanism. In the next module, we are going to cover the topic of digital identity and security, which is another important use case of blockchain.