Blockchain in Supply Chain Management: Streamlining Operations

Best known as the technology behind cryptocurrency networks, blockchain is gaining traction in an unexpected area — supply chain management.

This once-niche fintech protocol is changing how goods move around the world as major players across industries — from food giants to automakers — actively explore its potential.

Gartner analysts expect this innovation to unlock a staggering $3.1 trillion in new business value by 2030, but actual figures will likely be higher as more companies realize blockchain’s cost-cutting efficiencies.

After all, blockchain manages to tackle three of the most expensive problems in supply chain management: counterfeiting, cross-border complexities, and logistical bottlenecks.

Let’s look at how blockchain in the supply chain works.

In this article

• The basics of blockchain technology
• What is blockchain technology in supply chain management?
• How is blockchain used in supply management?
• What are the benefits of blockchain in supply chain management?
• Blockchain supply chain examples
• How can I implement blockchain technology in supply management?
• Key challenges and how to overcome them
• The future of blockchain in supply chain
• Blockchain development services

The basics of blockchain technology

Before we discuss blockchain in supply chain management, let’s quickly discuss how blockchains work in general.

Blockchains function as decentralized databases that sequentially record data in blocks, each one secured with unique digital fingerprints called hashes.

Here’s how these attributes ensure integrity and reliability:

• Hashes – These digital fingerprints are unique codes generated based on the block’s data. Any alteration to the data within a block completely changes its hash.

Every block includes the hash of the block preceding it, forging a secure chain of blocks linked together by unique fingerprints.

This means that anyone trying to alter a block’s data would have to change the hashes of all subsequent blocks — which would be nearly impossible without everyone noticing. Because of this system, blockchains can create tamper-proof records.

• Decentralization – Blockchain records are not stored on a single computer — instead, they’re spread out across a vast network around the world. This network constantly verifies the data across all the blocks to ensure everyone has the same information. Any data changes on the blockchain are visible to all parties in this incredibly secure and reliable system. 

To learn more about how blockchain works, read our blog: What is blockchain?

What is blockchain technology in supply chain management?

Blockchain’s secure and transparent record-keeping capabilities offer unprecedented levels of transparency and authentication across all stages of supply chain management.

It connects all parties in a supply chain to create a transparent environment that fosters trust without compromising privacy.

This technology makes it easier to trace unexpected issues to their source and identify potential weak links.

How is blockchain used in supply management?

Beyond spreadsheets and manual tracking, blockchain can streamline and secure every step of your supply chain.

Enhancing efficiency

Traditional supply chains involve manual data entry, multiple parties, and complex information flows that often create delays and errors. A blockchain eliminates these issues by allowing you to:

• Track inventory levels: Gain real-time stock level visibility across warehouses and distribution centers to optimize your inventory and prevent stockouts.
• Manage orders electronically: Record purchase orders, confirmations, and changes on the blockchain to automate order processing while ensuring transparency and eliminating errors.
• Monitor shipments: Track the movement of goods in real-time using the location updates and status changes recorded on the blockchain.
• Automate payments: Set up smart contracts to trigger automatic payments upon delivery to eliminate delays associated with manual reconciliation processes.

Establishing accountability 

Whenever a participant adds information to a block (such as when a supplier adds details about a shipment), they sign off with their unique digital signatures to establish a clear audit trail.

This makes it easier to trace the audit trail back to the responsible party if something goes wrong (like when a shipment gets delayed).

Enabling better visibility

Traditional data storage often creates information silos that make it difficult to see the bigger picture. Blockchain technology breaks down these barriers.

Every step — from raw materials to packaging and distribution — is recorded so all parties get a complete view of how a product is developed, packaged, and delivered.

Blockchains can store information across a global network, unlike traditional systems, where data can be lost if a company goes out of business.

Data remains accessible for any party who wants to analyze trends and make informed decisions about future product development, packaging choices, and/or distribution strategies.

Protecting against infiltration and tampering 

Blockchain’s design allows for backward tracing to spot inconsistencies. This could expose infiltration attempts (where unauthorized products enter the supply chain) or tampering (where products are altered or substituted).

Enhancing customer trust 

Blockchain technology empowers manufacturers and distributors to build stronger customer trust by offering a transparent view of their products’ journeys.

Customers can instantly verify a product’s authenticity and origin with a simple scan of its unique digital fingerprint. They can access a detailed record of manufacturing dates (to check freshness), authorized distributors (to ensure that they’re buying genuine products), and sustainable sourcing (to check if manufacturers follow ethical and eco-friendly practices).

What are the benefits of blockchain in supply chain management?

Blockchain delivers visibility and verification throughout the supply chain management process through: 

1. Transparency: This technology establishes a shared ledger — a single source of truth accessible to all stakeholders — that makes verifying product origins easier, swiftly identifying issues, and improving communication across the supply chain.
   
2. Traceability: Blockchains can be extremely effective in documenting the movement of goods to establish detailed traceability from raw material to the final product. This means businesses can conduct efficient product recalls if needed, identify logistical bottlenecks for optimization, and verify product authenticity to deter counterfeiting.
   
3. Trust: Blockchain’s immutable nature instills trust among supply chain participants. Data (like a product’s origin and who handled it) cannot be altered once added, so everyone involved in the supply chain can be confident that all information recorded about a product is accurate.
   
4. Resiliency: Distributed ledgers eliminate the risk of single points of failure inherent in traditional systems. It replicates data across multiple computers to build resilience against outages or attacks.
   
5. Automation: Through smart contracts, blockchain automates various tasks based on predefined conditions, eliminating manual paperwork and boosting productivity. For example, these smart contracts can facilitate automatic payments and quality checks at specified points.
   
6. Efficiency: By improving information flow, reducing errors, and automating tasks, blockchains can boost supply chain efficiency in ways never before seen. The result? Lower administrative costs, faster delivery, and optimized inventory management.
   
7. Improved international transactions: Blockchains also simplify the complexities of international trade by offering a secure platform for sharing trade documents transparently, speeding up customs clearances, and reducing fraud risks. Plus, blockchain networks make cross-border, cross-currency transactions quick, simple, and affordable.

Blockchain supply chain examples

Companies across various industries are embracing blockchain technology to enhance their supply chains. Here are a few standout examples:

Del Monte uses blockchain to improve consumer confidence

Del Monte integrates QR codes on their product packaging to enhance transparency and trust in their products, offering customers a comprehensive product information log “from farm to fork.”

Ford leans into blockchain for transparent sourcing

Ford collaborated with IBM on a blockchain initiative to ensure that cobalt used in its electric vehicle batteries is sourced responsibly. The goal is to create a transparent supply chain that builds stakeholder trust.

Walmart turns to blockchain for food safety

Walmart now uses blockchain technology to trace various goods through the supply chain, including mangoes, leafy greens, strawberries, dairy, meat, poultry, packaged salads, and baby food. Because it’s easier to trace products to their farms of origin, Walmart can quickly implement recalls if needed to boost consumer safety.

MediLedger Network fights counterfeit medications with blockchain 

To ensure product integrity, the MediLedger Network (backed by over two dozen medical and pharmaceutical firms) uses blockchain to track medications and share relevant data securely between authorized participants.

How can I implement blockchain technology in supply management?

The best way to implement blockchain in your supply chain depends on your needs and goals. Let’s illustrate with a couple of hypothetical examples:

Example 1: Blockchain in dairy farming

Consumers are increasingly demanding transparency about their food. However, traditional milk tracking methods rely on paper records, which are vulnerable to errors and manipulation.

A blockchain can create an immutable record of each milk batch’s journey. For instance, dairy farmers can use it to record:

• Milking dates and times to ensure freshness
• Farm location and ID to provide information about the origin source
• Transportation details to track temperature, route, and arrival time, ensuring proper handling

Automated record-keeping reduces paperwork and streamlines communication between farmers, distributors, and retailers. If there’s a contamination issue, authorities can quickly identify affected batches using the blockchain record to minimize consumer risk.

Example 2: Blockchain for tracking gemstone provenance

The jewelry industry has long struggled with counterfeiting and a pervasive lack of transparency around gemstone origins. Blockchain can address these issues by providing a secure and verifiable record of a gemstone’s journey from mine to market. For instance, it can be used to:

• Record the origin of the rough stone, including details like mine location and ethical sourcing certifications
• Track the stone’s processing stages, including details like cutters and workshops involved
• Record ownership changes and trade transactions throughout the supply chain to ensure authenticity

A tamper-proof blockchain record protects both consumers and brands by making it easier to verify a gemstone’s authenticity. It empowers consumers to choose ethically sourced stones. And because traceable gemstones with verifiable provenance can command a premium price in the market, jewelers and mining communities can achieve higher margins and enhance their brand reputation. 

Key challenges and how to overcome them

Applying blockchain technology to supply chain management comes with a few unique challenges. Here’s what to watch out for and how to avoid making these mistakes.

Challenge 1: Security concerns

While blockchain offers a secure foundation for supply chains, it is a relatively new technology, so some companies remain cautious. They have concerns about confidentiality (keeping sensitive data hidden), data integrity (ensuring information accuracy), and smart contract reliability (guaranteeing these automated agreements function as intended).

The level of risk associated with each concern can vary depending on the type of blockchain used. Public blockchains pose risks regarding unauthorized access and data exposure. In contrast, private blockchains offer greater control but introduce access management and permissions challenges.

Solution: Collaborate with cybersecurity experts. They can help you build a blockchain network that suits your security, access control, and validation (consensus mechanism) requirements. These experts can also anticipate potential threats and build safeguards to mitigate risks.

Challenge 2: Stakeholder buy-in and adoption

Some stakeholders might not fully understand the benefits of blockchain and question its ROI. There’s also the issue of change resistance. People often hesitate to adopt new technologies, especially if it means changing established workflows.

Solution: Develop a strong business case explaining how blockchain benefits all parties. Then, talk to everyone in your supply chain about its advantages.

Challenge 3: Integration with existing systems

Merging new blockchain technology with existing software systems can be technically complex. It requires coordinating data formats and communication protocols between the blockchain and existing systems and mapping out a clear migration strategy to minimize disruption to ongoing operations.

Solution: Partner with a blockchain service provider who has experience with both blockchain and legacy system modernization. These providers can bridge the technical gap between the new and old systems and manage the entire integration process.

Challenge 4: Cost considerations

Adopting and maintaining blockchain technology involves a significant investment. Aside from general hardware and infrastructure outlay, you also need to budget for integration. 

Solution: Work with blockchain developers actively involved in the blockchain community. They can recommend cost-effective strategies — such as leveraging open-source platforms and/or phased implementation — to minimize your upfront and ongoing expenses.  

The future of blockchain in supply chain

Blockchain technology is still maturing, but its potential to revolutionize supply chains is undeniable. As the technology advances and adoption increases, we can expect a wave of exciting developments, including:

Hyper-connected supply chains

Products can be equipped with sensors that automatically update the blockchain with real-time data on location and condition. This level of integration will create a hyper-connected supply chain that allows real-time monitoring and proactive inventory and logistics management.

Smart contracts for efficiency

Smart contracts (self-executing agreements) — one of blockchain’s most promising features — can reduce errors, paperwork, and administrative burdens. Think automatic payments upon delivery or instant customs clearance documentation.

Interoperable ecosystems

As adoption rises, standardized protocols and interoperable platforms will emerge, allowing different blockchain networks to communicate seamlessly and create a unified ecosystem. This will foster industry-wide collaboration and streamline global supply chains.

Blockchain development services

Interested in using the power of blockchain to supercharge your supply chain management?

Cheesecake Labs offers blockchain development services that make this innovation accessible and practical for your business.

We are a proud Stellar integration partner with a portfolio of groundbreaking blockchain projects such as Mercado Bitcoin Token Factory, Stellar Aid Assist, Stellar Asset Sandbox, and many more.

Let’s chat about your supply chain management requirements and how blockchain can address them!