Blockchain is a technology based on internet, prized for its ability to publicly validate, record and distribute transactions in irrevocable way. It acts as a digital record / encrypted ledger with transparency. This technology was invented to support Bitcoin transactions, since then transactions are encrypted so it is believed to be more secure.
Today, Blockchain is a potential game changer in financial segment. In India, 15 banks jointly formed Indian Banks' Blockchain Infrastructure Co Pvt Ltd (IBBIC) to process letter of credit. Bankers believe that use of Blockchain will eliminate paperwork and reduces processing time also ensuring opening of LC against same invoice only once which means duplication is not possible.
Similarly, Blockchain is believed to have the potential to change Supply Chain operations by faster and more cost-efficient delivery of products, improving products’ traceability, enhancing coordination between partners, and aiding access to financing.
In blockchain technology, components / assets of transactions like inventory, Bill of Lading, LC, orders, loans, etc. are given with unique identifiers which act as digital tokens. Similarly participants in blockchain are given with unique identifiers or digital signature which they use to add blocks to the block chain. Every transaction is recorded as a transfer of corresponding token from one participant to the other. No participant is allowed to rewrite past data.
Food Supply Chain will be the first industry to undergo with more implementation of blockchain technology. World Wildlife Fund in partnership with ConsenSys utilized blockchain technology to track Pacific Tuna (fish) from vessel to super market. There were reports that consumers were buying Illegal, unreported and unregulated Pacific Tuna (IUU) unknowingly, operators of those fishing were believed to use slaves for fishing. Now consumers are increasingly calling for fully-traceable seafood due to the application of blockchain technology. This eliminated Illegal, unreported, and unregulated (IUU) fishing in Pacific region.
Walmart , partnering with IBM developed a blockchain-based traceability solution that would be applied across the company’s food supply chain. The tested system allowed the retailer to track incoming food supplies from “farm to store” in near real-time. Aside from increased visibility, the company also explores how blockchain technology can be extended towards monitoring and controlling the spread of foodborne illnesses and help minimize costly recalls. Walmart further tested an application that traces pork in China and produce in the US, to authenticate transactions and the accuracy and efficiency of record keeping.
IBM is working on with a number of gold and diamond industry leaders (Asahi Refining, Helzberg Diamonds, and others), helping them create blockchain backed solutions for tracking and authenticating their products throughout the supply chain. Everledger startup is attempting to do the same. Maersk and IBM are working on cross-border, cross-party transactions that use blockchain technology to help improve process efficiency.
Challenges:
- Blockchain provides transparency in process though it is considered as advantage, Data Privacy questions of companies need to answered and addressed
- Supply Chain transactions are complex, varies between segments, following same process will not be possible
- Infrastructures like Internet of Things (IoT), Radio-Frequency Identification (RFID) needs to implemented for better tracking using Blockchain technology, this requires investment and digitization of process
- Supply Chain blockchain process needs to be operated as private blockchain with authorized participants but who is going to authorize the participants as there is no central governance in blockchain?
- Business Entities may not entertain two different suppliers of same material to be added to same blockchain network as transparency of price may reduce the negotiation opportunity
- Blockchain requires capital investment, since many participants are going to be part of it, sharing investment capital by all participants may not be possible in all cases
- Currently Bitcoin operates at only 3,60,000 transactions per day through blockchain which is limitation so processing numerous transactions of supply chain will not be possible
- Even when a blockchain record is secure, there is still the danger that a contaminated or counterfeit product might be tagged and introduced into the supply chain, either in error or by a corrupt actor
- Inaccurate inventory data resulting from mistakes in scanning, tagging, and data entry
- Blockchain is immutable so transactions of past can't be revised if there is an error
- Many of the participants in current supply chain process don't have knowledge on Blockchain, educating all the required participants about blockchain will require time and capital investment
- Cost of developing and running cost chain is not clear
Sources:
- https://www.mckinsey.com/business-functions/operations/our-insights/blockchain-technology-for-supply-chainsa-must-or-a-maybe#
- https://hbr.org/2020/05/building-a-transparent-supply-chain
- https://www.wwf.org.nz/what_we_do/marine/blockchain_tuna_project/
- https://medium.com/@infopulseglobal_9037/blockchain-in-supply-chain-management-key-use-cases-and-benefits-6c6b7fd43094
No comments:
Post a Comment