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Blockchain Applications in Supply Chain

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28th Aug, 2023
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Blockchain Applications in Supply Chain

The distributed-nature technology of Blockchain has disrupted many industries, with its uses and blockchain applications in supply chain leading to innovations everywhere. Bitcoin and other cryptocurrencies are just the initial use cases of the blockchain. The truth is that blockchain technology can be applied to far more sectors than was initially imagined. More security, decentralized nature, easy verification, and protected identities are just some of the many features that make the blockchain truly transformational. One area where this technology can be efficiently exploited is the supply chain sector.

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Blockchain essentially is a distributed ledger that is updated in real time with each network participant making a transaction. This specific feature can be put to good use when it comes to the supply chain management. Logistics demand transparency and traceability. It is clear that customers want their meat or grains to be exactly as has been promised on the packaging. Incorporating blockchain into supply chain management can certainly be a step towards ensuring that. With the potential to almost eliminate fatal errors, and minimizing courier costs, blockchain can be viewed as the next big step in supply chain management. Some companies have gone ahead and taken this step, with Walmart partnering with IBM for a project in order to trace their products much faster than traditional methods.  

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Here are a few use cases of blockchain which are certain to revolutionize the supply chain sector in the near future:

Seafood tracing and verification

News about mislabelled and ‘not-fit-for-consumption’ seafood have been floating around since 2016. The seafood industry faces a lot of problems due to difficulty in tracking produce from ocean to plate. In the event of a disease breakout due to seafood consumption, with the current supply chain logistics, it becomes tough to track and single out the source of the malicious activities. With blockchain, however, it can become a completely different story.

With projects such as the Pacific Tuna project, which aims at putting a label on every tuna that makes it from the ocean to the market, blockchain applications in seafood tracing and verification is something we all can get behind. Seafood is physically tagged and the data is then stored on the blockchain to enable easy access at any time and place. The food supply chain, in general, can benefit from blockchain uses, and seafood is a particular use case that is particularly problematic and could use the extra help.

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Pharmaceutical safety

The problem with drugs and pharmaceutical safety is two-pronged- Tracing and verification, Second being Frauds.
According to reports, the global fraudulent drug industry is worth about USD 75-200 billion. The traditional blockchain applications in supply chain just cannot be relied upon to bring down those numbers. The opacity of the chain is what causes the problem, and with blockchain applications thrown into the mix, the problem can certainly be reduced. Tracing drugs from manufacturer to buyer, it can be identified exactly where the problem in the supply chain lies. This can help counter fraud and prevent deaths due to counterfeit drug consumption.

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Blockchain applications in supply chain can also ensure drug safety which environmental conditions may threaten. As medicines need to be at a certain cool temperature, it can be disastrous for shipments if, perhaps, the AC unit fails, and the driver is oblivious to the problem. With all medicine units on the blockchain, alerts could be issued whenever the temperature falls below a certain level or for other environmental conditions so that human intervention could fix the problem.

Automotive supply chain

It is predicted that blockchain applications in  supply chain are set to take over the entire automotive marketplace. Ownership, payments, financing, production, and tracking are all set to be blockchain-ed soon. Looking at the blockchain applications in supply chain part of things, one of the biggest problems with the automotive supply chain is the counterfeit parts industry. As with counterfeit drugs, fake automotive spare parts can also be tracked using similar logic and features of the blockchain. At every step of the way, companies can track the parts they produce and sell so that customers get what they want.

Blockchain application helps in increasing the efficiency of the recall process as well. Since data about every car/vehicle produced is on the blockchain, it could be quickly identified when a shipped vehicle encounters a fault. This can be coded into a smart contract- with faulty parts triggering some clauses in the contracts, notifying the supplier to recall one or all units produced.

Another example where blockchain has helped overhaul the automobile industry is the cloud-based AutoDX, short for Auto Exchange Data. It is designed with the assistance from IBM and can handle invoices, purchases, and even transport requests. At present, more than 60 firms employ this system and plans are afoot to overhaul the general system onto a one that works on an intelligent blockchain network.

The reason for this is extremely clear – when automobile makers and component manufacturers are brought onto the blockchain, it brings a clear end-to-end supply chain visibility for everyone involved, which, in turn, improves the overall efficiency of the supply chain. Using the AutoDX platform, a purchase order from an automobile manufacturer is docked into its component marker’s system. The moment this is accepted, a sales order is automatically created without human intervention.

AutoDX has successfully been able to shave off a large chunk (approximately 80%) of the vendor management, invoices, and supply chain management costs which accounted for 1%-5% of total costs.

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Maersk and IBM: collaborative efforts

Two giants, Maersk and IBM, announced their joint efforts to use blockchain applications to revolutionize supply chain management in January 2018. The companies have been working together for several years, and this was how they made it formal and official. Other partners of the project include DuPont, General Motors, and Tetra Pak. Federal organizations have also shown support, including bodies such as the US Customs and Border Protection, and the Customs Administration of the Netherlands.

The Maersk-IBM joint venture aims at commercializing-

  1. Paperless trade. The amount of paperwork involved in the supply chain is too much and unnecessary. The joint venture aims to eliminate the need of paper for contracts, agreements, and other documents, by digitization of all contracts, into smart contracts, perhaps.
  2. Shipping information pipeline. This enables everyone involved in supply chain management to seamlessly exchange information, as the chain is visible openly to anyone on the network. Transparency is what the supply chain needs, and that is what it’ll be getting.

The project is aimed at providing value to every stakeholder in the supply chain, be it suppliers, retailers, producers or transporters. The project is still awaiting regulatory approval but is certainly a step in the right direction when it comes to blockchain applications in supply chain management.


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Blockchain-enabled Smart Contracts for Efficient Supply Chain Operations

Blockchain technology has introduced the concept of smart contracts, self-executing contracts with predefined rules encoded directly onto the blockchain. In the supply chain sector, smart contracts have the potential to revolutionize operations by automating and streamlining various processes. Here’s how blockchain-enabled smart contracts enhance efficiency in supply chain operations:

1. Automated Order and Payment Processing

Smart contracts facilitate automated order processing in the supply chain. Once predefined conditions are met, such as shipment delivery or quality inspection confirmation, the smart contract automatically triggers the payment to the supplier, reducing the need for manual intervention and accelerating the payment process.

2. Real-time Tracking and Transparency

Blockchain-based smart contracts enable real-time tracking of goods along the supply chain. As each transaction or movement of goods is recorded on the blockchain, stakeholders can trace the journey of products from the point of origin to the final destination. This transparency enhances accountability, reduces delays, and minimizes the risk of fraud.

3. Improved Compliance and Auditability

Smart contracts enforce compliance with predefined rules and regulations throughout the blockchain applications in supply chain. By recording all relevant information on the blockchain, auditing becomes more straightforward and less time-consuming. This ensures all parties adhere to contractual obligations, fostering trust among supply chain participants.

4. Supply Chain Coordination and Collaboration

Smart contracts promote better coordination and collaboration among supply chain participants. When all stakeholders share access to the same data set on the blockchain, they can make informed decisions based on real-time information, leading to more efficient and coordinated operations.

5. Reduced Disputes and Discrepancies

By eliminating the need for intermediaries and automating processes, smart contracts reduce the likelihood of disputes and discrepancies. All parties involved have access to the same information on the immutable blockchain, minimizing misunderstandings and conflicts.

6. Cost Savings and Efficiency Gains

Blockchain-enabled smart contracts streamline supply chain processes, leading to cost savings and efficiency gains. With automated order processing, real-time tracking, and reduced administrative overhead, businesses can optimize their operations and allocate resources more effectively.

Blockchain-enabled Smart Contracts for Efficient Supply Chain Operations

Blockchain technology has introduced the concept of smart contracts, self-executing contracts with predefined rules encoded directly onto the blockchain. In the supply chain sector, smart contracts have the potential to revolutionize operations by automating and streamlining various processes. Here’s how blockchain-enabled smart contracts enhance efficiency in supply chain operations:

1. Automated Order and Payment Processing

Smart contracts facilitate automated order processing in the blockchain applications in supply chain. Once predefined conditions are met, such as shipment delivery or quality inspection confirmation, the smart contract automatically triggers the payment to the supplier, reducing the need for manual intervention and accelerating the payment process.

2. Real-time Tracking and Transparency

Blockchain-based smart contracts enable real-time tracking of goods along the supply chain. As each transaction or movement of goods is recorded on the blockchain, stakeholders can trace the journey of products from the point of origin to the final destination. 

3. Improved Compliance and Auditability

Smart contracts enforce compliance with predefined rules and regulations throughout the supply chain. By recording all relevant information on the blockchain, auditing becomes more straightforward and less time-consuming. 

4. Supply Chain Coordination and Collaboration

Smart contracts promote better coordination and collaboration among supply chain participants. When all stakeholders share access to the same data set on the blockchain, they can make informed decisions based on real-time information, leading to more efficient and coordinated operations.

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Master the Technology of the Future – Blockchain

Blockchain applications in supply chain in the supply chain can result in benefits, and even though it is still in its initial stages, the potential for a supply chain revolution is huge.

To become a blockchain developer and build smart contracts and chain codes, check out IIIT-B & upGrad’s Advanced certificate program in blockchain technology.

Profile

Radhika Maloo

Blog Author
Radhika is Senior Program Manager of the Emerging Technology Vertical at UpGrad. Previously, she has worked for organisations like BCG and Government of India. She's an alum of London School of Economics and Political Science.
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Frequently Asked Questions (FAQs)

1What is a supply chain?

A supply chain is a complete system for manufacturing and delivering a product or service, from the initial acquisition of raw materials through the final distribution of the product or service to end-users. The supply chain diagrams all aspects of the manufacturing process, including the activities that occur at each level, human resources, information that is exchanged, natural resources that are turned into usable products, and other components that go into the final product or service. The importance of precisely drawing out the supply chain stems from the fact that it assists a company in defining its own market and determining its future direction.

2What are the advantages of Blockchain?

The usage of blockchain technology is beneficial for a variety of reasons. Blockchain is a technology that is decentralized. The network is not solely dependent on a single entity. Instead, each node maintains a copy of the ledger and contributes to the Blockchain network's upkeep. A blockchain's data cannot be changed or modified. When a transaction is entered into the ledger, it is saved indefinitely. Because Blockchain is hard to hack, it ensures data security. Blockchain relies on consensus mechanisms to function. A consensus algorithm is a method for all nodes in a Blockchain network to agree on the current state of the distributed ledger.

3What are the components of Blockchain?

A blockchain is made up of several components. The first is the node within the blockchain architecture, which is the user or computer. Then there's the transaction, which is the blockchain system's smallest building block. The block is the most essential component since it is used to keep track of a collection of transactions that are transmitted to all nodes in the network. The chain, which is the succession of blocks, is another crucial component of Blockchain. There's also a component called miners, which defines specific nodes that do block verification before adding them to the blockchain structure. Finally, there's the consensus protocol, which consists of a set of rules for conducting blockchain activities.

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