Why Supply Chain Management Needs Blockchain

Why Supply Chain Management Needs Blockchain

Blockchain in Operations & Supply Chain Management

Organizations are just as solid as their value or supply chains. Producers to run at a powerful and effective capacity, need to empower ordinary and solid data offering to their value chain partners — the suppliers, logistic companies, certification companies, service providers, purchasers that help their organizations. This information is recorded manually, such as documents, point to point communications increasing complexity, time, and expenditure, which reduces the efficiency of the organization. In an unalterable and unchanging manner, it allows parties to allow business transactions without modifying across the network.

However, Blockchain enables varied business applications while completely transforming value chains of organizations. In an unalterable and unchanging manner, it allows parties to allow business transactions across the network. It also provides controlled access to every partner in the chain a shared copy of the same data, which ensures that it enables an approach to secure, fast information exchange across the value chain.

It is believed that there are three ways in which a blockchain will be used in operations management-

  1. Re-engineering of the process – Blockchain will remove data storeroom and duplicity in processes which will enable manufactures to rebuild how they will interact with and act on shared data.
  • Productivity and quality enhancements – As the data will be mutualized via Blockchain, manufactures and their partners are in complete sync, and there is no need for duplicate data- thereby eliminating one-off data updates, exceptions and reconciliations.
  • Increased transparency – Blockchain will provide a platform where there will be real-time sharing across all the parties, which will lead to an increase in trust, knowledge and hence will give transparency.  

Applications where Blockchain is being implemented and provides benefits to manufactures are –

Supply Chain Optimization

The key for effective coordination of supply chains is basically the accurate data about inventory levels, the status of goods, tracking of shipment, payment processes etc. the risk of fraud and non-compliance is also reduced when companies leverage Blockchain’s improved trust, track ownership and streamline the manual process. Also, raw materials, products can be effectively tracked, better forecasted with shared data across the value chain, and it can enable real-time cross-company planning and decision synchronization. Distributed ledger technology known as DTL gives a single version of truth by establishing a trust. Distributed ledger establishes a system that traces the detailed transactions relating to any item required by participants to trust with cryptographic security and defines shared access.

Risk Reduction

Blockchain gives exact and dependable data for screening new merchants and providers. Merchant’s and provider’s profiles made on the Blockchain can be made on Blockchain to productively allow access to make decisions improving speed, ease, and risk of doing business with a company.


This case study talks about how Walmart with the help of IBM other prominent players in the food industry like Nestle, Dole, Golden State Foods, McLane Company, Kroger, and Unilever to set up IBM Food Trust after an outbreak of foodborne disease, E.coli virus in Chipotle stores in 2015 with 500 reported cases 43 restaurants were closed with an 80% drop in Chipotle’s Profit.

Challenges in any traditional supply chain are –

  • Poor communication across multiple parties
  • Low traceability of individual items
  • Variable quality for different food items
  • Wastage
  • Health implications – possible infestation/contamination by toxins, insects, bacteria, viruses, Spoilage/Expiry of the product due to temperature, humidity, etc.

Walmart, together with IBM, started two projects on Blockchain and IoT sensors to implement a food traceability system based on Hyperledger Fabric. These shipments were tracked by signing and logging at multiple checkpoints using six-digit IoT numeric identification.

Project 1 – Tracing mangoes from Mexico to be sold in US stores and the time to trace the origin of mangoes reduced from 7 days to 2.2 seconds.

Project 2 – Tracing Pork sold in China stores where food safety was always violated and was never up-to-date. Walmart was able to successfully trace pork products from the producer to the retailer to the consumers.

 In 2018 Walmart successfully traced around 25 products from different suppliers using Hyperledger Fabric which would contemplate the whole supply chain in seconds.

Demistifying Blockchain

Blockchain is a chain of blocks, i.e. the digital pieces of information (the blocks) linked with by using cryptography and stored in a public database (the chain). It is an extremely disruptive technology helping several organizations in remodeling their business plan. Every block records information about the transaction like date, time, or the amount of purchase done from any website. It also records the information about the person who is making the transaction by using their digital signature (sort of username) and not an actual name and the name of the website.

Blockchain’s goal is to record and distribute different digital information; however, not edit them. It is an open ledger that can record the transaction between two parties efficiently and in a permanent way.

The first work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta.”

 The ledger is stored and maintained on a set of computers, anyone who has a device and a good internet connection can access the replicated ledger which is synchronized via the internet when the Blockchain is public. The main problem in the digital transactions was double-spending, and so to solve this problem without the need of a central server or trusted authorities, there was an invention of Blockchain by an unknown person (or a group of people) using the name Satoshi Nakamoto in 2008. Blockchain for bitcoin was the first digital currency to serve as the public transaction ledger of the cryptocurrency bitcoin.

How does the blockchain work?

A block is a collection of data like in a blockchain. Once a transaction is made and is verified. It gets a green light, and the computer network itself stores the transaction dollar amount, the digital signature of the buyer, and the digital signature of the website as a block. And this block will be added with the hundred or thousand others like it in chronological order.

A block is given a unique, identifying code called hash once the verification of the block is completed. The block is also provided with the hash of recent block added to the Blockchain. Once hashed, the block will be added with the other blocks forming a chain linked by using cryptography.

Advantages of Blockchain

Decentralized technology

Blockchain is decentralized by design in that the transaction ledger is stored and maintained on a distributed set of computers that can communicate with one another. The network does not have a single governing authority; preferably, a group of nodes maintains it. This can help avoid the need for a third party in transactions and maintain data transparency.

Data immutability

The blockchain technology is a permanent, unalterable network. One cannot modify the data in any node without corrupting all nodes in the network. This ensures data authenticity and can be used to fight corruption. This feature has significant use in cybersecurity.

Enhanced security

Blockchain uses encryption to store the data in blocks, which provides an additional layer of security. The technology uses cryptography in comparison with other existing technologies available in the market.

Faster settlement

This feature is mainly of use in areas like banking where traditional banking systems are quite slow in the processing of transactions and final settlement.

Increased capacity

Blockchain increases the capacity of the whole network. The computing power is distributed across the devices to ensure a better outcome. Supercomputers are used in the mining of blocks for the same reason.

Types of Blockchain

All the data was stored in on blockchain hyper ledgers fabric which was protected with high encryption. Once all the data was collected and stored in a safe place, all the data was leveraged to track food freshness, minimize wastage, longer product shelf lives, better access to shared information, etc. This solution brought back the trust of the customers in food supply chain as it allowed the customers to not only track the food ingredients but also check whether the food went through the required safety processing or whether the food item was truly organic or not in seconds.

There are three types of Blockchain –

•          Public Blockchain

•          Private Blockchain

•          Hybrid Blockchain

  1. Private Blockchain

A public blockchain can be accessed by anyone who has an internet connection and can send transactions to it and become a validator. They are fully transparent in transactions. They are highly censorship-resistant, and hence are difficult to shut down. The most popular and most extensive public Blockchain like Bitcoin and Ethereum.

  • Private Blockchain

These types of Blockchain maintain a closed network in which only authorized people are allowed to access the information. It grants specific rights and restrictions to the authorized people in a network. It is also referred to as Permission Blockchain. It is centralized are the control is in the hand of the participants only.

  • Hybrid Blockchain

 A hybrid blockchain is a combination of the privacy benefits of a private blockchain with the security and transparency benefits of a public blockchain. It allows the users of the Blockchain to determine what information stays private and what information is made public. It is useful for businesses that need flexibility.


Blockchain has not only been successful in reducing costs but is also equally feasible for small transactions. It is best to use in a crisis involving food contamination as tracking via IoT it has ensured easy identification of the source to remove only affected products in the item. It eliminated the burden of paper records and reduced the regulatory compliance costs by giving digitally signed contracts with encrypted storage and transmission. Blockchain has a unique set of characteristics that can improve the working, supply chain perimeters like dependability and risk reduction. It is certain of the transparency; hence, minimizes possibilities of frauds.

Read about Supply Chain Management.

Read about Smart Contracts: Here.

Read about Tokenization.

Read about Bonds Issuance on Ethereum: Here.

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