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How Blockchain Is Revolutionising Procurement And Supply Chain In India

How Blockchain Is Revolutionising Procurement And Supply Chain In India

Efficient management of procurement and supply chain systems is crucial for business operations

Businesses have acknowledged the importance of digital transformation to revamp their supply chain systems

Blockchain adoption is gaining traction and the momentum will sustain through the new decade

The procurement and supply chain industry is infamous for the complexity of the processes involved in keeping it functioning smoothly. Inefficiencies in data flow and the fact that systems are seldom integrated with very little interoperability often result in the creation of data silos. Despite sizeable investments in digital technologies, most companies still have limited visibility about the movement of goods and produce across their supply chains.

The culprit, in most cases, is the gap that exists between the systems in use within organisations and those across organisational boundaries. Companies are using electronic data interchange (EDI) and XML messaging to maintain the flow of information across their networks and outside company boundaries.

But the point-to-point messaging system has its flaws as data flow is not seamless across different departments.

Efficient management of procurement and supply chain systems is crucial for business operations, and an inefficient supply chain can severely impact the bottom line of the company. How can an organisation revamp its outdated supply chain systems? How can it track the source of the produce and ascertain the credibility of its vendors? More often than not, business leaders are perplexed by these questions. These are not easy questions to answer.

New age customers are more vigilant and vocal in raising concerns over product quality and authenticity. This has created the demand for greater clarity over the product’s origin and journey. Most organisations find it challenging to answer these concerns due to the notoriously complex supply chain systems that they have in place.

Blockchain technology has the potential to transform the way companies go about their supply chain management. While adopting new technology and driving change in legacy processes can be a bit overwhelming, the risk of delaying these improvements can prove to be costly. With the emergence of distributed ledger technology, procurement and supply chain leaders have started exploring applications built on blockchain to gain operational efficiencies and enhance the productivity of their teams.

Explaining Blockchain

Blockchain is a fascinating new technology that has quickly grown in popularity since its origin a decade ago. With all the hype and debate about cryptocurrency and blockchain, people sitting on both sides of the fence have plenty to argue about.

However, one aspect that all parties would unanimously agree upon is the sheer usefulness of this technology – the most significant innovation since the internet. Interestingly, blockchain technology has disrupted every industry, be it retail, healthcare, or manufacturing, and it is expected to transform the lives of almost everyone on the planet within a few decades.

Blockchain technology started almost a decade back as a platform on which cryptocurrencies function.  According to Don & Alex Tapscott, authors of Blockchain Revolution (2016), “The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”

Utilizing a sophisticated algorithm, it provides the security needed to transfer digital assets anonymously while keeping a log of information safe. With the use of an immutable distributed ledger, all the participants of a blockchain network can have access to the same information. Additional information can be added, but the original data cannot be altered. Transactions are recorded on the distributed ledger with the consent of most of the blockchain network participants.

Blockchain And Supply Chain: A Match Made in Heaven

Businesses have acknowledged the importance of digital transformation to revamp their supply chain systems and reap the benefits of emerging technologies. Manual processes are resource-intensive, prone to human error and have sky-high operational costs. Digitization and process automation is necessary for seamless integration with blockchain networks.

How can blockchain technology benefit complex supply chain management systems? Well, to benefit from this digital transformation, procurement and supply chain management needs to become more agile and resilient. 

Supply Chain Implementations On The Blockchain

*Shanghai and Guangdong, the two busiest ports in the world, doing a business of almost 1.5 trillion annually, are using blockchain technology to streamline the process while ensuring the legitimacy of any ships entering or exiting ports.

*According to the World Economic Forum, streamlining information through blockchain has the potential to increase trade by 15%.

By leveraging blockchain technology, Farmer connect and IBM is partnering with coffee manufacturers and brands to establish efficiency and fairness in the coffee supply chain, and to meet customer expectations around the traceability of each bean from farm to factory.

MediConnect blockchain solution removes counterfeit medication from circulation and simplifies its distribution to pharmacies.

Implementing Blockchain Logic Within Supply Chain

By utilising blockchain-enabled industry solutions, inefficiencies and financial sustainability issues in procurement and supply chain management systems can be simplified and addressed adequately. Blockchain technology allows information to be updated almost instantly and it can be tracked in real-time. Separate points in the chain allow for spotting the current location of the shipment along with its condition and size.

With the availability of this information in advance, a vehicle can be reserved and space can be allocated within the warehouse to accept delivery of the goods. Moreover, smart contracts can be created to manage the multi-step procure-to-pay process with global vendors.

These contracts can be used to automate certain functions that will enhance efficiency. For instance, smart contracts can be used to automatically pay out vendors once the three-way matching of goods receipt, invoice and purchase order has been completed.

Creating Supply Chain Vision

Blockchain adoption is gaining traction and the momentum will sustain through the new decade. But distributed ledger technology is not the panacea that can eliminate every environmental and ethical issue that supply chain professionals face.

Factors such as the lack of interoperability and standardization are responsible for the slow adoption of blockchain technology. To leverage blockchain technology efficiently, it is crucial to first digitally transform the organisation by building scalable and stable systems. Once the supply chain system is digitised with the creation of information highways, it becomes much easier to employ blockchain-based technology solutions.

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.