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Beyond Finance: How Blockchain and Distributed Ledger Technology Are Transforming Supply Chain Management

Yuuma Nakamura by Yuuma Nakamura
January 24, 2025
in Blockchain
0

FintechZoom > Cryptocurrencies > Blockchain > Beyond Finance: How Blockchain and Distributed Ledger Technology Are Transforming Supply Chain Management

When blockchain is mentioned, the first association made is usually with cryptocurrencies, with it being the underlying framework for the likes of Bitcoin. However, in reality, this technology has been continually developing and it now has influence way beyond finance. Just one of the sectors benefiting from what blockchain offers is supply chain management. Here, distributed ledger technology (DLT) is allowing for improvements in areas such as transparency, security, and efficiency. The impact is that businesses are taking an entirely new approach to how they manage logistics, interact with suppliers, and ensure the authenticity of products.

As you read on, we’ll be looking at this in much more detail. We’ll be considering how blockchain works, the challenges faced by the traditional approach to supply chains, as well as considering other uses.

Understanding Blockchain and DLT in the Supply Chain

Before we look at their specific application, it’s worth taking the time to understand just what blockchain and distributed ledger technology involve. With blockchain, this is best described as a decentralised ledger. It records transactions across multiple nodes in a network. Traditional databases are centralised and this makes them vulnerable to tampering whereas, being decentralised, all transactions are secure, verifiable, and transparent.

DLT technologies are decentralised databases, but they do not always use blocks to store data. Blockchain is one type of DLT but not all DLTs are blockchains. When it comes to supply chain management, what makes blockchain and DLT standout is the fact that they are able to foster trust and also reduce friction among stakeholders. 

The Challenges Faced by Traditional Supply Chains

The reality faced by modern-day supply chains is that they are extremely complex. They involve numerous intermediaries, worldwide networks, and extensive documentation. Bringing all of this together has led to a range of challenges, such as:

  • Lack of transparency: When considering traditional supply chains, these rely on siloed systems. These make it almost impossible for stakeholders to access information in real-time. This leads to inefficiencies that can cause delays and a lack of trust.
  • Fraud and counterfeiting: The industry of counterfeit goods costs businesses billions of pounds every single year. Sectors that suffer greatly here are pharmaceuticals and luxury goods, with the former able to pose a risk to life.
  • Inefficiency: Inefficiencies caused by paper-based systems and redundant processes only lead to increased costs. With manual interventions and fragmented systems, there are bigger risks of errors and slow operations.
  • Environmental concerns: Consumers and regulators demand sustainability, but current supply chain management means that there’s no accurate data to track this. Action here can only be taken when there are reliable metrics.

With blockchain and DLT, these challenges can be addressed. This is done by introducing a shared, immutable ledger that is a single source of truth for all involved. This approach leads to massive improvements in terms of trust, efficiency, and sustainability. 

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Key Applications of Blockchain in Supply Chain Management

There are several applications to consider here. Let’s take a look at these now:

Enhanced Transparency and Traceability 

Perhaps the biggest contribution that blockchain offers is its ability to improve traceability. Every transaction is recorded on a blockchain and is timestamped and immutable. This means that all stakeholders are able to trace the entire journey a product makes, from source to consumer. As an example, food supply chains are able to use blockchain to track produce from farm to table, and this leads to the best levels of freshness, as well as the verifying of organic claims.

One of the strongest examples of this in practice can be seen via the partnership that Walmart has with IBM Food Trust. Through the use of blockchain, Walmart can trace the course of foods in a matter of seconds. This means that contamination risks are reduced and when recalls are necessary, they can be dealt with far quicker. 

Combating Fraud and Counterfeiting 

Counterfeit goods have long been an issue, with pharmaceuticals, luxury goods, and electronics being especially vulnerable. Thanks to blockchain’s tamper-proof qualities, it’s possible to ensure that product data, including certificates of authenticity and manufacturer details, are now accessible and secure. This means that all stakeholders are able to verify the legitimacy of products at speed and with ease.

Companies such as Pfizer, in the pharmaceuticals sector, are now experimenting with blockchain as a way to challenge the circulation of counterfeit drugs. With each step of the production and distribution process recorded, blockchain can ensure that only genuine products ever make it as far as consumers. The benefits here are huge, especially when you consider the risks that come with counterfeit medication that escapes the usual regulations.  

Streamlining Documentation and Smart Contracts 

If you’re familiar with supply chains, you’ll already know that they have a huge reliance on documentation. This includes the likes of invoices and customs declarations. With blockchain, this can all be simplified by digitising documents. This makes them accessible to all parties and also reduces the risk of any errors being made.

Smart contracts streamline the process even more. These are self-executing agreements that are stored on a blockchain. As just one example, a smart contract could automatically send payment to a supplier once the goods have been received and verified. This does away with the need for manual intervention and does away with any potential disputes. 

Improving Sustainability 

Sustainability is something that matters more and more to consumers. They will judge a business on this and it’s easy to lose customers quickly if they can’t demonstrate a commitment in this area. With blockchain, businesses are able to provide end-to-end visibility into how the supply chain has impacted the environment. This means that consumers get a clear picture and businesses can build trust and legitimacy.

Right now, the fashion industry is using the features offered by blockchain so that it can track the use of sustainable materials. The likes of Patagonia are using this technology so that it can verify that raw materials have been ethically sourced and this gives consumers the ultimate when it comes to levels of transparency.  Blockchain can also be used to document the recycling process. It can demonstrate the lifecycle of a product and encourage better practices. 

Real-World Examples of Blockchain in Action

We are already seeing industries tapping onto what blockchain can offer in terms of supply chains. Some more notable examples include:

  • Maersk and IBM’s TradeLens: This is a blockchain-based platform that streamlines global shipping. It does this by digitising documentation and boosting visibility for all parties in the supply chain. Numerous ports and carriers have adopted TradeLens and this has seen significant impacts on efficiency.
  • Provenance: Here, businesses can share the story of their products with consumers. It allows consumers to see every step from sourcing to sale. Right now it’s been used in industries such as food and fashion.
  • Everledger: Used to track diamonds, Everledger ensures that sourcing is conflict-free and that the risk of fraud is reduced. For anyone seeking ethically sourced diamonds, the use of Everledge provides the standard that needs to be met. 

The Future of Blockchain in Supply Chain Management

Blockchain technology is still maturing and, as it does, the role it plays in supply chain management will only grow. Just some of the emerging trends that can be seen include:

  • Integration with IoT: When blockchain is combined with the Internet of Things devices, real-time tracking of goods is possible. This leads to enhanced visibility and efficiency. As an example, IoT is able to record data relating to temperatures of perishable goods and all of this information can be securely stored on a blockchain.
  • Decentralised Finance (DeFi): If you examine supply chain financing, there are real opportunities to benefit from DeFi solutions. These can lead to payments that are faster and more transparent. If businesses leverage what blockchain has to offer, they can access working capital in a more efficient way and reduce financial bottlenecks,
  • AI and machine learning: When AI and blockchain are combined, predictive insights are possible, such as demand forecasting and risk assessment. The use of these technologies can help businesses to adapt whenever market conditions change.

Aside from these, there are also industries away from supply chain management that are now exploring the benefits of blockchain. Crypto casinos, such as Bety, are tapping into this technology so that they can also offer enhanced levels of security and transparency. This highlights the fact that blockchain has almost limitless uses. 

Final Thoughts

Supply chain management is being transformed by blockchain and distributed ledger technology. They are allowing long-standing challenges to be dealt with while also bringing whole new opportunities. With improvements in traceability, the ability to combat fraud, and chances to enhance sustainability, it’s clear why these technologies have so much to offer.

Industries are still exploring the exact benefits that blockchain can bring to supply chain management, but it’s clear that the influence will be beyond significant. This technology is still in its early days and the future is certainly bright.

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Yuuma Nakamura

Yuuma Nakamura

Yuuma Nakamura is a staff writer covering crypto, blockchain, metaverse, tokens, stablecoins, bitcoin, ethereum and other crypto technology for FintechZoom. In addition to his previous experience, Yuuma also participated in the prestigious "Blockchain and Money" course offered by the Massachusetts Institute of Technology (MIT) in 2022. This rigorous course provided him with a deeper understanding of blockchain technology and its applications in the financial sector. Contact: [email protected]

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