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Will the Blockchain Technology Bring a Change in Your Supply Chain?

May 30, 2017

An end consumer, who picks up a shirt off the rack or orders a chicken burger, shows little or no interest in finding the source of the raw materials and ingredients, as he trusts the quality of the product he has purchased. But in the case of a manufacturer, the source of the raw materials and the supplier details are of utmost importance. The entire supply chain is a network between the suppliers and the organization which includes all the processes from procurement to manufacturing and distributing the final product to the end-consumer. Today, supply chain has become one of the most sought after functions of an organization, where every effort is directed towards making it more efficient and transparent. But how can this transparency be incorporated into the supply chain, that is already so complex in nature?

There’s one way how this can be possible.

Thanks to cryptocurrency, one of their underlying technology, blockchain, is all set to emerge as a market disruptor, changing and redefining the operations and economics of the supply chain industry across the globe.

Cryptocurrency and Bitcoin – What is So Cryptic About it?

Cryptocurrency can be defined as a form of digital currency that uses cryptography for security purposes, thereby eliminating the risk of counterfeiting. Basically, it is a digital cash system without a centralized entity governing it, with an incredibly complex coding system that encrypts the data, which means it is safe, anonymous, decentralized and its flow is determined only by the market demand.

Bitcoin, the original and most popular form of cryptocurrency, is a peer-to-peer network, that serves as a standard currency in the cryptocurrency industry. Recently, through the WannaCry ransomware attack across the globe, the cryptoworm attacked the Microsoft Windows operating system, encrypting data and commanding ransom payments ranging between $300 to $600 in cryptocurrency bitcoin. As a result, its value has crossed the $650 mark with a heavy increase in the number of its daily transactions.

Blockchain Technology – The New Wave in Supply Chain

A blockchain is a digital database or a ledger of records arranged in batches called as blocks, encrypted so as to link themselves together, creating a new record or block every time a new transaction or update takes place. It can be accessed by multiple parties with an enormous level of confidence and security, thereby increasing the security and efficiency of transactional information exchanged, aided by a hashing function which forms an unbroken chain in the digital database. It provides a transparent environment thereby preventing money laundering and securing activities such as international payments. This can benefit the supply chain and procurement function of an organization in the following manner,

  • As blockchain permits access to update the data and information, this enables real-time supplier validation and compliance related activities.
  • It will enable the management of invoice payment and validation minus the requirement of a third party reconciliation.
  • Blockchain can integrate smart contracts automatically facilitating better management and verification of SLAs.
  • It can be leveraged for tracking supply chain through real-time intelligence and predictive analytics thereby predicting its future movements in the market based on historical data.

The core benefit for B2B market is that the blockchain technology will facilitate the identity assignment to both organizations and products and change the global supply chains by enabling transactional and payment transparency between two or more organizations. Will it change the way existing supply chains function or will it block the logistics and procurement pipeline, only time will tell!

At SpendEdge, our experienced team of procurement analysts backed with in-depth knowledge across various industries can assist you to derive actionable insights that will help you bridge the gap between being a market player to a market disruptor.

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