In a context in which supply chains are increasingly complex – they cross multiple countries with different regulations, must meet demanding regulatory requirements in terms of temperature, quality and delivery times, and are turning towards sustainable business models – the challenges seem to multiply towards infinity.
But one technology is on the horizon to provide a solution to this: blockchain. The inviolable and unalterable digital records used in transactions involving multiple parties ensure that everyone involved has the latest information available in real time and that any movement that has been recorded cannot be erased or modified. Two of its great qualities, end-to-end traceability and transparency, make it ideal for supporting intelligent supply chains: from the moment of production through intermediate storage, border crossings and shipments, to the delivery to the end customer, every item can be tracked and managed.
The result? Maximum efficiency, minimized human error and clear, single visibility into how each party involved asserted its rights and fulfilled its obligations. This eliminates all types of friction.
End-to-end benefits
Moreover, to the extent that legislations allow it, the gradual adoption of smart contracts, which also have blockchain technology at their core, will have a direct impact on the cost of products: it will make it possible to eliminate intermediaries and the huge volumes of documentation that is currently processed and managed – including the payment of taxes and fees that vary drastically from border to border and may show differences depending on the type of product.
It will also avoid the costs currently incurred in resolving disputes between parties in the event of non-compliance with conditions or deterioration of goods, since responsibilities will be clear at all times. Another benefit is the avoidance of fines due to errors in documentation or tax assessments.
In some specific industries, such as the transportation of food or medicines, blockchain is essential to ensure that everything that is transported is in good condition and, in the event of a problem, to analyze the backward traceability to verify where it could have been triggered.
A technology with potential
The adoption of blockchain in supply chain provides benefits to everyone, from large corporations to SMEs supplying inputs or transporters, customs brokers and security companies in charge of protecting cargo or insurers, since the ability to accurately track the location and status of products, as well as the route to be followed and the next stops, is information that can be used to minimize risks.
Although this technology is still taking its first steps with one-off implementations, its potential is huge: according to the market research consultancy, Markets & Markets, this is a solution that is growing at over 50% per year. By 2020, investment in blockchain solutions applied to supply chains had reached US$253 million. By 2026, the number will have grown to US$3,272 million.
What remains to be done? In addition to the aforementioned regulatory frameworks that enable the digitization of the cross-border passage of goods, there is also a need for greater maturity in the standards associated with this technology.
Beyond these barriers, the horizon is clear: the arrival of blockchain to supply chains brings efficiency, traceability, transparency and potentially lower costs: everything that companies and consumers demand in this new digital economy.