The Benefits of Decentralizing Supply Chain Management
Deploying Distributed Ledger Technology can improve supply chain management in countless ways. Supply chain management, as we have already noted, requires intensive data coordination. When critical information is disorganized, difficult to share across multiple locations, and payment processes are slow, decentralization is a beacon of hope for alleviating these paint-points. The flaws of the supply chain management web 2.0 systems we love to hate can be integrated onto the blockchain or a distributed ledger for fast and easy information sharing, counterfeit prevention, and enhanced customer experience. Decentralization works to eradicate needless bureaucracy and trim the fat of the supply chain to reimagine how we move goods from point A to point B.
Here are some of the main benefits of decentralizing supply chain management using distributed ledger technology and blockchains:
- Traceability and transparency
Blockchain helps to facilitate more transparent supply chain operations. Every time a product moves from one location to the next, it will be documented on the public ledger creating a not only transparency but also a trail to trace in the event of a recall. Customers will know exactly where their goods came from. This will also help support supply chain logistics allowing managers to track assets at any point in time.
Speaking of transparency and traceability, the distributed ledger supports real-time track. You cannot only locate the items you can also know what condition they are in. This reduces the opportunity for human error and adds to industry transparency.
Faster transactions mean faster supply chains. Blockchain technology has the potential to break Visa’s currently held record of about 10,547 transactions per second (tx/s). Speed is the most coveted, attractive feature for any payment platform. Objectively, the faster a blockchain can process a large number of transactions the better. Blockchain, as a technology, has more potential for scalability than Web 2.0 financial services, this makes transacting in cryptocurrency on the blockchain the faster option when compared with fiat. It not only becomes easier to make many small transactions; it is faster to move large amounts of money across the globe as well.
Instead of trusting that a product is authentic or that your item will be delivered on a certain date, you can know. Smart contract technology opens the doors for released payment automation; smart contracts can be used to hold payment between manufacturer and vendor or vendor and consumer in escrow. No party has to pay, trust, and wait. The money will only be released from escrow after the shipment has arrived, authenticated and as promised.
- Eliminates fraud and error
Certifying items on the blockchain can help save industries millions that would otherwise be lost to counterfeiting and fraud.
The immutable ledger is a more secure environment for data and facilitates improved accuracy. Decentralized networks are inherently more difficult to breach because there is no single point of entry for hackers to target. To launch a successful attack on a blockchain the hacker would have to perform multiple attacks from multiple devices all at once which requires more resources and expertise than hacking a server.
Decreased need for returns results in a reduced carbon footprint. Distributed ledger technology prevents errors and miscommunications from occurring during the shipping and distribution process. This means that shipping will happen only once, rather than twice or three times in the event of a mistake. Millions of items are returned annually all along the supply chain, adding to global carbon emissions. Improved logistics can also open the doors for more efficient shipping and storage, and therefore greener transport systems.
All of the previously mentioned benefits of decentralization help to reduce the overall cost associated with distributing and moving materials through a supply chain. Blockchain helps to prevent duplicate processes without sacrificing accuracy and security. Middlemen added onto supply chains for quality assurance and verification significantly add to the cost of doing business. With fewer people on the chain, more secure/reliable data, and faster overall operations, distributed ledger technology can considerably cut supply chain overhead.
Here are some additional perks of decentralizing supply chain management:
- Improved inventory management
- Lower courier costs
- Less paperwork
- Faster issue identification
- Happier customers
- More time to innovate better products