The Coronavirus pandemic has exposed a weak link in the supply chain: dependence on a sole area of manufacturing. Soon, another issue came to light: the lack of flexibility of the supply chain when quick fixes are needed. In light of these two issues, and as a safeguard for the future, the world of logistics has to change. And the key ingredient of this change could be blockchain.
How Can Blockchain Transform the Supply Chain?
We wrote about the future role of blockchain in logistics and supply chain two years ago. Back then we shared a few theoretical ideas – a version of Einstein’s thought experiment. But now the future is here and companies worldwide are forced to make a tough choice: speed up innovation or go out of business.
It is not just an idea of the Logistic Packaging team. The same opinion was recently shared by the World Economic Forum. The organization believes that supply chain needs to be reinvented in the wake of the current disruption. Digitalization is the key solution for staying in business in a world were social distancing will remain a norm to an extent.
Why Is Blockchain a Potential Solution to Rebuilding the Supply Chain?
We are still, in many ways, a paper-based economy. While we communicate by live chat or email, our contracts and agreements are still on paper, with handwritten signatures and stamps applied on them.
At the same time, every phase of the supply chain is accompanied by printed documents. Merchandize needs paper based documents to exit a country, go aboard a ship, get unloaded, pass through customs and be accepted by the customer. These papers get stamped and signed at every step of the journey. In the current conditions, these procedures take a lot of time, or cannot be performed at all.
This is where blockchain and other smart technologies can help. These are no longer theoretical concepts. They are tested and proven realities, adopted by a growing number of industries, from reputable financial institutions to innovative hi-tech companies, like Ripple or IBM.
Ways in Which Blockchain and Smart Tech Can Improve the Supply Chain
While some of the ideas below have already been tested, others are suggestions made by logistics experts.
1. Smart Contracts Improve Visibility and Flexibility across the Supply Chain
Smart contracts or digital contracts are already in use by fintech companies. These are paperless agreements, with the same binding force as traditional contracts. Instead of written signatures, the parties use digital signatures, which are more secure and tampering proof.
Smart contracts can be negotiated and signed from any corner of the globe, without a single meeting in person, between as many parties as needed. This is something extremely beneficial for the supply chain, where producers, distributors, shipping companies and retailers are working together to move merchandize from the manufacturing facility to the store shelf.
As each change and each addendum made to a smart contract is updated in real time for all the parties to the contract, this means that disruptions can be easily identified and mitigated.
2. Merchandize Traceability Boosts Customer Trust
Customers want to know where the products they buy come from. They want to know whether the raw materials are ethically sourced. They want to know all the ingredients in food products.
It is nearly impossible to print all these data on a label. With blockchain technology, the customer can use their mobile phone to scan a QR code and find out everything about the product, starting with the place of origin and going through all the processing phases.
3. Improved Security in Data Sharing
So far, blockchain has never been hacked – and not for lack of attempts. The principle it is built on prevents this from happening: data is stored on various nodes across the internet, and every new change is analyzed against the rest of the nodes for validity.
This means that key players across the supply chain can share information without the risk of seeing their confidential data leaked to unauthorized parties. In this way, the supply chain becomes more flexible. For instance, a manufacturer can share their extra stock of specific products, and a retailer looking for those products, but unable to find them at their traditional suppliers, can access this new source of merchandize.
4. Faster Payments
The circulation of money keeps the supply chain working. When a disruption occurs, it affects every aspect of the supply chain – including payments.
One of the major advantages of blockchain is that it does not depend on traditional money transfer mechanism. It does not use banks and wire transfer protocols. Instead, the operation is performed in real time. At the precise moment when an amount is debited from the payer’s wallet, it is credited to the receiver’s wallet.
The Logistic Packaging team is working hard to provide all our clients with the packaging materials and logistic solutions they need to keep their supply chain going. We encourage you to contact us by email or live Skype chat for any inquiries about our products!