How the Blockchain Can Help Solve Problems in the Supply Chain


E-commerce has been a boon to small, medium-sized, and big businesses alike.

While sales figures and profit margins are what make the news, the supply chain – made up of the producers of raw materials, manufacturers, shipping companies and courier services – often gets forgotten. The boom in online retail has helped sustain many economies through difficult times, but it’s also put a huge strain on supply chains.

E-commerce companies ship tens of billions of packages each year all around the globe. That’s a considerable logistical challenge on top of the traditional movement of goods and materials. It’s no longer uncommon for online sales to outstrip purchases from physical stores during peak buying periods such as Christmas, Thanksgiving, and Halloween.

While the supply chain system hasn’t broken down, many will tell you that it’s struggling to keep pace, not only with the increased volume but with the rapid rate of expansion in trade. One of the most troubling side-effects is the increase in reported abuse of current systems by fraudsters, and an unsustainable level of wastage in supply chains. The answer to problems of this kind lies in better management, monitoring, rapid responses, and efficiency. But how do you achieve that?

Enter the blockchain.

While it originated to support the security and functionality of digital currencies such as Bitcoin, Ethereum, and Ripple, the blockchain has proved its usefulness across the spectrum of online trading technologies. For the shipping industry and the supply chain as a whole, it could be a lifesaver.

As regulation and security requirements tighten, the supply chain must respond without raising costs beyond a competitive level. AI (artificial intelligence) and the IoT (the Internet of Things) are already providing traceable, real-time data on goods in transit. The role the blockchain plays in securing this data in its decentralized ledger supports compliance, security, accountability, and cost efficiencies end-to-end.

The blockchain was always about security. Its ledger provides an immutable, publicly accessible record of transactions. Everyone with a stake in a given industry can access the data stored in the blockchain. Increased transparency and accountability minimize the risks of fraud and abuse, while simultaneously building trust and efficiently boosting functionality.

Any supply chain is a complex structure which needs to be both flexible, fast, and robust.

The blockchain allows for smart contracts (digital protocols which automate payment and logging transactions) to be embedded into the system. This in turn boosts security, traceability, and speeds up otherwise time-consuming transactional processes. Contractors are compensated immediately when their obligations are fulfilled, and suppliers can monitor and adjust stock flows in real-time.

E-commerce and a global trading economy are here for the foreseeable future, despite local political and economic disruptions and global crises. As the virtualization of industry and commerce continues apace, the supply chain needs to find and implement solutions as fast as possible. All current indicators suggest the answer to this need lies in the blockchain.