Blockchain and IoT can massively transform supply chain management.
As a customer, we often order many items online, and wait for its delivery at our doorstep. For the e-commerce portal delivering the product, it has to be an efficient supply chain, to make this delivery possible without any undue delay.
A supply chain is essentially just a network between the company and its many suppliers to produce and distribute the products, and it includes all the steps that are taken to make the product or service reach its final recipient – the customer. Each company that is distributing goods in the market, has its own supply chain, and it is the effectiveness of this chain that gives certain companies the edge over their competitors.
The international market for supply chain management solutions is estimated to reach $32.4 billion by 2026 at CAGR 11 per cent from 2018. This incredible rise is attributed to the high demand caused by e-commerce companies to gain a competitive edge over their rivals. However, the traditional supply chain management has its own limitations. Some of the key problems faced by them are the lack of end to end visibility, inefficient models and poor response times due to multiple intermediaries, etc. To rise above these issues, many companies have moved to solutions enabled by technologies such as the Internet of things (IoT) and Blockchain technology. In fact, IoT is estimated to create $1.9 trillion market alone for supply chain and logistics, according to a joint report by Cisco and DHL. This is the enormous impact that these two technologies can have in this domain.
The arrival of globalisation changed the production and distribution patterns from earlier times. Currently, enterprises globally have shifted their manufacturing operations to those countries where the labour cost, taxes and cost of transporting raw materials are lower. These outsourcing practices have extended the company’s procurement network. Now, since the suppliers are spread over various geographical locations, it has complicated the supply chain. Companies need to contact, collaborate and deal with the suppliers across borders with respect to manufacturing, logistics and warehousing. This often complicates the task of supply chain management (SCM).
It is to deal with such issues that IoT and blockchain are currently seen to be the most promising technologies that can solve supply chain problems.
In essence, blockchain is a digital distributed ledger technology that has applications in banking, finance, supply chain and its viability is being explored in other sectors. Blockchain makes processes traceable since all the transactions are recorded over copies of ledger in the form of blocks, which is distributed over numerous nodes and also makes it secured since every new block is linked with the preceding blocks in form of a chain. Eventually, a blockchain can increase the efficiency of supply chain and manage tasks that can include storing data and making payments.
The way IoT works is it connects processes, data and things using sensors and devices. It has the capability to connect to a network and send and receive data. For example, if all the inventories at a retailer are tagged, it would provide visibility into the stock levels at the store by which enterprises can plan when to replenish the stock which ultimately would avoid revenue losses. IoT also enables the demand for goods to be tracked from the distribution centres to across geographies.
These are some of the ways in which transparency and traceability in the supply chain can be improved by adopting these two technologies.
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Author – Aval Sethi, Founder