Block-chain technology in managing the supply chain

Introduction

Businesses and companies are facing challenges in managing their supply chain. As companies shift their operations towards globalization, the scope of their supply chain widens, making it more complex. With the expansion comes additional costs and information to the operations creating concerns about the integrity of the supply chain. The advent of block-chain technology seems like a viable solution to the emerging supply chain challenges. Companies are now integrating block-chain technologies into their current operations in managing information flow, which assists in validating the information and increasing the security and integrity of the supply chain. The following reading presents the challenges facing companies in their supply chain and how block-chain technology is a recommended solution to the issues. By analyzing the concerns within the supply chain uniquely, the paper concludes by recommending the block-chain as the best strategy to address the concerns.

Major Issues in the Supply chain

As an industry, the worth of the supply chain worldwide goes beyond $40 trillion annually. With such a high value, the stakes are high for companies in ensuring they are at par with international regulations with regard to how they conduct their supply chain activities. In addition, companies that have scaled to international capacities are vertically integrating since minimizing expenses and effectively managing information within the supply chain is core to boosting their competitive edge. Integrity within the supply chain is a prevalent issue troubling regulators and businesses globally. Information security within the supply chain is becoming a deep concern (Pan, 2016). Cyber-attacks to a company’s supply chain database are more complex and result in even a higher loss for businesses receiving vast information from global sources.  Businesses that fail to safeguard the transaction of information within the supply chain not only face a security risk, but they also risk ruining the trust of their consumers, suppliers, and producers.  In addition, the adoption of digitizing company records and transactions by most businesses resultantly creates concerns regarding managing their databases as well as securing communication.

Objectives for an improved supply chain

To address the concerns within the supply chain, a viable solution would be the one with objectives that seek to preserve the business’s reputation.  Among these objectives is the integrity of goods. An effective supply chain is one that upholds a business’s brand equity by ensuring reputational and operational integrity.  Customers are becoming more affluent as they seek more beyond a product’s functionality. The value proposition of a product is what now drives customers’ purchasing decisions. Businesses are hence seeking to integrate their entire supply chain from sourcing raw material to the retail store. Another objective is trust. Businesses seek to move away from an opaque supply chain that hides information from their consumers regarding their marketing claims (Pan, 2016). To build trustworthy relationships with their customers, companies aim to implement new strategies in their supply chain. Strategies that allow customers to see the company’s supply chain operations completely if they uphold health and environmental awareness.  Another objective is monitoring the supply chain. Businesses want a supply chain that bridges time lag and other barriers that make it difficult to track transactions and goods. A solution that would lead to symmetrical sharing of information among all involved parties within the supply chain. In turn, the information would always be consistent and timely processing, and synchronizing of information will be achieved.

Investigating Alternatives

Implementing block-chain technology is among the alternatives for resolving the supply chain issues. Block-chain is a digital record-keeping mechanism that functions as a distributed public ledger with a capacity to hold an expanding list of information. The information is stored in internet nodes which have no control by a single party and are linked to one another. Users access the information through a peer to peer connectivity, allowing them to trace a transaction’s history on the basis of one transaction. Block-chain will address the concerns surrounding the supply chain in various ways, including; monitoring the origin and specifications of containers with their movements among the parties in the supply chain, offers external stakeholders information regarding raw ingredients lists and the manufacturing as well as assembly processes for each product. In addition, block-chain will access, track as well as share real-time information among the participants in the supply chain, allowing them to analyze the data for insights (Romanovs, 2018). Businesses that adopt block-chain enjoy various benefits from the technology boosting their competitive edge. One of these is transparency. Through block-chain, companies have the capacity to track how goods move along the supply chain, recording the origin of the product together with all transactions that happened before reaching their final destination. This puts companies at a better competitive advantage by establishing customers’ trust as they have full accessibility to the journey of the product, which motivates them to purchase it. Another benefit of adopting block-chain to a company’s supply chain is increasing scalability. The distributed nature of block-chain’s database structure allows scaling to infinity. Therefore, businesses that implement the technology allow any capacity of users to access its database any time. Improved information security is also a major benefit of implementing block-chain. The technology’s permanent ledger with its capacity to trace all transactions makes it expensive to change the history of transactions. Cyber attackers are hence reluctant to attack the network.

Businesses might also choose not to implement the block-chain due to the risks and challenges that come with the technology. Key among these is its excessive consumption of energy. Maintaining real-time ledger requires power. Developing a new node which simultaneously communicates and links with other nodes consumes significant capacities of computer power. Each node requires stringent fault tolerance capacities, no downtime, as well as creating the data stored on the block-chain permanent and unaffected by censorship (Romanovs, 2018). All these are actions that burn time and electricity. It becomes wasteful when multiple nodes have to achieve such a consensus. Another setback of block-chain technology is its limits in splitting chains and adding old nodes to new block-chains. Nodes that run on old applications prohibit transactions in the new chain. This means that old nodes and blocks become invalid in the new chain following upgrades.

Proposed alternative

Implementing block-chain is a viable solution to managing the supply chain. With its wide benefits of increased transparency, scalability and security block-chain will surely streamline the flow of information and goods, easing a business’s operations. Also, the technology which is still in its infancy will most likely grow to be adopted by a substantial number of companies, which makes it relevant to implement now.

Conclusion

In summary, monitoring and managing the supply chain bears different concerns which not only expose companies’ information to cyber-attacks but also delay information processing affecting general performance. Despite its minor challenges, block-chain stands as a suitable option for resolving the supply chain issues. Not only does it offer better information security and scalability, but it also makes the supply chain more transparent, increasing consumers’ trust in the company’s products. Businesses hence ought to adopt the block-chain technology to improve their supply chain.

References

Pan, M. (2016). Block-chain: A New Solution For Supply Integrity. In M. Pan, Block-chain: A New Solution For Supply Integrity (pp. 1-8). Richard Ivey School of Business Foundation.

Romanovs, J. G. (2018, November). The Advantages and Disadvantages of Blockchain Technology. Retrieved from Researchgate: https://www.researchgate.net/publication/330028734_The_Advantages_and_Disadvantages_of_the_Blockchain_Technology