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How Blockchains Simplify The Supply Chain

Supply chain management continues to be one of the most difficult aspects of business operations. In theory, there are only five steps in the equation: planning, sourcing, producing, delivering, and handling returns. However, in reality, there are nuances in-between each step that makes them extremely taxing and prone to errors. In particular, waste is an issue across all industries. In the US, about 30-40% of food waste is derived from the supply chain, while 25% of global fashion production materials end up in landfills. 

The most innovative solution to solving the supply chain dilemma is using blockchain technology to automate as many processes as possible. Blockchains are essentially public ledgers of transactions—a definition that’s often associated with cryptocurrency. Each blockchain network can be powered by a token, such as ETH for Ethereum and TPR for The People’s Reserve. While crypto is more commonly used for investments or payments, it also plays an important role in helping age-old processes—such as the supply chain—evolve through blockchain technology. 

Issues in The Supply Chain

The supply chain involves highly complex planning and management, as each step needs to be done before the next. If one area falls behind, then the rest of the chain will be affected, opening the likelihood for massive delays or cancelled programmes. These are detrimental to fast-moving businesses, such as retail, which rides on trends and product releases—both of which are dependent on a fixed schedule. 

For one, sourcing materials can be a multi-continental affair, which requires a delicate logistics process to ensure a coordinated delivery in time for production—especially where perishable goods are concerned. Second, the production process might be done overseas, requiring two or more parties to constantly communicate to ensure that operations go smoothly. At times, each part of a product—usually electronics—is manufactured in a different location, demanding even greater coordination among multiple factories and chain managers.  

Third, shipping products from various warehouses to stores all over the world is a process that’s prone to delays. Cargo can get lost somewhere down the line, calamities can cause unprecedented setbacks, and confusion among logistics managers can result in packages arriving in the wrong destinations. The problems don’t end there. After customers receive their products, any issues can also merit returns, which needs to go through another process to determine how the products would be handled. 

In short, all areas of the supply chain require extremely precise management to ensure incident-free processes—but that is rarely the case. 

Blockchain-Based Solutions

Smart Contracts 

Decentralised applications can be developed on blockchains. These are essentially software—like a mobile app from the App Store—that operate through automation rather than a central authority. This function is made possible through smart contracts, which developers can use to trigger if-then actions, removing the need for manual reactions to specific instances. 

For example, strawberries are being transported from Mexico to Japan. The berries need to be stored at exactly 32°F to retain their freshness throughout the journey. There are two steps to this process: first, the strawberries need to be cooled to the exact temperature before storage. And second, the storage unit needs to be cooled to the exact temperature before the berries are placed inside. However, say the person in charge forgets to cool the trailer, and the fruits are loaded in and transported all the way to Japan—only for the receiving end to find that everything had spoiled. An entire trailer of strawberries would have been wasted. 

What if there was a system that could track the temperature of the trailer? Upon detecting that the storage isn’t perfectly cooled, it could send a notification to the person in charge, who would then be alerted of the minute detail, thus solving the problem immediately. Blockchain-based supply chains allow this solution to almost any aspect of the operations, as smart contracts can be written to accommodate any triggers and responses. 

Public Tracking

Apart from smart contract technology, blockchains also play an important role in supply chain tracking—one of the biggest challenges in a manual process. Because each product involves a complex series of global material sourcing and production efforts, it’s incredibly difficult to track every step in an item’s delivery cycle. This limitation makes it almost impossible to obtain basic information on what occurred, who was responsible, and when the issue happened. Liability becomes a grey area: there’s no way to gain enough evidence to support the testimonies of employees. 

As blockchains are public ledgers of transactions, every product’s journey—from planning to material sourcing, production, and all the way to final delivery and post-delivery issues—can be tracked with a unique code. The code can be inputted on the blockchain, allowing managers to get visibility on how the supply chain is progressing, who was responsible for certain actions, what occurred to trigger issues, and more. 

The data is accessible to the public as long as they have the string of letters and numbers or the QR code corresponding to each item. Green companies have taken advantage of this feature by placing QR codes in products, where consumers can personally see the sustainable supply chain behind each item. 

Cryptocurrency’s Role in a Blockchain-Based Supply Chain

VeChain is the most prominent blockchain figure in the supply chain niche, having gained the trust of some of the biggest corporations, from Microsoft to PwG and Deloitte. Its native cryptocurrency, VET, is used to generate a secondary token called VTHO, which is then used to power the smart contracts that run on the decentralised applications—essentially the supply chain programs—on its network. In other words, owning VET generates VTHO, and every time a smart contract is triggered, a small amount of VTHO is used to enable the function. That way, companies don’t need to burn liquid funds in VET, as owning a fixed supply is enough to generate enough VTHO to power the supply chain. 

Apart from being useful in specialised blockchain networks, cryptocurrencies can also simplify the international purchase process. Often, banks and payment gateways charge massive fees to cover exchange rates and cross-country transactions. Cryptocurrencies with negligible transaction fees, such as Ripple (XRP), Cardano (ADA), and The People’s Reserve (TPR), can be used to avoid the hassle of online banking and make payments easier for international consumers. Where returns are concerned, smart contracts can be employed to automatically return crypto to customers who qualify for refunds, making it more cost-efficient than outsourcing customer service representatives to manually process these issues. 

Supply chain management is a constant, long-running struggle for business, but blockchain technology has opened the gates to a new era of innovation and automation. As the world continues to evolve into a digital-forward environment, business pillars need to adapt to the changing times.