Implementing Blockchain and IoT in Supply Chain
At the heart of every successful consumer-based business lies a robust supply chain management. As the world is getting increasingly globalized and the consumers’ demands rise, efficient management of products over multiple geographies is essential to maintain a competitive edge in the global market. Therefore, in order to stay competitive in the global market, the need of the hour is to incorporate new technologies, in order to make supply chain effective and efficient. Experts believe that implementing blockchain and IoT in the supply chain can address this need. However, many medium and small-scale enterprises, particularly in the developing countries, are either not aware or are not convinced of the need of employing an efficient supply chain into their business strategy. Also, the integration of blockchain technology into existing business models helps prevent data manipulation, which is expected to be one of the most important factors boosting the growth of the blockchain IoT marketplace. The game-changing technology could disrupt everything in the near future. According to a 2014 survey, conducted by Deloitte, it was found that 79% of supply chain leaders have above-average revenue growth. Therefore, before emphasizing on the need for integrating blockchain and IoT in the supply chain, a quick glimpse at reasons which emphasize the necessity of supply chain for every business may be helpful:
Improved front-end services – getting a product delivered to the customer, without any damages and at the right time is important for maintaining high levels of customer satisfaction. Besides, in the event of product replacement, ensuring prompt customer service becomes a key to retaining customers.
Reduced costs – To avoid delays in manufacturing, wherein timely production is critical, efficient management of supply chain network is necessary. Besides, for retailers, to avoid incurring a loss from expensive inventory pile-ups, swift delivery of such items can be ensured with a supply chain.
Increased market penetration – For any enterprise seeking to expand its business operations, globally or domestically, a plethora of customs and compliance requirements need to be met. In addition, companies need to have a logistics solution in place to source materials or items to the region in which they are expanding. With a supply chain management in place, companies can easily plan their expansion without any associated hurdles.
While it is evident that enterprises, in particular, consumer-based, seeking to increase revenues and grow their businesses require a supply chain management, there are various challenges that enterprises need to be aware of. According to Selvam VMS, an expert with more than a decade of experience in the supply chain, ‘The issues that permeate in the supply chain business today are largely related to security of the inventories, transparency of the channels, traceability of inventory items, last mile connectivity to fulfill deliveries and vendor relationship, most of these issues are nothing too significant that technologies like blockchain and IoT cannot solve, wisely incorporating these into the current management can be a game changer to businesses’. A closer look at some of these main challenges in the existing supply chain can prove helpful:
Security – Although supply chains are all about moving products through various channels so as to deliver them to customers, often intermediaries within the network work in silos, this results in lack of proper visibility of the items in the network. This lack of visibility, therefore, poses a risk of theft and piracy.
Transparency – one of the biggest issues faced in supply chains is the lack of transparency. Supply chain transparency refers to the information available about all the parties in the network such as the companies, suppliers, distributors and sourcing locations. When companies have to cater to the global market, inventories have to pass through multiple channels over different geographies. This makes it inherently difficult and complex for companies to have knowledge of the intermediaries involved, which in turn can allow for inefficiencies that ultimately affect the business.
Relationship management – For an efficient and effective supply chain in place, one of the critical ingredients is good relations with all those in the network. As companies solely rely on these networks to propel their business through timely product delivery, without any control over the network, companies and suppliers need to have a mutual understanding while at the same time avoid errors in communication.
While global enterprises like Walmart, Amazon etc., maintain a sophisticated network to penetrate in the global market and meet the consumer demand, technology can make it significantly easier for enterprises, whether small or large, to handle supply chains more effectively. DiscoveryIoT is a startup that is developing a platform based on blockchain and IoT, to track products in the supply chain. Costing as low as $0.10, Discovery is developing an IoT tag housing multiple sensors that can be affixed on every item to know its state and location. Currently, Discovery is holding pre-sale of it’s DIS tokens which will be followed by ICO rounds commencing in August. Whereas, Evrythng is another startup that is developing a cloud-based IoT solution to provide a single digital platform for inventory identity by combining the existing technologies like GPS, barcodes, RFID etc. Convinced by its potential, the startup has thus attracted many investors and have raised $24.8 million in their funding rounds.
Benefits of blockchain and IoT in the supply chain
With many use cases, blockchain and IoT have a promising potential to be adopted into the supply chain. Bernard Marr, an expert on data analytics and keynote speaker on business, writes in his article that ‘blockchain can increase the efficiency and transparency of supply chains and positively impact everything from warehousing to delivery to payment‘. While writing on IoT’s potential Daniel Newman, CEO of Broadsuite Media group, rightly analyzes that IoT will revolutionize the supply chain with ‘both operational efficiencies and revenue opportunities‘. IoT provides the much-needed visibility and traceability of processes and inventories, whereas blockchain provides a way to store data, distribute them and make quick payment transactions. The benefits of combining these two can be summarized as follows:
- Improved visibility of processes
- Improved traceability of assets
- Reduced paperwork
- Quicker payment transactions
- Improved customer satisfaction
Although there are numerous benefits associated with implementing blockchain and IoT in the supply chain, the above glimpse into some of its benefits shows the enormous potential the two technologies have for transforming the supply chain.
Steps to implement Blockchain and IoT
While it may seem that blockchain and IoT are the right investment for the supply chain, companies have to evaluate and review their requirements and risks beforehand. For instance, the requirement for a food processing company may involve identifying key elements that result in the spoilage of food and it also depends on the size of the company. Essentially, the main steps involved in implementing blockchain and IoT are:
- Identifying a use case – Any enterprise looking to incorporate blockchain and IoT into their supply chain business needs to identify and clarify its requirements.
- Assessing the issues in the supply chain – It is important to identify the specific areas of the supply chain that require improvement.
- Developing a proof of concept (POC) – Once a use case has identified and the issues in the supply chain have been determined; a proof of concept needs to be developed. While developing a POC, it’s scope should be restricted to the demonstration of a specific issue.
- Limited deployment – Once a POC has been developed, a field trial limited to a small area of the supply chain network should be conducted to test out the system’s functionality.
- Scaling up – If the field trial has been proved successful and the functionality of the system meets the company’s expectations, the solution developed can be rolled out to the entire supply chain network.
As supply chain involves a complex web of channels and intermediaries, the existing ways of its management are not enough for enterprises to be competitive in the market. Tackling the inefficiencies in the supply chain, such as the lack of transparency and security, is therefore critical for businesses to gain a competitive edge. Therefore, solutions, as enabled by blockchain and IoT, are seen to have the potential to address these existing issues, also lowering the operating cost of supply chain management.