The past few years have seen an important shift in consumer preferences for shopping, with more people demanding to know not just what they’re receiving at the door, but where it comes from and how it was sourced.
This heightened focus on producers’ supply chains stems both from an increasing focus on ethically sourced products and an increasing number of high-profile incidents that result from poor supply chain management.
For larger corporations, the problem isn’t catastrophic—most enterprise-level businesses can afford the technology required to deliver greater transparency. For small and medium enterprises (SMEs), however, re-conceptualizing supply chains is usually expensive, and in some cases prohibitively so. As a result, SMEs often struggle to meet consumers’ demands for transparency in their supply chains. Yet, some have started to explore emerging technologies to identify workarounds capable of overcoming these challenges.
Blockchain, specifically, exhibits one of the most promising potential solutions for resolving the current conundrum facing manufacturers and sellers. The technology is already in use across industries, with some implementations already deployed and more in the works. However, for blockchain to be truly effective, it must help those who need it most—SMEs—or risk exacerbating the existing status quo. Even so, blockchain has shown a promising start in the arena of transparency.
Using Blockchain to Break Down Walls
The calls for greater transparency in supply chains are but a few years old by now, having grown louder as companies seemingly ignore consumer cries. However, after several high-profile incidents across different points in supply chains highlighted the limited visibility consumers actually have, the calls have only gotten more intense. From tainted Romaine lettuce and Chipotle’s food safety issues to faulty products such as Samsung’s exploding Galaxy phone, producers and sellers are being forced to be more accountable from resource to shelf.
Indeed, for large companies and enterprise-level corporations, providing greater transparency is not always problematic, and it can be important for avoiding PR disasters (Monster Beverage Corporation’s current issues with slavery in its chain represents a perfect example). SMEs, however, cannot always access the top-tier, customized services corporations deploy, and are more susceptible to encountering problems across their supply chains. One of the biggest issues—supply chain visibility—is a major sticking point for modern consumers.
Most importantly, creating fully transparent supply chains represents a cost that is simply prohibitive for smaller businesses. Instead of providing a better service, SMEs are forced to raise prices to meet consumer demands, driving away shoppers with unreasonable costs. Therefore, blockchain solutions that are low overhead and scalable offer a potential alternative that could level the playing field for SMEs and corporations seeking to compete in a globalized marketplace.
Blockchain has become an increasingly valuable tool across several industries because of the inherent benefits distributed ledger technology offers. On one hand, blockchain offers an easier, more direct mechanism for recording transactions—smart contracts. On the other, distributed ledgers are known for their ability to instantly and immutably store information for all users. This mechanism provides an easy way for supply chains to quickly upgrade their visibility and exert greater control over every facet of their procurement and production operations.
Disrupting the Status Quo
Blockchain is already active in the supply chain field, but it still faces some issues in terms of scalability and broader adoption. Despite the obstacles, there are now several companies that provide or are in the process of building systems that will revolutionize how supply chain management functions.
One such contender is TEMCO, a South Korea-based blockchain firm building its platform on the RSK blockchain. The company, which is the first to launch an ICO on the platform (and thus on Bitcoin’s chain, which RSK is built on), is already pursuing improved visibility and management efficiency. TEMCO commands strong backing, as well, with South Korea’s top VC pledging its support for the idea.
TEMCO is in the process of unveiling its supply chain network, which utilizes IoT sensors combined with blockchain to provide near instantaneous and fully transparent logs of supply chains. More importantly, it will allow retailers and other companies to know exactly where and how their products are being made. Thanks to its construction on the RSK network, the platform will be faster, highly scalable, and take advantage of bitcoin’s position as the top coin on the crypto market.
Others are also actively exploring solutions for competing in the burgeoning market. Walmart, for instance, already uses blockchain to track its food products from source to shelf to reduce the possibility of health scares. IBM has been hard at work on its own supply chain solution though it is more focused on larger clients and logistics especially. Some are providing a focused approach, such as Ambrosus, which offers IoT blockchain solutions for food and pharmaceutical companies to track their production processes.
Redefining Supply Chain Visibility
Until recently, supply chain transparency was more of a PR stunt than a real goal for many businesses. The prohibitive costs and complications tied to maintaining a fully transparent log of supply chain activities meant that the initiative was simply inaccessible for most companies. However, the introduction of blockchain shakes things up, creating a foundation for businesses to re-imagine their supply chains and employ systems that are both cost-effective and more reliable than existing solutions. Should the sector achieve large adoption, it could mean a significantly more transparent market for shoppers, and accordingly, more accountable businesses.
Jim Hoffer is founder and managing director at Hoffer Financial Consulting. Follow him on Twitter.
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