Although the concept was developed by the inventor of Bitcoin back in 2008, blockchain and Bitcoin are two separate entities. It is a database that has many other applications, notably in supply chain and logistics. Naturally, the industry has begun to adopt blockchain technology – and it is predicted to continue growing. But how does it work?
What is Blockchain?
Blockchain is an encrypted electronic ledger with a list of entries or transactions (blocks), linked to a previous block using a pointer (hash). This database is constantly growing and maintains a record of all blocks ever created, with each individual block containing all transaction information.
At each step, a user adds a new record or block to the database. Once added, this cannot be modified or deleted. As such, blockchain acts as a peer-to-peer network, requiring all supply chain participants to verify and view records.
Benefits of Blockchain
So, what benefits can this offer supply chain and logistics?
Transparency and accountability
One of the largest benefits blockchain can offer supply chain and logistics firms is transparency. As a decentralised database, blockchain requires the authorisation of all other parties, ensuring accountability at each stage of the process, without any single individual being able to claim ownership. The nature of the database means that all blocks are visible, monitorable and traceable. This level of transparency could help firms to form new partnerships and boost customer confidence, thus increasing sustainability.
Scalability and growth
For supply chain and logistics companies that choose up uptake blockchain early, there are arguably benefits in terms of growth and scalability. This is because blockchain can provide a greater understanding of the inner workings of a company’s operations. This could help to plan for challenges, forearming a business and highlighting growth opportunities. Additionally, blockchain can help a company to form partnerships with ease, potentially scaling a business.
Security and trust
Shared and decentralised, blockchain is a secure database that offers a number of security benefits. This includes protection from cyber threats and theft, as each block is encrypted. It could also reduce the needs for audits, as each partner is required to act to high standards. Thirdly, it promotes integrity. The unchangeable nature of the data means the ledger cannot be compromised or altered, and all ledger information is made available to all parties. This increases trust and ensures that every party must fulfil their part of the smart contract.
Cost and speed
Ultimately, one of the biggest factors when supply chain and logistics firms choose blockchain will be the potential reduction in costs and quicker processes. Using smart contracts, as each party completes their portion of the agreement and the conditions have been met, payments are automatically executed. This reduces the need for human verification and payment, speeding up transactions and cutting overall spend.