Blockchain Application in Supply Chain Management

Updated: Sep 23

Cryptocurrencies like Bitcoin and Ethereum have been hotly debated in recent years. The end state of these and many other cryptocurrencies are still unknown. A much less discussed application of the blockchain technology underlying these cryptocurrencies is being pioneered in supply chain management. One major difference is that, unlike cryptocurrencies, supply chain blockchains usually involve known and trusted partners that are invited rather than open to anonymous parties. In this blockchain system, all parties are able to access the distributed ledger and play a part in maintaining it. The Canadian Blockchain Supply Chain Association is an organization that promotes blockchain in Canada.


Why is it Appealing?

Information is often kept in different systems among business partners (ex. manufacturers, carriers, government, distributors, buyers, and financial institutions). Even within a business, information may be kept in different systems (ex. legacy systems, ERPs, spreadsheets, WMS, etc.). This separation creates blind spots and also a lot of administrative effort to reconcile or audit when the need arises. Blockchain is a distributed ledger that integrates and stores data on business information, physical inventory, and financial flows that is chronological, verifiable, and tamperproof in one place. You have may have heard of the phrase “one source of the truth”. Blockchain aims to facilitate this mantra.


An extension of this data availability is traceability. Government and consumers are increasingly demanding to know the source of products. This task is nearly impossible because many parties are involved in bringing a single product to market. Most sellers cannot guarantee that a product is truly ethically sourced or that it does not violate any sanctions. Blockchains have the potential to make this ability closer to reality. This transparency also reduces the risk of counterfeits that protects each participant's brand reputation.


Additional Functionality


Other technologies can be incorporated with the blockchain to make it more efficient. Smart contracts and Internet of Things (IoT) are two such examples. Smart contract is software that automatically executes a contract once the terms and conditions of a contract are met. Smart contracts reduce the need for intermediaries and manual administration in the execution of the contract that is verified on the blockchain.


Internet of Things describes the use of sensors and software to exchange data over the Internet. The use of IoT increases efficiency by reducing manual data input and human errors. It also increases tracking capability. For example, temperatures, position, and arrival times can be recorded and then stored on the blockchain as shipments are being made to ensure compliance for perishable food products.

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