Blockchain in Supply Chain: Benefits & Top Use Cases in 2024

Today’s supply chains are more complex than ever due to the globalization of the market. Nearly half of supply chain leaders say that they only have visibility into their first-tier suppliers but not their upstream supply chain.¹

Any business with a supply chain has to manage all of the multiple suppliers, manufacturers, consumers, logistics, etc. at the same time with precision and swiftness. However, as the complexity increases, transparency and workflow decrease. Since the future scenario of the world market signals more complexity, successfully and efficiently sustaining the functioning of supply chains seems challenging.

Due to this complexity, plus the lack of transparency and rapidness, the implementation of blockchain in supply chain management is becoming an attractive idea.

In this article, we will investigate how blockchain technology can be used in supply chains, what advantages it brings to the area, and its top use cases in the supply chain.

What advantages blockchain technology offers to supply chains?

A blockchain is a distributed ledger technology. In this ledger, transactions are recorded as a series of code blocks that constitute a chain. When the blockchain changes, each computer that has the same ledger is updated. This means that, since each block only exists in relation to its antecedent and subsequent block, the data within a block can’t be changed. Therefore, this makes blockchain a highly verifiable, anti-tampering, transparent technology in business, and especially in supply chain management.

Now we can focus on what kind of advantages this functioning of blockchain brings to supply chains. Here is the overlook of some fundamental ones.

• Traceability: Blockchain enables the mapping and visualizing of steps in a supply chain easily because of its interconnected and encompassing bridging of actions. This enhances the traceability of each element constituting a supply chain, such as keeping track of supplier information, procurement, delivery of goods, etc. 

• Transparency: Another advantage of blockchain is that, it builds trust among the parties included in a supply chain because it provides open access to key data points it captures. Also, its traceability enhances its transparency.

• Speed: Blockchain encapsulates smart contracts, i.e., chunks of code within a single block in a blockchain. Smart contracts automatically update actions when predetermined conditions of the actions are met. This feature enables replacing slow and manual processes that require time-consuming confirmations.

• Immutability: Since blockchain is a distributed ledger consisting of multiple copies, it is almost impossible to tamper with a specific transaction because one has to alter all the copies simultaneously. This makes blockchain use in the supply chain highly trustworthy and resistant to fraud.

• Consensus: For transactions to successfully follow one another within a supply chain, all parties should agree on the actions. Without consensus, work is impossible. Blockchain is also advantageous for ensuring and sustaining consensus over the process because all the parties know that the transactions are automated and valid.

Use Cases of Blockchain Technology in Supply Chain

Although it is still early to say that blockchain technology dominates supply chains, businesses are leveraging it in various areas and steps of their supply chain. We can list some of the use cases of blockchain in the supply chain:

1. Supply Chain Management

With its qualities of transparency, traceability, speed, and consensus, blockchain facilitates the management of supply chains. Blockchain coordinates communication systems of the supply chain with a unified platform on the basis of its abilities for information-sharing and processing.

Also, according to a study, blockchain helps reduce the risk of certain supply chain disruptions deriving from behavioral uncertainties, fraud risks, data loss, manual errors, transactional and operational risks, and informational asymmetries.² Therefore, it can greatly enhance the monitoring and management of the supply chain.

2. Lowering Costs

Blockchain allows cross-border transactions. Thus, businesses can avoid intermediaries. By doing so, they not only save time but also money by cutting unnecessary costs emerging from intermediary steps.

3. Regulating Product Recall

Thanks to its traceability and transparency, blockchain makes it easier for supply chains to regulate product recalls by facilitating the identification and location of the affected products in the process. Thus, the recalling process becomes less expensive and time efficient.

4. Reducing Counterfeiting

Provenance is important for the quality and reliability checks of products. Since blockchain allows traceability of every step within a supply chain, the provenance of goods can be verified correctly. Thus, it helps reduce counterfeiting by allowing a quick check of the provenance of the suspected goods. According to a study by OECD, counterfeited and pirated products constituted 3.3% of world trade and 6.8% of total EU imports in 2016.³ This indicates that there is an alarming need to combat counterfeiting, which can be succeeded by blockchain technology. 

Plus, since every transaction is under the control of authentication, blockchain can also prevent documentation fraud with the ability to verify certifications and official documents.

5. Maintaining Ethical Standards

Today, consumers are more aware of what ethical standards they expect from the businesses they provide their products from. 60% of consumers say they seek brands that reflect their own values of sustainability and purpose and research about the company’s environmental, social, and governance (ESG) practices before buying from them.⁴

So, consumers want assurance that the products they are buying are not subjected to unethical production and delivery processes. By blockchain traceability, they can know the provenance of their products and know how the product is manufactured and shipped.

6. Logistics

We mentioned the use of smart contracts in blockchain technology. Via these smart contracts, transactions can be verified, recorded, and coordinated autonomously without third parties. Thus, a complexity element for global supply chains is alleviated. Some logistics companies like DHL are thinking of implementing blockchain use in their business. 

Figure: How smart contracts could work in logistics. Source: DHL

7. Supplier Payments

As we mentioned, blockchain revolutionizes transaction traceability. Payments are an internal part of this. As blockchain allows automatic control of verified processes with smart contracts, once standards are met, supplier payments are done faster and with less intermediary involvement.

8. Food Safety

Blockchain is under consideration by the food industry for the food supply chain health. For example, Walmart with the collaboration of IBM innovatively uses blockchain technology to track the provenance and condition of its pork supply coming from China. With increased traceability, it is easier for the food supply chains to:

• Avoid tampering with information on the provenance of foods, 
• Prevent contamination of the supplied goods with a faster and more regulated process between the processor and the distributor, 
• Forestall spoilage of goods in the process between the distributor and the retailer.

9. Post-sale Services

With the digitalization of product information via blockchain, post-sale services such as warranties and maintenance can become more trustworthy and under control. When a buyer verifies the product’s digital identity, the warranty period can start automatically. Also, second-hand buyers can confidently investigate the product’s unique identity, which makes second-hand trade more trustworthy.

If you have other questions about the use of blockchain technology in supply chains, feel free to ask:

External Links

• 1. “Supply chain disruption and resilience.” McKinsey, 26 August 2022. Accessed 19 November 2022.
• 2. Alkhudary, R., Queiroz, M. M., & Féniès, P. (2022). “Mitigating the risk of specific supply chain disruptions through blockchain technology“. Supply Chain Forum: An International Journal. pp. 1–11.
• 3. OECD/EUIPO (2019), “Trends in Trade in Counterfeit and Pirated Goods“, Illicit Trade, OECD Publishing, Paris,.
• 4. “Holiday spending statistics: 2022 Holiday Outlook.” PwC. Accessed 19 November 2022.