Posted on: 04 November 2019
How can blockchain affect your supply chain?
Advancements in technology has allowed businesses to better monitor how their goods are created and delivered. By taking advantage of blockchain, businesses are innovating how they track their products from the creation of the product, right through to the delivery.
It is estimated that every year, £17.7bn of goods are stolen in cargo theft cases. Because of this, many business executives are investing in blockchain technology which will help to prevent such losses. Research from Deloitte found that 42% of business executives will invest at least £5m in blockchain tech over the next year.
What is blockchain technology?
A blockchain is a piece of software that stores information that can be accessed across a network of computers. For a supply chain, a blockchain could hold information such as how much a product costs, the location of the product and who will be involved in the production and transport of the product. Blockchain technology makes faking records, transactions and other key information difficult as the blockchain will verify the legitimacy of the record and encrypt files so that the data is stored in a safe and secure manner.
Each point in the chain is known as a block, which could be a piece of information about what work has been done by each user along the chain. Before a new block is added to the chain it is checked by other computers in the network to make sure that the added block is genuine. When this new block is confirmed as accurate by the network, it will be added to the overall chain.
Each new block is also timestamped with a permanent link to the previous block in the chain, which are encrypted, and whilst elements of the block can be added, they cannot be changed. This, combined with the large levels of encryption and that every computer in the network stores a complete copy of the chain means that a blockchain is very difficult to both delete or corrupt.
What does blockchain technology look to solve?
One of the main problems with supply chains is that a lot of products’ origins are undocumented or unknown. Because some supply chains are known to span not just countries, but sometimes even continents, it can be hard to track where some of your products and its individual parts have really come from and if they are genuine.
For example, one of the biggest sourcing scandals in recent memory was the 2013 horse meat scandal, where some of the most well-known UK supermarkets’ beef products were found to contain horse meat from a Romanian supplier, rather than the Irish beef that some supermarkets had advertised. This scandal led to a huge loss of profit and reputational damage to the brands.
Blockchain could allow businesses to be more transparent about where their products are coming from.
What are the benefits of blockchain
As we outlined above, blockchain allows more transparency in your supply chain. Users of the blockchain will be able to see in-depth information about your products origin, tracking and suppliers. It also means that you could more easily identify if a product has been interfered with as records are permanent and you can see exactly who has interacted with your supply line with accurate and permanent data.
No need for intervention
Because of the steps in place for the blockchain powered supply chain, there is little need for manual intervention for each transaction. Transactions can be completed electronically at certain steps, rather than relying on third-parties or humans to get involved in completing manual processes. Transactions are also secure because the blockchain requires confirmation from the network to verify each transaction is genuine.
Blockchain can be accessed from anywhere in the world, with opportunities to be expanded on demand. This allows business owners to be able to better plan their strategy for the future, taking expansion into account, which also makes blockchain technology easy to install.
Are there negatives to using blockchain?
Your supply chain is likely to be a complicated process that has taken years to get into place. Adding new steps into your supply chain will naturally take time to adapt, which could create problems with your current supply chain. You should consider how long it could take to adopt a blockchain into your supply chain before adopting the technology.
Adopting the new technology
Any new technology that you add to your supply chain could be disruptive to your current supply chain. Consider the different types of blockchain technology that are available and see if they can fit into your supply chain with minimal disruption.
There are many reasons why businesses have been slow to take up the use of blockchain technology for a supply chain. For example, many businesses are wary of divulging their trade secrets to companies who supply blockchain solutions, as they are largely untested at the time of writing and may be unwilling to work with new, unknown partners.
Until blockchain use is better understood, its common usage is outlined and regulations are put into place, businesses may be slow on the uptake for blockchain technology.
Cross border laws and regulations
Some businesses will have a supply chain that crosses the borders of countries that may have different laws and regulations to the UK. Because of this, any new technology takes time to be adopted across borders as different laws and regulations apply.
Will you adopt blockchain technology?
Many companies have already adopted blockchain to keep up with the latest technology trends or to keep up with competitors. Before adopting a blockchain technology into your business, you should do extensive research to ensure you completely understand how it will impact your current supply chain.
Commercial Combined insurance with Premierline
Even if you have taken all precautions when dealing with your supplier, defective or counterfeit parts can still make their way into your production line. If your product causes injury or damages property and you are found to be at fault, you could be prosecuted, face legal costs and suffer a business interruption, all of which can damage your company’s reputation.
Product liability insurance is designed to protect your business in the event that someone tries to claim against you if they believe your product has caused injury or damage due to being defective through your negligence. Product liability insurance can also cover you if your products were sourced from outside of the EU and even if the manufacturer of your parts has gone out of business.
Speak to an insurance expert at Premierline who can assess your business needs and find the right business insurance for you.
Source – Zywave inc. – Manufacturing risk insights: Blockchain and your supply chain
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