Bringing the unique benefits of cryptocurrencies and blockchains to this sector will significantly improve traditional supply chain management processes. If you are wondering about crypto, check out how crypto can liberate you from fiat currency. As a result, supply chain relationships are improved by bitcoin, blockchain technology, and other cryptocurrencies.
Supply chains are interconnected in a global system fraught with complications, fraud, financial losses, and security threats. A significant part of supply chain management is managing risk through constant auditing and monitoring of assets along the supply chain. It works well when the assets being transacted are digital commodities, such as financial assets, but what if the assets in question are not digital commodities but physical commodities? What if the assets are tangible conventional physical items?
It is no surprise that many companies have resorted to using centralized management systems to manage their supply chains. However, centralized management systems rely on trusting a third-party agency to handle your assets and information, which can be risky at best. On top of that, these systems may not provide adequate protection against cyberattacks or cyber theft.
Role of blockchain:
Blockchain technologies provide the trust factor removed by centralized management agencies by providing a system where all parties involved can access and secure information through a network. For example, suppose you want to send something to a third party. In that case, the blockchain eliminates an intermediary so that the seller can negotiate directly with buyers and manage the transaction independently.
Additionally, blockchains can provide a ready mechanism in which people can execute agreements between parties. In supply chains where goods are transferred or exchanged, this is critical to maintaining trust in the transaction. The ability to manage a large number of transactions in real-time through intelligent contracts also becomes critical in keeping both suppliers and customers satisfied with their transactions.
Blockchain improving relationships between participants in the supply chain:
This significant increase in trust leads to several improvements in the relationships between manufacturers, suppliers, and customers. In supply chains where physical goods are involved, these relationships are often managed by a traditional intermediary, such as a bank or an insurance company, that all parties pay to manage the transactions.
It increases costs for reimbursement to the payee for their loss and added fees for intermediaries. If you were the manufacturer of the item being transported, you would have no way of knowing how safe it was or what quality control checks were being performed on the goods being shipped until they arrived at their final destination. In addition, banks have limited capabilities when it comes to verifying the authenticity or provenance of items shipped through their systems.
Bitcoin for payments on supply chain contracts:
The supply chain becomes more efficient by replacing these traditional systems with bitcoin, blockchain technology, and other cryptocurrencies. When these items are traded between individuals or businesses over the internet rather than via a banking system or insurance company, costs are reduced, and transparency is improved through supply chain management.
Another benefit of using cryptocurrency for supply chains is that people can use cryptocurrencies to store value. Given the uncertain nature of many transactions in the conventional financial system, companies that accept bitcoin payments can use those funds to more securely store their assets in bitcoin. This reliance on crypto-currencies as an alternative payment method helps ensure that people will always meet demand by supplying crypto-currency rather than fiat currency or some other asset.
Many of these cryptocurrencies can also be used by companies for payments for the goods and services provided in the supply chain. Using blockchains to store information about the asset and then assigning cryptocurrency values to those assets makes it easier to negotiate transactions. More examples of supply chain management using blockchain technology:
Blockchains can help standardize contract workflow via public ledgers by internalizing the payment system through smart contracts. Doing so will make it easier for everyone involved to access up-to-date information about the contract.
Blockchain in manufacturing supply chain:
Producing goods on a large scale is often a logistical nightmare brought on by multiple parties, cultures, languages, and time zones that users in real-time must coordinate. However, what if the government built an economy around a network of smart contracts that could link all the participants in any industry over a shared ledger? Rather than having to go through multiple intermediaries, blockchain technology could eliminate the need for all of the intermediaries and instead provide a single source of trust.
One such industry that could benefit from such an arrangement would be the manufacturing supply chain. In countries where regulations are complex, and there are often cultural barriers affecting things like auditing procedures, governing supply chains without relying on an intermediary can give businesses more control over their commerce. However, it is essential to note that just because one company can use blockchains for supply chain management means only some suppliers have to do so.
