How Is BlockChain Revolutionizing Supply Chain Management in India
How Is BlockChain Revolutionizing Supply Chain Management in India: In recent times, BlockChain has been quite in the limelight, giving off an impression that it could be the panacea for the grievous problems across various industries. The technology is thought of to have the potential to rev up the efficiency and profitability of many businesses, if not all. One of the major use cases of the emerging technology has been recognized to enhance transparency across the supply chain and logistics industry.
It is difficult to ignore the significance of supply chain transparency and efficiency in a large growing economy like India. In fact, as per a research report, India’s supply chain and logistics industry is projected to grow at a CAGR of 10.5% by 2025. However, the supply chain industry is still subject to several challenges such as a poor infrastructure, weak distribution system, fragmented market and lack of technology adoption.
Most companies have very limited knowledge about the flow of goods and products throughout the supply chain. These are some of the key areas where the logistics sector of India lags behind its global peers. In such a situation, many supply chain experts believe that it has become imperative for the country to jump on the BlockChain bandwagon to transform the logistics landscape.
How Is BlockChain Revolutionizing Supply Chain Management in India
But the question is if blockchain is a panacea or just a red herring. Before we dive into the argument, let’s understand what blockchain really is.
What is BlockChain?
Simply put, BlockChain can be described as a collection of blocks that can store information about the transaction such as date, time, details of the participants of the transaction, among other things. It can also be considered as a chain of blocks that is not controlled by any central authority. Each block has a unique hash value along with the hash of the previous block which distinguishes it from the other blocks. If the information stored on the block were to be modified, the hash of the block would be modified too. So if a hacker tried to change the information on some block, the alteration would be detected immediately as the modified hash would not match with the original hash and the transaction would be deemed void.
The above process makes it very difficult to change the information stored on the blockchain. Moreover, the data is not stored in a single place or controlled by a single authority which makes it less likely to get corrupted or hacked.
Some of the BlockChain features are:
BlockChain is decentralized such that no single individual or group can control the entire network. This feature of BlockChain makes it very powerful to enable security and transparency amongst the participants of the network.
The data recorded on the ledger cannot be modified by anyone. If we try to change the data on a single block, we will have to change the data on each of the blocks because each block in the BlockChain stores the hash value of the preceding block. It is a very complicated and highly unlikely process for a person to change the hashes of the entire network as it requires a great deal of computational power. This immutability feature of BlockChain makes it very powerful against potential hackers and ensures the security of data.
- P2P network
Another great feature of blockchain is the peer-to-peer interaction between two parties. In this model, the participating parties can interact without the requirement of any third party. Elimination of third parties also means that no extra charges are deducted in a transaction.
What role does BlockChain play in the supply chain?
To evaluate the value that BlockChain could add to the supply chain industry, let’s have a look at the key areas where the technology could stir up efficiency.
Enabling supply chain transparency
Distributed ledger technology can make end-to-end tracking in a supply chain more transparent and reliable. The concerned parties can digitize the physical assets and maintain a decentralized record of the transactions. As we have already seen, these records are immutable which increases reliability. This increased transparency of the supply chain is beneficial to the organisations as well as the consumers. This increased transparency of the supply chain gives companies as well as the customers more information and visibility.
Replacing tedious manual processes
Many of the processes involved in the supply chain are extremely tedious and rely on a lot of paperwork. The Good news is smart contracts can automate much of the work based on the fulfilment of certain criteria. For example, smart contracts can automatically execute payment on the fulfilment of certain conditions. Blockchain could also affect how supply chain data is exchanged. For example, smart contracts could eliminate the need for documentation between the participating parties during shipments. This also has the potential to eliminate all the third parties involved in a transaction, thus reducing unnecessary hassle. Moreover, a distributed ledger could be used for all the relevant information instead of relying on a process that requires manual compliance checks that may take weeks.
All in all, blockchain has inspired many IT companies and startups to initiate promising logistics projects. Although many projects are in their infancy, the potential has no limits. In fact, the World Economic Forum (WEF) also feels that the technology can address the gaps in the supply chain, especially in the post-COVID-19 period. The security, transparency and durability offered by the technology can go a long way in recovering disrupted networks. The WEF stated that these factors could play a big hand in the recovery of the economy. The WEF has also devised a blockchain deployment toolkit aimed at supporting solutions that can help businesses in their endeavours while restoring the post-COVID-19 economy.
Some leading BlockChain-powered logistics projects
Many IT players and startups are exploring and leveraging the applications of BlockChain in innovative pilot projects to revamp the supply chain market. Some of the promising projects are as follows:
- It would be unfair to not talk about IBM while talking about BlockChain. IBM and Farmer Connect are using BlockChain technology to bridge the gap between consumers and small scale coffee farmers. Coffee consumers can trace their coffee beans from the farm to the factory to get an assurance of the quality and origin. The project bridges the gap between the consumers, traders and the farmers by giving real-time access to data and insights on the origin of the products.
- In 2018, Microsoft partnered with BlockChain solutions provider Adents to provide end-to-end traceability in the supply chain. The solution was mainly created to reduce the illegal access to medicines and to cut the volume of the counterfeit drugs available in the market. At the time of the collaboration, CEO and founder of Adents, Christopher Devins stated, “Our alliance with Microsoft to co-develop Adents NovaTrack will offer game-changing BlockChain-based unit identification for various industries around the world. Our deep roots and successes in serialization and traceability, enhanced by Microsoft Azure Cloud technology, will provide our clients total transparency all along their supply chains and secure product authenticity for end users.”
- Established in 2018, CargoCoin is a project which targets different sectors in the supply chain and logistics industry. This includes shipping by land, sea and air. The project leverages smart contracts to ensure a safe way to transport goods. The project allows the participation of all the players involved in the process, providing a uniform method to make transactions or record necessary documentation.
- Shanghai and Guangdong, handling a business of $1.5 trillion of imports and exports, are using BlockChain to streamline port operations and extend the connectivity of the ports.
- In India, Kerala is one of the leading states which has adopted BlockChain to streamline the food supply chain. One of the projects is headed by the Keralan think-tank – the Development and Innovation Strategic Council (K-DISC). The project uses BlockChain and IoT to monitor and track the supply of milk, fish and vegetables. In this project, each item is assigned a unique Radio Frequency Identification (RFID) tag. This ensures that the product can be traced right from its source to the very last stage of distribution.
What are the challenges that lie ahead for BlockChain?
Even though the advantages of employing the technology look quite promising, there are many challenges that stand in the way of wide-scale adoption of the technology.
Lack of understanding of the technology:
One of the biggest hurdles is the lack of understanding of the technology amongst the business leaders. This factor makes them sceptical of the technology and they end up waiting for a wider adoption before they can jump on the bandwagon themselves. In fact, even some of the people who do understand the potential of the technology are sometimes reluctant to invest the time and money. Moving forward, it will become imperative to take measures to increase awareness about the technology and lay down industry-wide standards for convenient adaptability. In order to reap the benefits that can be rendered by the technology, all the stakeholders of the project will have to be on the same page in terms of having an adequate understanding of the potential risks and benefits. Therefore, market acceptance is the key to wide scale adoption. Business leaders will have to be educated to understand the plethora of advantages that can be born by leveraging technology.
Quality of data
A very important parameter that businesses should consider before switching to BlockChain is the reliability of the system used to record the data. The data recorded on the BlockChain should be error-free as it is very difficult to modify it once it has been recorded. If the business is using an unreliable system to record data, using BlockChain can do more harm than good. Therefore, the immutability property of BlockChain does not seem very beneficial if the quality of the data is compromised in the first place.
Blockchain is slower in retrieving committed records as compared to a traditional database. The scalability of the resources is also a major problem. Scalability refers to the ability of the technology to adapt to the increase in the volume of data as per user demands. In order to scale blockchain, it is not sufficient to increase the block size. This approach reaches its threshold and is not sufficient to compete with companies like Visa which can process 1,736 transactions per second. While there are many solutions that are being considered to solve this scalability problem, each poses its own set of pros and cons. But as the network is growing by the day, it will become imperative to evaluate the benefits of these solutions to address the scalability issues of blockchain.
Lack of interoperability
Even though BlockChain’s acceptance has proliferated over the years, a major problem is that individual networks cannot communicate with each other efficiently. Each network has different characteristics altogether – right from the type of the transactions, the algorithm used for hashing, among other things. Moreover, different networks run on completely different regulatory norms and technological versions. This issue has led to a series of unconnected BlockChain networks which are siloed from each other. This stands in the way of exploiting the full potential of the technology. This is where interoperability comes in. Interoperability is critical as it means that siloed BlockChain networks will now be able to communicate with each other. This will enable different systems to share and access information without the need for a third party. There are several things that have to be considered to achieve interoperability. This includes the conduction of transactions on the other networks, transactions with deployments on the same chain as well as the other chains.
In the future, interoperability solutions can change the entire game in the favour of BlockChain. It will be a fundamental step in achieving wide scale adoption of the technology by opening the field for business collaborations and sharing of solutions.