Contemporary retail traders have access to wide range of interesting features that exploit the unique architecture of decentralized networks. On-chain analytics, crypto whale tracking tools, and many other unique instruments make investing easier and safer. The same is happening in multiple industries including transportation, provision of resources, and storage. However, using decentralized solutions for everything seems to be the biggest game changer out there with thousands of companies adopting or planning to implement these solutions into their business practices.
With the necessity to significantly improve the quality of control, record keeping, and transportation in general, we have to search for new solutions. Breaking ground is hugely important. The COVID-19 pandemic revealed many weaknesses in the sophisticated network of connections bringing the world closer together yet making everyone dependent on someone across the big pond. A crisis can expose local production to unexpected challenges and completely ruin the ability of a nation to react appropriately.
The ideal scenario is a new landscape of logistics with people being fully aware of origins of every single item in their household. It works for laymen who know can make informed choices about their future purchases. It also works for producers and regulators who can observe the total volume of goods and how they are being made.
For example, China, a country that is feeling a strong pressure from their trade partners, wants to start making more stuff in-house. They are spearheading the adoption of decentralized solutions from the likes of VeChain and similar development teams that focus on real-world applications for the technology that is currently revolutionizing the world of finance.
How blockchain improves supply chain
The global network uniting manufacturers and suppliers is a sophisticated and fragile infrastructure that involves an endless army of stakeholders, producers of goods, distributors, retailers, and other participants of numerous international industries. The intricacies of this web of connections are quite challenging to manage efficiently. Experts cite different hardships that the global economy faces: the lack of transparency and traceability, low efficiency, and confusing logistics. These issues, in theory, can be addressed using blockchain supply chain solutions.
The technology is great at reducing fraud, inefficient movements of goods, and coordination inadequacies. Since the use of immutable ledgers offer a better control over records, the transparency is also not a big issue. In 2020, the World Economic Forum focused strongly on various benefits of using innovative products in the craft of managing manufacturing and shipping. They are estimating that the affected trading volume globally would reach $1 trillion by the end of 2025.
Businesses desperately want to provide their consumers with exhaustive, fully transparent data on the source of their raw materials, components, and other things that make their products great. It is an important part of the global effort to create a better international manufacturing infrastructure that can be easily inspected by any official or customer. Decentralization seems to be the only viable solution to make it happen in the foreseeable future.
The advantages of blockchain applications in transportation, distribution, and production
There are many reasons why this particular technology is considered a priority for many participants of the global economy. In theory, the benefits of using it for every step of the materials procurement process and the following distribution of end products are massive and positively affect all sectors of the global economy on multiple levels.
Here are some interesting aspects of this issue that should be contemplated by potential investors:
- Supply chain transparency with blockchain. The use of decentralized ledgers is great for many applications. For example, they make settlements permanent reducing fraud in financial markets and building a strong foundation for a trustless environment in the future where things like crypto automated trading can be used higher efficiency. At the same time, the same ledger can be used to record a path that your bananas take before they reach a dinner table.
- While we are on the topic of traceability, the ability to precisely track all goods and components as they travel the world is essential for businesses to make things for efficient and for end consumers concerned with the origins of products they purchase. Studies indicate, that companies observe up to 30% improvements in traceability of goods. For example, Walmart can now identify potential contaminations of fresh produce easily and react within hours to remove affected goods from the shelves.
- Increases in efficiency are achieved through careful handling of records and immutability of ledgers significantly reducing the number of errors that can happen while something is travelling across the glove through a myriad of waypoints. Human intervention is slow and costly to all participants of a logistical network meaning that any improvement dramatically affects the overall productivity. Capgemini conducted a research where they found that using blockchain logistics solutions can improve efficiency by up to 30% by making cargo documentation streamlined and standardized.
- This improved efficiency is a key unlocking the smoothing of logistical pathways that now require less intermediaries and middlemen who often make transportation slow and add more cargo handling than necessary. Reducing costs is the main goal of any business. The use of decentralized ledgers can save up to $50 billion in paperwork annually according to the research conducted by Accenture.
- Another important benefit of a supply chain blockchain technology is improved safety. Fraud and cyberattacks affect all participants of the global logistical network causing financial losses, reducing throughput, and slowing down deliveries. One of the most prominent defenders of the technology is IBM. The representatives of the company believe that fraud reduction can be close to 75% if the market adopts decentralized ledgers.
- Some companies benefit from improved practices in handling goods and materials. Thanks to effortless real-time tracking, businesses can manage inventories much easier and faster. Employees can coordinate quickly to adjust orders and avoid overstocking. Some companies reported up to 20% cost reduction thanks to better tracking of goods inside their warehouses. For example, H&M heavily uses ledgers to monitor their inventories. It is one of the best blockchain supply chain case studies.
- Collaboration between different participants of any logistical network is quite important. It is strengthened by the existence of a single point of reference that contains immutable truth about cargo, its destinations, and handling on different stages of the delivery. MIT Sloan conducted a research and found that the effect of collaborative efforts can be increased by up to 40% through the facilitation of trust between partners.
- Ethical sourcing of materials is another important issue that must be addressed by the global economy to ensure that there is a brighter tomorrow for everyone, not only wealthy nations. Sustainability of non-renewables should be a top priority too. Thankfully, the Gartner’s survey of multiple businesses indicates that up to 30% of the companies will be using different methods to improve sustainability and make their sourcing practices more ethical. One of the best examples that illustrate this point is Starbucks using ledgers to track the production of coffee beans.
- Regulatory compliance is a huge expense for many businesses that want to operate internationally. In theory, using decentralized ledgers with immutable information can be quite useful in complying with local and international regulation. Traceability of components and sourcing from multiple suppliers can be easily done in a lawful manner while reducing associated costs by up to 50% according to a study by Accenture.
- Lastly, customers have more faith in companies that have nothing to hide. The easiest way to show that a business operates within certain ethical and juridical norms is to provide access to the information about sourcing and manufacturing which is an effortless practice if decentralized solutions are implemented correctly. For example, many wineries are using these technologies to showcase the origins of their bottles which is a great marketing move since over 73% of all consumers are willing to pay extra for this transparency.
The long list of benefits seems to be sufficient to convince everyone that it is a great idea to start tracking everything using the best data-handling networks that do not have a single point of failure, issues with verification of origins, and other great perks. However, we are seeing a painfully slow adoption of these promising technologies. Often, the issue is in the difficulty of transforming corporate structures, designing efficient transitioning plans, and having a reason to switch in the first place.
How can a company combine blockchain and supply chain?
There are several ways for companies to implement the technology seamlessly. While many believe that decentralized ledgers are a recently discovered concept, it has been around for over 40 years. We just did not think that it was useful until the sheer scale of the global economy and practical applications of the technology in the financial sectors revealed its benefits.
The path toward implementation may appear complicated, but it can be done in five distinct steps:
1. The identification of goals and overall strategies. The whole company must be on board and prepare for the change. Selecting the right approach can be quite hard for less agile teams and large corporations but outlining a strategy after realizing that business practices can be improved is not a big challenge if the leadership is ready for a change. Determining the right set of initiatives and the necessary adjustments to existing business models is quite important too and must be done preemptively.
2. Survey the market and look for use cases that seem to reflect your strategy and goals. It is important to conduct a thorough study and examine the reasons why a particular approach works well. Setting reasonable and, more importantly, achievable KPIs is possible only if you know your numbers. Aim at very specific metrics and ROI.
3. Start putting together a team of motivated individuals. Search for people with relevant skills including back-end and front-end developers, experts in logistics, experienced managers, and others. The scarcity of talent makes it hard to fill all the positions. Looking for hires in other sectors can be a good idea. For example, many programmers have experience in building tools for the fintech industry. If you see a free coder who worked on a futures grid bot and made it work well, hiring them is a good idea.
4. Plan your investments in the transformation strategy. You may take a variety of technological approaches to create a solution that suits your business needs. The industry already has ready-to-implement templates, libraries, data bases, and more. While the toolkit is there to work with, it still takes time and effort. It also costs a lot of money, so be ready to invest a sizeable portion of operational capital in upgrading your logistics.
5. A deployed solution must be kept relevant. After the launch, it is necessary to monitor the performance of the new system and track KPIs. The adoption will take some time, people will need time to adjust, and reviewing outcomes is also a lengthy process. New iterations have to be designed and developed as you acquire operational data. The effort will be ongoing but it can significantly reduce expenses and make your business more flexible and transparent.
Future of blockchain in supply chain
The use of the technology in logistics and manufacturing has a big potential and may change the way we do business globally. Right now, experts see many ways in which it can affect the international trade and improve the delivery and distribution of raw materials, components, and end products.
There are many was in which everything in a typical supply chain can be improved:
- Market growth. The market is projected to reach $3.3 billion in value by the end of 2026 with a CAGR of 53%. The increase of global trade by 2025 has been quite optimistic (by $1 trillion) when the participants of the World Economic Forum discussed the potential of the technology. While numbers were dramatically affected by the COVID-19 pandemic and the following geopolitical issues, the effect of the technology was deemed positive.
- Adoption rate. Up to 20% of grocer corporations will be using these solutions by the end of 2025. In general, up to 30% of all companies globally are interested in enhancing their logistical networks with decentralization. IBM experts believe that over half of all transportation companies will be using ledgers to record cargo movements by the end of 2025.
- Interoperability. Some experts believe that the introduction of decentralization will lead to higher levels of mutual integration allowing many systems to work in a unified ecosystem. ABY Research reveals in its study that the Internet of Things will be a significant component of logistics with up to 60% of all contemporary solutions using some form of automation by 2025.
The use of the technology on a global scale is a good thing for the crypto industry too. Investors are seeing the positive impact of decentralization on all aspects of business. Groundbreaking changes are happening in all sectors of the global economy thanks to the proliferation of decentralized solutions. For example, an AI crypto trading bot is something that would not exist if we did not have target digital assets that benefit from such advanced technologies. Today, these designs can be applied to all types of financial markets.