5 Reasons the Blockchain Could Improve Your Supply Chain

Blockchain is one of the most prominent technology buzzwords seen and heard over the last few years. Known for being the driving technology behind Bitcoin and other cryptocurrencies, blockchain’s decentralized software architecture slowly found its way into numerous industries in addition to finance; the supply chain industry being one of the largest.

In fact, according to one market analysis done by IDC, behind the financial sector, the distribution and services sector is projected to be the second largest market (worldwide) for blockchain technology in 2018 (at $510 million), while the manufacturing and resources sector is projected to be the third largest (at $448 million). With the emergence of cryptocurrencies, it may be obvious why the financial sector is the largest spender on this technology, but you may be asking yourself why this technology is such a big deal in these other sectors, like supply chain.

Supply chains require vast amounts of data to be shared with multiple parties and passed through various points in a network. In addition, numerous physical and monetary transactions occur between suppliers, purchasers, and distributors on a frequent basis. Blockchain technology provides an array of capabilities – which address major issues like quality, risk, and communication inefficiencies – that accompany the large amount of data sharing and complex transactions that happen within a given supply chain.

While most blockchain applications (outside of cryptocurrency) aren’t quite mature enough to enter the mainstream, most experts agree that it won’t be long until refined applications of blockchain are easily accessible to the entire market. Below are 5 reasons why your organization may want to consider adopting blockchain technology into its supply chain.

5 Reasons the Blockchain Could Improve Your Supply Chain

1.  Quality Assurance

With the blockchain between you and suppliers, you have the ability to track and trace the sourcing of materials and the production of parts within your supply chain via time-stamped and geo-tagged transactions added to an immutable ledger. This means that you’ll be able to ensure parts were manufactured in the proper facility using the correct materials and transported appropriately. Depending on the granularity of this blockchain, you may even be able to get live updates on processes such as testing and inspection.

2.  Improved Planning

Depending on how your blockchain is set up, it may take anywhere from minutes to a few hours to record transactions. By monitoring and evaluating data on a daily basis, you can more quickly identify delays in production and/or transportation, and quickly adjust your planning and scheduling. This analysis can be performed on an ad-hoc basis.

The blockchain contains verified and up-to-date data. Using advanced analytic techniques, this data could be used to optimize supply chains where, over time, planning would become more precise and lead times would be reduced.

3.  Expedited Legal & Auditing Procedures

Blockchain allows you to enter into a contract with your suppliers which states that all parties agree that the blockchain is an authoritative source. Because the blockchain is an immutable ledger, all transactions that occur are confirmed by every other node on the blockchain and may not be changed; it’s nearly impossible to alter a previous node and it wouldn’t be worth the time and resources required to do so. Thus, these blockchain records would clear up legal disputes quickly, or prevent them altogether.

4.  Information Sharing

In a traditional blockchain environment, all data is accessible by all parties. Retaining information in one place reduces the need to search through your inbox for specific emails that are months old, eliminates delays because an engineer sent the updated specifications to the wrong person, etc. This technology reduces the need for communication through managerial personnel and streamlines the flow of information in your supply chain.

5.  Smart Contracts & Cryptocurrency Integration

Once all of the parties involved in a deal decide to exchange funds for goods and/or services on the blockchain, currency transactions can happen quickly, requiring no middlemen. These transactions take place by way of smart contracts, which initiate immediate transactions after certain actions occur or when milestones are met, removing the need to trust that another party will hold up its end of the bargain.

For example, once you confirm your parts were delivered by a supplier, the smart contract initiates an immediate financial transaction, requiring practically no administrative work, where money is directly transferred to the supplier. These instantaneous transactions currently take shape in the form of cryptocurrencies, however, the financial industry is working effortlessly to expand the capabilities of smart contracts to include fiat currencies.


The five considerations mentioned above are just some of the most common and immediate benefits of blockchain technology implementation within the supply chain. As this type of decentralized software architecture evolves, it will gain additional use cases and capabilities for government, health care, infrastructure, and the management of natural resources. As the market availability of this technology improves, all companies should consider how the blockchain could reduce risk and increase efficiency in their supply chains.