What is supply chain management?
The supply chain management is a process of managing a chain or network of activities, individuals, procedures, organizations, and resources that are involved in the execution of the flow of materials from the supplier for its distribution to customers in the most economical way. That is to say, the supply chain is a step by step process which involves physical and information flows. The physical flows involve the movement of goods/resources from the supplier to the customer. They are the visible part of the supply chain. Whereas, the information flows involve all the flow and coordinations that take place between the parties in the supply chain process. The four-step equation below will guide you on how exactly a supply chain works:
1) Supply of raw material:
This is the first step, to begin with, the supply chain of any products, the supplier delivers the raw material of the products to the manufacturer who processes it further.
2) Manufacturing of the goods:
The manufacturer makes the goods from the raw materials and then sends them to the distributor.
3) Distribution of the goods:
After this, the distributor delivers the goods to different retailers.
4) Selling the product:
As soon as they receive the finished goods, retailers sell them to the customers.
Issues in a supply chain:
The ability to track the product at every stage of the supply chain is now a crucially important step. The customers have more demands than before, they demand more data regarding where the products come from and what stages have the raw material gone through before coming to them. Sharing authentic information about every step develops the trust of consumers in a brand. However, it is not an easy thing to do. The lack of traceability in the supply chain process causes consumers to lose trust in the brand. If for instance, there is an outbreak of food-borne disease, it takes days or sometimes weeks to trace the actual cause of it.
The cost to transfer goods from one place to another elevates very quickly. These include fuel of transport, logistics, manpower, the investment in software and management workers.
Fraudulent data issues:
The parties involved in the transfer of goods sometimes may be corrupt or disloyal to each other. They may replace the data of the goods.
Other times, the parties may be honest, but the data they transfer is fragmented or incomplete, because of less knowledge of each other’s plans of action. For instance, the information about the quality of the raw material of a certain good may be misinterpreted by someone and forwarded to the other party further. Poor communication results in poor records of information, inefficiency, waste, recalls, and customer dissatisfaction.
The safety of the products matters a lot to customers these days, especially if its a food product. They value their health over everything else. Hence, they demand a lot more from the manufacturer and retailer. The manufacturers have a lot of pressure to produce the best quality products they can. Unpleasant weather conditions, poor storage spaces and transportation delays all affect the safety of a product.
It takes days and sometimes weeks, to sign an agreement between a manufacturer and supplier, and a customer and vendor, just to initiate a supply chain. The contracts take even more time as they require a lawyer and banks.
A real-world example of a supply chain:
The Coca Cola company, headquartered in Atlanta, has one of the biggest supply chain systems in the world. they sell different kinds of beverages but their specialty is Coca Cola itself. Coca Cola company manufactures its concentrated syrup and then sells it to one of its partners like Coca Cola enterprises. The company has a franchised distributed system for the distribution of this syrup to local bottlers all around the world. These enterprises combine concentrated products with different ingredients to manufacture and package the drink. Then they market the product to retailers, and finally, to customers.
The supply chain of the Coca Cola company is spread across more than 200 countries. It has always been a challenge for the company to manage the supply chain. Because of its complexity, it has been inefficient, costly and lacked visibility. All of the cross-company transactions had been inefficient. The company wanted to elevate the cash flow in the supply chain and bring about efficiency.
How is Blockchain revamping the supply chain industry?
Blockchain is more than just a way to transfer digital currency to parties directly. Its three main properties; Transparency, Immutability, Scalability help supply chain management in tons of ways.
The transparency in supply chain management provides the companies with a clear view of all the information and data with manufacturers, vendors, retailers, and customers. It helps in the tracking of the goods, where they are at the moment, their delays, which path they are taking, where they are stored and at which time they will be delivered to the customers. The chances of misplacement or wastage of a product are nearly impossible this way. Any mishap can be reported directly without any efforts of parties, or costs of transportation.
The immutability of Blockchain technology eliminates the corruption aspect in the supply chain. So no fragmented data or miscommunication. No one can change or edit the transaction record, payment record or any other sort of information once it is sent through a Blockchain-based system. Blockchain's scalability replaced their paperwork written and checked on by workers, with efficient and trustworthy Blockchain-based systems. It also helps to identify issues with the products faster. The negotiations become faster between parties, adding potential to the overall communication.
Blockchain adds security to the system, by not letting any third party accessing the information entered by the workers of an organization. Moreover, the potential of Blockchain to connect different nodes or ledgers with each other, keeping their integrity in place is a property that corporations strive to implement in their systems to build brand trust in customers. Permissioned Blockchain platforms, such as Hyperledger Fabric, are now helping companies like Wallmart to not only trace their food products but also maintain the integrity of data among different parties involved in the supply chain process.
A real-world example of a supply chain with Blockchain:
Traceability of products with Hyperledger Fabric:
Walmart is a multinational retail company, headquartered in America, that operates a huge chain of supermarkets, departmental stores, clubs, and grocery stores. Walmart is the world’s largest company by revenue according to the Fortune Global 500 list, 2019. It is also the largest employer in the world, with 2.2 million employees working across the globe, in 11,438 stores and 27 clubs in 27 different countries. Walmart has a relatively larger and more complex food supply chain network than many other corporations that operate hypermarkets. It is hard to keep track of food supplies while they are being delivered to and from different points in the supply chain network. Walmart has been failing in implementing systems to help in the supply chain. Luckily, they decided to explore Blockchain technology.
The food safety and technology team at Walmart partnered with IBM and planned to run two proof of concept projects to test how the distributed ledger technology, ‘Blockchain’ could help in their food supply chain network. The POCs could trace two items in two different countries. Mangoes in the US store, and pork in the China store.
The Hyperledger Fabric blockchain-based food tracking and traceability system finally worked! The time to trace the provenance of mangoes used to be 7 days before the implementation of this system. Now, it is 2.2 seconds! For the pork tracing, the system allowed uploading a certificate of authenticity to the blockchain, which brought in more trust in the system. According to a case study written on this POC experiment, Walmart had been building centralized systems that were inefficient for such a supply chain ecosystem. That was the mistake they have been doing. When the IT department put forward the idea of a distributed ledger system for their ecosystem, Walmart team started imagining the possibilities.
After testing, Walmart deployed the new system to trace the origin of 25 different products and 5 suppliers. Currently, it is tracing products like poultry, fresh produce, dairy, and multi-ingredient products with the latest Hyperledger Fabric blockchain-based supply chain system. It plans to deploy it to further products in the near future.
Take a look at the actual case study published by Walmart here.
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