In many industries, the lack of transparency and accountability across complicated supply chains is a huge problem. Brands aren’t always able to keep a watchful eye on suppliers and make sure that each part of their supply chain meets the standards they expect. A good example of how this can affect a brand is what happened to Chipotle in 1995 when the share price dropped to a three year low after some of their beef was contaminated somewhere along the supply chain, leaving 55 customers ill.
A radical solution called blockchain is now being explored by a number of companies and start-ups. This technology entails titles, records and activity logs being transferred across the supply train to track the flow of goods and services across borders and between businesses. Users are able to attach unique, digital tokens to goods as they progress from production to shipping and delivery phases and as they pass between different players that form part of the process.
The core system of blockchain is similar to bitcoin, where computers that are owned by separate entities use a cryptographic protocol that continuously validates updates of a commonly shared ledger. No single company owns or controls the technology or system and it resolves the challenge of accountability and disclosure that exists in many supply chains across the globe. The relevant information that the stakeholders in the supply chain use can be uploaded in real time, which removes time-consuming reconciliation that is prone to human error. Each stakeholder also has greater visibility of the activities related to their business transaction and the movement of their stock or goods.
The advantages that this technology offers means that corporations will be able to have dynamic demand chains instead of rigid supply chains, which will help them use their resources more efficiently and have far greater flexibility to find markets and with price risk.
Full thanks and acknowledgement are given to www.hbr.org for the information contained in this article.