You've probably heard the phrase "blockchain technology" tossed around a bit lately. But what is blockchain technology? How does it affect procurement?
This video from Wired does a superb job of describing blockchain technology. In it, researcher Bettina Warburg explains it to five different people, starting with a child and working up to an expert.
In the old days, people could trade supplies with each other. Over time, this process grew complicated as other factors came into play. Much like the complex supply chain with its many stages, invoices, payments, companies, and individuals involved. However, it lacks interoperability, traceability, and transparency. And its data is either unavailable or inconsistent.
Supply blockchain technology will overcome these problems while adding value and transforming supply chain and logistics. The supply chain blockchain technology will help with supplier payments, contract bids and executions, and product traceability. When the blockchain becomes the universal supply chain operating system, it will boost logistics security, transparency, and scalability.
At one time, supply chains were simpler, when most of the commerce took place locally. Now, manufacturing can occur in another country, and sometimes in multiple countries. This affects the company's procurement process as the involved parties will have to coordinate manufacturing, storage, and logistics sites across borders.
Another challenge is the fast-changing market demands. This results in shorter product life cycles and forces companies to redesign their supply chain to adapt to product changes. Then things happen. What if a supplier's lead time changes? This affects procurement activities and inventory levels, which impact costs and optimization. When the right product in the right quantity doesn't show up in the right place at the right time, it'll lead to higher costs and customer service problems.
One of the biggest benefits of logistics blockchain technology is that companies and individuals can transfer funds anywhere in the world without a third-party intermediary like a bank. This helps supply chains operate on a global scale.
Companies with merchandise must be able to trace every product to its source, from its beginning until it reaches its customer. Blockchain can record where each product and its parts come from. For example, De Beers diamond company can track its diamonds from the point of mining to shining on a customer's finger. This capability helps De Beers ensure none of its stones are conflict or blood diamonds. Customers will know they have the real thing. Blockchain technology also reassures customers they're supporting a company with sustainable manufacturing and environmental stewardship.
Even with logistics blockchain technology simplifying things, getting the product made is only part of the equation. Inventory, transportation, distribution, and logistics still must be factored in.
However, logistics costs have risen for the first time since 2009 according to the 29th Annual State of Logistics Report. This report notes companies face a driver shortage, which leads to fewer people and eyes on the company's assets. The company needs to find a more cost-effective distribution security to prevent cargo and vehicle theft.
With the higher cost of logistics, what options do companies have for distribution and logistics? Distribution center security technology saves on costs with services like live video monitoring and remote gate access control protecting the company's most valuable assets.
Companies that implement supply chain blockchain technology will operate more efficiently as it will remove much of the supply chain complexity. Are you ready to revolutionize your supply chain?
If you'd like to learn more about our customized logistic security solutions, please contact us.