Supply chains are more complicated and depend on each other more than ever since the global economy is more integrated than before. There are many distinct people, rules, and parts of the legislation that make up logistics networks. They get raw materials from faraway places and then bring them to cities. Even though technology has come a long way, businesses still face problems including fake products, unclear origins, paperwork that isn’t efficient, and data that isn’t shared.
Blockchain is a ledger system that is spread out and can’t be changed. It says that it will change how supply chain management (SCM) works by making it more reliable, secure, efficient, and open than ever before. Blockchain-based supply chain management (SCM) solutions are going to change how firms move items and information around. This is even more true now that Web3 is getting more widespread. Web3 is the next step in the Internet’s evolution, focusing on users and being decentralized.
In the Web3 age, blockchain is changing the way supply chains work in five different ways that this article talks about. It also advises businesses and developers how to use this technology in the real world and answers common questions to help them get the most out of it.
1. Full transparency and the ability to keep track of everything from start to finish
1.1 The Issue of Not Being Able to See in Traditional SCM
In traditional supply chains, it’s usual for people to write things down, have paper documents that aren’t linked to each other, and have databases that aren’t linked to each other. It’s hard to tell what’s going on since things are so broken up. Customers still don’t know how a product gets from the farm to the table, and manufacturers can’t always be sure that parts come from secure sources. IBM’s survey found that 56% of customers would switch brands if they couldn’t be sure that a product was real.
1.2 How Blockchain Keeps the Same Provenance
A blockchain is a record that can’t be changed and has a date and time on it. It connects all transactions, from moving raw materials to keeping track of quality-control tests, using encryption. Everyone involved—suppliers, manufacturers, transporters, and retailers—writes information to a single ledger. This makes a chain of custody that is always there. The cryptographic hashes will stop working if someone tries to change old records. This keeps the data safe.
For instance, Walmart has built a Hyperledger-based system for keeping track of leafy greens that cuts the time it takes to find out where food comes from from seven days to two seconds. This makes it significantly less likely that diseases spread through food.
1.3 User Interfaces That Work with Web3
People and corporations can both be open in the Web3 way. People can use decentralized apps (dApps) and mobile wallets to scan QR codes or NFC tags and see the complete history of a product as it happens. This builds brand loyalty, shows “proof of ethical sourcing,” and makes compliance more visible. All of these things may be seen on a public or private blockchain.
2. Smart contracts help things run more smoothly on their own
2.1 The Problem with Paperwork
Writing out bills of lading, invoices, and purchase orders by hand can make things take longer, cause mistakes, and generate fights. Administrative costs can make up as much as 30% of all logistics costs for global supply chains.
2.2 Smart Contracts: Promises That Are Kept
Smart contracts are pieces of code that are stored on a blockchain and execute by themselves. They automatically make payments, release products, or change ownership when certain conditions are met. Once a GPS-enabled IoT sensor confirms delivery, a smart contract can send payment to the carrier without anyone having to do anything.
For example, Maersk and IBM’s TradeLens platform uses smart contracts to automatically make bills of lading, clear customs, and unload cargo. This can make it take up to 40% less time to process documents.
2.3 Less time spent on problems and more money coming in quickly
By getting rid of manual reconciliation and making sure that contract terms are followed exactly as they are written, businesses can avoid disagreements, speed up cash flow, and lower legal costs. Real-time audit trails also make it easier to deliver reports to regulators and undertake audits.
3. More ways to protect against fraud and greater security
3.1 Problems with Old Systems
Every year, businesses lose billions of dollars because of fake parts, fake invoices, and wrong diversions. It’s hard to find out where fraud happens in long supply chains because there isn’t usually one place to get all the right information.
3.2 Keeping an eye on the security and trustworthiness of cryptography
Cryptographic hashing, digital signatures, and consensus mechanisms are some of the main factors that make it very impossible for anybody to change data on the blockchain. Decentralized identity (DID) standards also let everyone involved, from suppliers to customs officials, have credentials that can be checked. Only people who have permission can see or write confidential information.
It is thought that fake goods would cost the world $4.2 trillion by 2022, with supply chains being the main targets. Blockchain-based serialization and anti-counterfeit tags can decrease these losses in half by giving each item a unique, verified ID.
3.3 The ability to handle single points of failure
Blockchain is made up of several nodes, thus no one node can change the whole ledger. Centralized databases are open to insider threats and DDoS attacks, however this is not the case. You have more control with permissioned blockchains, which helps keep privacy and openness in balance.
4. Making tokens out of assets and getting money from a variety of areas
4.1 Problems with getting money for foreign trade
Small and medium-sized businesses (SMEs) often have trouble getting trade finance at a good price since they don’t have clear collateral and there is a risk of default. According to the World Trade Organization, trade financing is out of balance by $1.5 trillion a year.
4.2 Turning money and stocks into tokens
In the Web3 age, digital tokens can show things like invoices, inventory, and even purchase orders. You can split these tokens up, trade them, or use them as collateral for decentralized finance (DeFi) services. This makes it simple to sell products that would be hard to sell otherwise.
IBM’s Trade Financing Network is a test project that leverages blockchain to let banks back loans with tokenized bills of lading. This could make it cheaper for exporters in poor countries to get money by up to 20%.
4.3 Dynamic Discounting and Financing Between Peers
Small and medium-sized businesses (SMEs) can work directly with institutional or individual investors in decentralized marketplaces. Smart contracts can figure out early-payment discounts on their own by looking at risk evaluations in real time. This makes it easier to get money from clients and makes liquidity pools bigger.
5. Following the rules and keeping an eye on the world around you
5.1 The growth of ESG and pressure from regulators
Investors, consumers, and regulators all care a lot about environmental, social, and governance (ESG) standards. Companies now have to tell people how they treat their workers, how they get their goods to the top, and how much carbon they emit into the air.
5.2 Keeping an Eye on the Environment in Real Time
Businesses can keep track of environmental data (such CO₂ emissions and energy use) at every step of the supply chain when they utilize IoT sensors and blockchain together. You can check and confirm claims of sustainability because the data can’t be modified and has a time stamp.
Provenance, a blockchain platform, helped a cosmetics company get a “zero‑deforestation” certification by letting it keep track of the carbon footprint of its palm oil supply from start to finish.
5.3 Sending compliance reports automatically
When certain limits are reached, such as the most emissions allowed, smart contracts can automatically send out alerts or make compliance reports. When regulators can quickly and safely get the forms they need, they can do their jobs better.
How to Get Things Done
- Choose the Best Blockchain Platform
- Public vs. Permissioned: Ethereum is a public chain, therefore anyone can use it. But it might not be able to protect your information or help it grow. Corda and Hyperledger Fabric are two examples of platforms that require permission. They only let some users in and can handle more traffic.
- Interoperability: Use standards like EPCIS and GS1 and cross‑chain bridges to connect networks that can’t talk to each other.
- Make explicit plans about how to do things
- Set rules for how to get to an agreement, who may see data, and what each person’s job is.
- Let the blockchain settle disputes and improve smart contracts.
- Link up with earlier systems
- Use middleware and APIs to keep data on‑chain and off‑chain in sync all the time.
- RFID and the Internet of Things (IoT) let them gather data on their own.
- Your top priority should be to respect the rules and protect people’s privacy
- Keep personal information off‑chain and encrypt sensitive locations to keep them safe. To get to them, use hashes on‑chain.
- Follow the rules set out by the GDPR, CCPA, and your field.
- Pilot, Measure, and Scale
- Begin with focused proof‑of‑concepts, such a single location or product line.
- Set key performance indicators (KPIs) like how quickly you can get funding, how long it takes to trace a transaction, and how much it costs to do a transaction. Then keep going.
Questions that are often asked (FAQs)
- What is Web3, and how does it interact with supply chains that use blockchain?
A1: The Internet is getting better and better, and Web3 is the next stage. People own their data, identities, and digital goods in it. People who work in supply chains can now talk to each other, tokenize assets, and use dApps that link directly to blockchain networks. This makes everything more useful and open than it has ever been. - Is it costly to set up blockchain solutions for supply chains?
A2: The starting costs depend on the size, complexity, and platform you choose. But a lot of organizations see a good return on investment (ROI) in 12 to 18 months by cutting down on fraud, paperwork, and costs related to money. Pilot projects usually show that costs can go cut by 10% to 30%. - How safe is blockchain against hackers and anyone who want to change it?
A3: Blockchain can’t be changed because it uses decentralized consensus, digital signatures, and cryptographic hashing. There can be problems at the application layer, but adopting best practices for keeping keys safe, checking smart contracts, and only letting certain people make choices greatly lowers the risks. - Can blockchain help small enterprises make their supply networks better?
A4: Yes, of course. Tokenization and DeFi connections make it easier for small and medium-sized businesses to get paid and do business in other countries. When everyone on a blockchain network shares the costs of infrastructure, it is also easier for others to get part. - When things happen in the real world, what do smart contracts do?
A5: Smart contracts use “oracles,” which are trusted pieces of software that bring data from outside the blockchain network, such IoT sensors, GPS trackers, and customs declarations. Two very important things you can do to make sure the information is correct are to use reliable oracle suppliers and check it with more than one source. - Will blockchain replace the SCM software we use now?
A6: Blockchain doesn’t take the place of enterprise resource planning (ERP) or warehouse management systems (WMS); it works with them. APIs help keep data flows in sync, protect prior investments, and add new features. - What steps do I need to take to use blockchain in my supply chain?
A7: Start by writing out all of your steps from start to finish and looking for problems, including delays in getting money or missing connections in traceability. After that, put together a team from different departments. Then start a little pilot, maybe by only keeping track of one SKU, see how it goes, and slowly grow it.
Blockchain and Web3 are changing the way we think about running the supply chain. They answer problems that existing systems have been unable to handle for decades by offering irreversible transparency, automatic efficiency, better security, new ways to pay for projects, and tracking of sustainability.
The network effect will grow as more and more businesses, big and small, start using blockchain in real life and in test projects. More people will join, the information will get better, and trust will develop. All of these things will make the network stronger and more helpful. Companies who use these new technologies the right way now will not only make their businesses run better and lower their risks, but they will also get ahead of the competition in the future of global trade, which will be less centralized.
References
- IBM Institute for Business Value. “Meet the consumers driving change in supply chains.” IBM, 2021. https://www.ibm.com/thought-leadership/institute-business-value/report/consumer-supplychains
- Walmart. “Walmart and IBM Food Trust: Provenance and Traceability.” Walmart, 2020. https://www.walmart.com/food-trust
- McKinsey & Company. “Digitizing the supply chain: Breaking the last mile barrier.” McKinsey, 2022. https://www.mckinsey.com/business-functions/operations/our-insights/digitizing-the-supply-chain
- TradeLens (IBM & Maersk). “How TradeLens drives efficiency in global trade.” TradeLens, 2023. https://www.tradelens.com/resource/
- OECD/EUIPO. “Trends in Trade in Counterfeit and Pirated Goods.” OECD Publishing, 2022. https://www.oecd.org/gov/risk/trade-in-counterfeit-and-pirated-goods.htm
- World Trade Organization. “The Global Trade Finance Gap: A Market Failure.” WTO, 2021. https://www.wto.org/english/news_e/pres21_e/pr876_e.htm
- IBM. “Blockchain in Trade Finance: Unlocking Working Capital and Efficiency.” IBM, 2023. https://www.ibm.com/blockchain/trade-finance
- Provenance. “Case Study: Carbon Tracking in Cosmetics Supply Chains.” Provenance, 2022. https://www.provenance.org/case-studies/carbon-tracking
