4 minute read
Insight: Blockchain is an enabler for supply chain transparency and business growth
Recent research by the Economist Intelligence Unit has uncovered significant issues in the way multi-national firms manage the ethical performance of their supply chains. With less than a third of organisations addressing issues such as ethical breaches or supply chain corruption, this represents a major concern across all industries. Terri Hiskey from Epicor looks at the opportunities blockchain offers for a transparent supply chain and business growth.
Supply chains bear the responsibility of reputation for a brand. Recent problems in the supply chain have resulted in frozen foods being recalled over warnings of a potentially deadly listeria outbreak. It has also generated costly, and damaging challenges for aviation companies.
A lack of trust can become a major issue for manufacturers that want to earn and maintain customer loyalty. A Harvard Business Review study showed that retailers with a high level of trust in the manufacturer generated 78 percent more sales than those with a lower level.
In an environment where over half of consumers are willing to pay a premium for services from companies promoting social responsibility, now is the time for manufacturers to prioritise supply chain transparency.
Supply chain issues are also a costly business. A prime example here is KFC, who experienced massive supply chain issues after switching its logistics service provider—losing up to £4.2 million a week in the peak of its well-publicised chicken outage.
A challenge facing manufacturers is how to achieve supply chain transparency while still remaining efficient, and enabling growth. Here we explore the role blockchain can play.
Increasing visibility in the supply chain
Blockchain (which refers to a distributed ledger, where a list of transactions is stored in multiple participating servers rather than on a central transaction server) is a promising technology that is being adopted quickly in the manufacturing industry.
A global study conducted earlier this year showed that the consumer products and manufacturing industry has been the fastest to adopt blockchain technology, with around 74 percent of respondents in either the experimentation or the production phase of blockchain development.
At a time when companies are dealing with complex and non-integrated supply chain networks, this relatively new technology has the potential to resolve some of the major challenges of this increasingly interdependent environment.
Blockchain can increase visibility throughout the supply chain, decrease administrative costs, and improve traceability. As an immutable record of events without a central authority, the technology is being hailed as a breakthrough innovation that could help prevent supply chain scandals in the future.
The theory goes that because each party in a supply chain has a copy of the blockchain that they can access locally, no one has to log into anyone else’s system to enter data. No one has to rely on emails to keep paperwork in order, and when an event occurs all parties can be notified automatically.
Some businesses are already putting blockchain to work to great effect. For example, MIT is building a platform that organisations can use as a blueprint for blockchain applications—meanwhile, IBM has launched a service that allows businesses to use blockchain to improve record-keeping. Toyota, for one, has already been experimenting with IBM’s solution, to see how the company might be able to use blockchain to track high-value items through its supply chains.
Likewise, Everledger is looking at using blockchain technology to help trace where diamonds entering the market have come from, determine their authenticity, and check if they are linked to forced labour or corruption. In agriculture, Deloitte predicts that farmers will soon be able to record crop data via blockchain. In a recall scenario, this means that they will be able to quickly match tainted products to supply chain records, and accurately trace the size and expense of the process.
Joining forces to solve the supply chain headache
Whilst blockchain is a powerful tool with great potential, it can‘t single-handedly bring transparency and accountability to the supply chain, and shouldn’t be considered as a standalone innovation.
Blockchain will be most powerful when it’s combined with other solutions, such as a business’ existing enterprise resource planning (ERP) system. Because of an ERP system’s ability to integrate with multiple platforms, and filter relevant data, blockchain can be seen as a new plug-in tool that helps expand analytical possibilities and give users a more comprehensive view of what’s happening in their business. Ultimately, this will enable more accurate decision making.
A transparent future
We are living in a world where businesses are under increasing scrutiny, where customer trust is invaluable, and where the ability to quickly demonstrate product provenance is vital. The transparency and incorruptibility of blockchain makes it a revolutionary force for the supply chain—and when integrated with an ERP system, this technology can provide business leaders with real-time, actionable data.
With blockchain technology at their fingertips, manufacturers can bring extended visibility and clarity to their operations—using these insights to support business growth and improve ethical performance.
To find out more about how Epicor ERP can support business growth please visit our Business Growth Hub.