How Blockchain Technology Has Revolutionized Global Supply Chains
Updated: Oct 25, 2021
Today, supply-chain transparency is more important than ever. Blockchain technology is at the forefront of today’s global trading industry. This cloud-based documentation system promises to untangle complex supply chains and provide an unprecedented level of transparency. Experts believe that it could become the new gold standard for business-to-business transactions.
How Blockchain Technology Works
A blockchain is a distributed database that allows multiple authorized parties to securely access confidential and sensitive information. These databases address security challenges and guarantee that records cannot be altered or falsified. Robust encryption systems make sure that customer data, financial records, legal documents and product certifications are only visible to the right people. This increases the confidence that companies place in their trading partners.
In essence, a blockchain is a shared digital ledger that records and verifies transactions completed by network participants. Procurement professionals currently use blockchains for all types of business tasks, but they’re particularly useful for processing and reconciling invoices and payments. Some experts believe that the technology could eliminate some back-office administrative jobs. Here are several examples of how companies use this technology to categorize, protect and review sensitive information.
Big Data and Blockchains in the Financial Industry
Blockchains are useful in the financial industry where record keeping is of the utmost importance. Traditionally, banks created separate databases for organizing departmental information, including transactions and customer records. This made it difficult to complete internal audits and processes that involved customers and other banks because they required a series of cross-checks. Until recently, this process was time consuming and expensive. Now, blockchains integrate the information.
By replacing isolated department-specific databases with a distributed system, companies can increase efficiency and productivity while lowering the costs of core processes in administrative and middle-office departments. There’s also evidence that the technology improves data quality.
With distributed databases, network members collaborate on verification and documentation efforts. Each block contains a series of entries that cannot be changed once they have been recorded. The database also uses authenticated index structures and tamper-evident data logs. This is a critical part of the technology that greatly improves supply-chain governance and protects the chain of custody.
To maintain data security, administrators adjust access credentials according to the user’s authority. For example, in-house analysts might be qualified to view a wide range of data, but external participants may only need access to information that pertains to their organization. Blockchains have numerous benefits in industries where upstream verification is needed to satisfy regulatory requirements.
Distributed Database Trends
According to estimates, more than 80 percent of the world’s largest financial services corporations have made substantial investments in blockchain systems. Over the past few years, companies have spent more than $1.8 billion to implement the technology. Experts say that by 2022, the potential savings will exceed $20 billion.
In an age where fraud, data breaches, appropriation of trade secrets and identity theft are increasingly common, companies quickly recognized the security benefits that blockchains offer. Systems instantly verify each entry that’s submitted by network members. This eliminates the inefficiency of communicating with third-party liaisons. Now, both parties can immediately authorize transactions. Blockchains also eliminate the uncertainties of manual settlement methods.
A New Era of Supply-Chain and Procurement Transparency
Distributed databases easily track transactions between multiple organizations. Blockchain technology streamlines business-to-business sales and dramatically increases transparency when payments and commodities change hands numerous times. Improved transparency impacts all global supply chains. The financial benefits of this valuable technology are already worth billions of dollars.