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How peer-to-peer network can improve supply chain management

Over thousands of years, human beings have actually established a trade system in order to meet their needs. Regional and global trade has arisen because different regions have different commodities, so they can exchange these commodities for value. 

Since the advent of the Industrial Revolution in the 19th century, human beings have become more and more efficient in processing and packaging raw materials into value-added products and distribute these products around the world.

Proper management of the supply chain, which covers the entire trade process, from the extraction or collection of raw material, manufacturing process to distribution, is essential to the global trade.

Yet, speaking of globalization, it understandably makes supply chain management more complicated. For one, it involves lots of separate players handling different works covering the upstream and downstream aspects (cultivation, processing, packaging, transportation, stockpiling, etc.).

Understandably, the involvement of these separate players handling separate functions will create discrepancies in records, as well as data silos among them, making cross-process visibility and evaluation difficult.

Because of the above mentioned challenges, the current supply chain management system also suffers from a lack of transparency regarding the manufacturing process. Transparency on the manufacturing process especially becomes relevant in the age of “conscious capitalism”, where consumers want to make sure that the products they buy are sourced and manufactured in adherence with environmental sustainability.

Finally, the global supply chain system is also plagued with counterfeiting. According to the International Trademark Association and the International Chamber of Commerce, the global economic value of counterfeiting and piracy could reach US$ 2.3 trillion by 2022. A staggering amount indeed. Think about counterfeit drugs and the thought alone will give you the creeps! 

Fortunately, the peer-to-peer network (part of blockchain technology) can help make supply chain management more efficient, tackling the above mentioned challenges. This article will tackle the subject, in two different parts:

— How blockchain improves supply chain management

— Blockchain use in supply chain management cases

How blockchain improves supply chain management

Through the blockchain, the peer-to-peer network integrates and automates these processes, while recording the entire process on the supply chain, keeping track of the inventories and parties involved, covering the upstream and downstream elements. The records and inventories also cannot be taken down from the system, so they will be available permanently.

Furthermore, the peer-to-peer network also has some security advantages compared to the centralized, single-server system. For one, it involves group consensus to run its operations, so whenever any node in the network conducts anomalous activities to tamper with the system, the node will automatically be ejected from the system. 

Of course, no system is perfectly secure, so the peer-to-peer network can still be compromised. Yet, due to its decentralized nature, the peer-to-peer network can have higher resilience in the face of such disturbances as more nodes of the network will stay intact. This is different from a centralized system whereby once the server is being tampered with, the whole system will go down. 

Blockchain use in supply chain management cases

In 2017, America’s largest retailer WalMart announced its partnership with IBM to adopt blockchain into its supply chain management in order to monitor its food safety system more effectively. 

The peer-to-peer network system allows WalMart to backtrack on each food produce it sells (especially the fresh fruits and vegetables) right down to the farmer who cultivates it, thanks to the strength of blockchain technology mentioned above. 

WalMart became aware of the critical importance of improving its supply chain management and traceability through blockchain after Americans were dealing with another round of e-coli bacteria breakout associated with Romaine lettuces in 2017. The peer-to-peer network helps retailers make sure that the products they sell are manufactured free of contamination.

More and more multinational retailers such as Carrefour have been adopting blockchain to improve traceability of their food produces. Fast-moving consumer goods brands such as Nestlé and Unilever have also invested in blockchain to improve their supply chain management.

Blockchain has also been used to improve the effectiveness of logistics around the world, by sea, by air and by land.

The future looks promising in terms of blockchain use to improve supply chain management. More and more businesses have recognized blockchain’s potential in this realm as well. According to Gartner, by 2023, 30 percent of manufacturing companies with more than US$5 billion revenue will have implemented projects leveraging blockchain.

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