Supply Chain and Operations Management Weekly Tips

- One of the most interesting new technologies to emerge recently is blockchain. While blockchain started with digital currencies, the possibilities for supply chains are huge. In this video we'll look at what blockchains are and why they could be a useful tool for your supply chain. The easiest way to understand the blockchain is to think about it like a ledger. Imagine that you had a logbook where you kept track of every sale you made. Every time you make a new sale, you'd record that transaction in your ledger.

With a blockchain, each of these transactions is recorded in a block of data, and the blocks are all tied together in sequential order so they form a chain. You can have many copies of a blockchain so you can share copies with your customers and with your suppliers. You might even share copies of your blockchain with your competitors so that you're all sharing information on the same platform. Now in order to keep all of the copies of the blockchain synchronized, you set rules for who can add new blocks to the chain and what information they can include.

You can also set permissions for who can read the information in each block. Some blockchain platforms allow you to create smart contracts. Smart contracts are just like legal contracts except that they execute automatically. For example, a smart contract could automatically transfer money from a customer's bank into yours once they acknowledge receipt of a shipment. So blockchains could help solve three of the big challenges that are present in today's supply chains.

First, they can keep transaction information synchronized between different systems, and between different participants. In other words, they'd make it easier for everyone in a supply chain to collaborate. Second, they could improve the reliability of supply chain data by make sure that everyone's using one set of books and automatically enforcing the rules around who can make entries. Third, blockchains could increase trust across the supply chain.

In international transactions, for example, blockchains could make it easier for banks to issue letters of credit and for customs officers to collect duties and and clear shipments. I like to say that supply chain managers need to synchronize three flows: the flow of money, the flow of material, and the flow of information. Blockchain-distributed ledgers provide a new approach to managing information flow. That could soon change many of the processes that occur in a supply chain.

Blockchains aren't the right answer for every challenge, but it's a good idea to learn more about them. Because there's a good chance that blockchains will play an important role in the future of your supply chain.