Supply Chain Management: Traditional Database Vs. Blockchain

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Foremost, what exactly is supply chain management? So, supply chain management is the whole series of activities of regulating and managing the delivery of products and services to buyers and users in the most efficient procedures. It involves five processes which are:

1. Planning 

Planning is an integral part of an organization’s supply chain, aiming to have a more significant edge over its competitors. It helps sort out ideas that would meet the standard of the market, considering the best options for materials, partners, potential clients, and so on. It includes the procedures on how theories are implemented and who will be taking charge, and so on. This activity is usually coupled with forecasting processes at the business unit level.

2. Sourcing

Sourcing is identifying prospective raw materials and services based on the planned or actual demands in the market. It also includes spotting potential vendors or business partners who will be buying and reselling the goods as well as the logistics involved to bring the products to the factory.

3. Acquiring Raw Materials

The acquisition of raw materials refers to the harvesting and transporting commodities into manufacturing establishments or buyers worldwide. Raw materials are natural or organic resources acquired from reliable suppliers. There are the raw materials and products bought and sold in the market as primary factors for production or manufacturing. 

There are different types of raw materials, which include the following:

  1. Mine-based raw materials- gold, copper, diamond, coals, metal, crude oil, etc.
  2. Animal-based raw materials- meat, silk, skin, horn, leather, bones, hair, tusks, etc.
  3. Plant or tree-based raw materials- cotton, fruits, vegetables, flowers, trunk, leaves, and many others.

4. Manufacturing

This process refers to molding raw material into a new product using manual labor, machines, tools, and chemical components. An example of this would be a crocodile skin manufactured into a high-quality leather bag. Another one would be coffee beans harvested from the farms and are manufactured into flavored coffee packed in bottles or plastic sachets.

5. Delivering

Part of supply chain management is contacting potential clients and customers to buy the goods and services. It also includes the transportation of the manufactured goods to the clients or customers by air, trail, and rail.  

The following are the three entities involved in supply chain management:

  1. Supplier

There are various kinds of suppliers, but essentially it is an individual or organization that delivers goods and services to customers. It may also refer to a unit that sources and procures raw materials and delivers them to manufacturers. Or it can also be a manufacturer and distributor that provides bulk goods to another reseller or client. 

An example of this would be the grocery departments. Without the goods, the establishment wouldn’t exist or operate. It needs diverse suppliers of various products to sustain its existence. Farmers, for instance, deliver rice based products, sugar, and more while fisherfolks provide them with fish.

  1. Producer

Producers refer to an entity that procures, processes, and produces raw materials into new materials and materials distributed to the different wholesale and retail enterprises. An example of producers would be manufacturing clothing from natural materials and into signature designs that are procured by mall establishments to sell. 

  1. Customer 

Customers are individuals or organizations who buy and use the services or products on retail (B2C) or wholesale demand (B2B). They can be the clients who buy directly from the manufacturers, suppliers, or producers with the intent of reselling them. The best example for this would be the small store owners who purchase from the grocery stores to sell them at a higher price. 

Lastly, customers can also be those who purchase for personal use. An example of this would-be clients or customers who buy groceries or any products in establishments such as make-ups for personal use.  

Now that we have established what supply chain management is, let us examine what a blockchain is. Blockchain is the digitalized transaction used by almost every high-end industry in contemporary times. It stores transaction information such as product/service price, assets, and ownership, providing more secured, decentralized, and easy-to-manage transactions.  

Before the digitalized database became a trend, managing supply chains was a laborious and painfully extensive operation, especially for industries with expansive set-ups. With the blockchain gaining its position in the modern economic era, various business sectors are already exploring its use on their platform, ramping up the traditional method. 

Despite the emergence of blockchain, traditional supply chain management is still observed in modern society, and they are operated mainly by small-scale businesses. Although the conventional supply chain setup offers promising results, it is very costly and not as transparent and efficient as blockchain. So, which is better? What is the difference between the two?

Here are the key differences between a traditional supply chain management and blockchain managed supply chain:

  1. Easy-to-Access Company Information

Easy-to-access company information is a big challenge to traditional supply chain management, making blockchain more of an attractive option to execute. This is because most often than not, standard setup requires their company background, logistics, and transactions printed on paper. With this, the risk of tampered documents is likely to pan out.  

Also, documents will need a laborious and time-consuming effort of storing them into safes and reacquiring them for review purposes or any transaction for that matter. Something that will be a headache during emergency meetings for any business.

With the use of blockchain, company information will be much more accessible with no trouble. You can click on the digital data, and automatically, you receive them just seconds or minutes later. 

  1. Secured Company Data

With the spurring competition in the industrial world, one of the most potent assets of a company is its most prized possession, the company data. It contains the background, the transactions, and other highly confidential information stored away from prying eyes that might use it to destroy one’s hard-earned empire. 

Why is it so essential to secure your data ? Well, just like a famous and most sought-after dish with a secret ingredient that makes it more delectable than the others, a company also has its private leverage or data that makes its reputation, products, and services on top of the market. And of course, you would not want your competitors taking a peek, because it could hurt your competitive advantage. After all, you wouldn’t want your effort on planning and establishing your business secrets to go to waste as it would hurt your competitive intelligence.

This is another plus point to blockchain in the industry as it offers more secure company data. Blockchain is equipped with cryptography algorithms that make it safe for information storage. Basically, cryptography refers to a technique that uses complex methods of securing the process of storing and transmitting any company activity. 

More importantly, it assures access to confidential data only to the intended entity. With the execution of blockchain, the risk for theft and altercation problems are reduced if not eliminated as a whole. 

  1. Reduced Cost

Reducing cost is one of the primary goals of businesses or organizations. Reduced costly activities would mean more profit streams. Under the traditional supply chain management, paper works and manual administrative tasks are required to operate to thoroughly review every detail, transaction, and activity of the organization or business. Both, of course, demand money for labor and materials used in the process or activities. A very costly one for businesses.

But, with blockchain, it’s a different story. All transactions will be via digital platforms, given the information is already stored online. This makes it easier for companies to process transactions online where it is possible to accept payment using online media such as bitcoin or any blockchain payment settlement.

Another advantage of using blockchain is the use of automation keys that allows the companies to lower or eliminate their overhead cost on legal aspects such as procuring contracts drafted and approved by lawyers, the cost accounting procedures, and other expenditures offered by external services.

Now that we have understood what a supply chain is and its management is, including the differences between the traditional supply chain management and supply chain management using blockchain, we can weigh out which model is more promising and provides a more sustainable result.

This is an essential factor to note, especially if you are considering opening a business of your own. It will provide you with substantial information on which to base your choices from. You can keep up with your competitors in whatever industry you are planning on going after . In that case, intelligent and creative execution of the blockchain platform will give you a better chance to get an edge over everyone in the industry. 

It is a good time to  know more about the importance of blockchain, how it is implemented, and so on. Most importantly, review the feedback of the different industries that embraced blockchain so you would know how successful it is and how they could fully utilize and learn from them.

Choose well and most especially implement well. Remember, blockchain can be a massive advantage for your business or organization, but if you lack research on how to execute it smartly, it will not get you anywhere. So what’s it going to be? A traditional set-up? Or a blockchain-operated supply chain?