How Can Blockchain Improve Supply Chains?

Allison Champion
4 min read
September 9, 2019
Modified: March 20, 2023

Blockchain is revolutionizing warehousing and logistics, and changing the way we operate our supply chains. But what is blockchain and how can you use it to improve your supply chain? We’re going to answer these questions and show you just how beneficial blockchain can be to your business.

What is Blockchain?

Blockchain is a collection of digital information (blocks) stored, bound, and secured (i.e. chained) together in a public database using cryptographic principles. Think of it as a digital ledger book programmed to record not just financial transactions, but almost anything of value.

Blockchain is built on three pillars of technology; decentralization, transparency, and immutability. Decentralization means blockchain does not depend on any single entity, such as a bank for safekeeping. The nodes (computers) connected to the network receive updated versions of the digital ledger every time a new transaction occurs.

With multiple copies of the ledger, it’s easier to discern the truth of every transaction made thus far in the blockchain, because any attempt to falsify the ledger would require someone to tamper with all the copies at the exact same moment.

How Does Blockchain Work?

The appropriately named blockchain consists of blocks of data strung together to create a digital ledger used for any transaction, including the exchange of contracts, shipment tracking notifications, and the transfer of funds.

Each block in the blockchain can store a range of information like the date and time of shipment delivery, to the dollar amount of your last vendor transaction. Every transaction is then recorded on to a block and distributed over many computers, or “nodes.”

A node initiates a transaction by creating a block, then digitally signing it with a cryptographic  key. Once the transaction is validated, it is added to a block, which is then propagated onto the network and confirmed.

The block then becomes part of the digital ledger then the process repeats itself, with the next block linking itself cryptographically to the back of the block before it. Transactions are reconfirmed every time a new block is generated.

Why is Blockchain Important?

Blockchain is important because it enables companies to enhance their supply chain with transparency, scalability, increased security and improved communications with suppliers, vendors, and nearly every part of their supply chain.

Blockchain is a distributed ledger, which that ledger information is spread across the network among all the nodes in the network. Since there is no central authority to control or manipulate the entire ledger, the ledger is practically immune to falsification, and therefore entirely reliable.

Though blockchain is most commonly associated with cryptocurrency, it can be applied to nearly every business. It has many applications, especially when applied to warehousing, logistics, and supply chain.

How is Blockchain Used in Supply Chain?

Think of how much faster you’d be able to pay your international suppliers if you didn’t have to channel funds through foreign banks. Think about how much easier it would be to ensure health and quality standards if you could rely on an infallible product history. With blockchain, all of this is a possibility.

Blockchain documents every time a transaction is made, thus creating a permanent history of a product, from manufacture all the way to final sale. This is extremely beneficial to global supply chains, as it dramatically increases efficiency, enables more effective communication with business partners, and simply makes it easier to conduct international business.

How Can I Use Blockchain to Improve My Supply Chain?

Many supply chains are already using blockchain technology. So many, in fact, that industry experts predict blockchain will soon become the standard operating system for supply chains. But how can you use blockchain to improve your supply chain? You can use blockchain to:

  • Record the quantity and transfer of product as its manufactured, processed and shipped along your supply chain.
  • Track purchase orders, receipts, and shipment notifications.
  • Link physical goods to serial numbers.
  • Connect critical information like RFID, QR codes, and barcodes.
  • Enable more transparent trade finance record keeping.

The Future of Blockchain and Supply Chain

As incredible as blockchain sounds, it is simply a mechanism to increase accountability. It eliminates missed transactions, notifications, errors, and makes it easier for you to communicate with all parts of your supply chain. 

As word of blockchains immutability spreads to nearly every corner of industry, we can expect it to become an essential part of warehousing, transportation and fulfillment – you simply can’t put the blockchain genie back into the bottle.

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Written By:

flowspace author Allison Champion

Allison Champion

Allison Champion leads marketing communication at Flowspace, where she works to develop content that addresses the unique challenges facing modern brands in omnichannel eCommerce. She has more than a decade of experience in content development and marketing.