Blockchain can slash supply chain costs by $450 bn in Western Europe

Supply chain costs in Western Europe are witnessing meteoric rise with a convoluted network of suppliers, customers, retailers, and product manufacturers across the globe, and a recent study shows that these costs can come down drastically if the sector embraces blockchain.

The new-age supply chain involves highly tricky tasks such as sourcing, procuring, coordination, and distribution. Given the multitude of stakeholders involved, data sharing and management becomes extremely critical. Because blockchain provides a novel platform to register and store records, it can be used to address some of the most urgent issues concerning the sector.

Blockchain can axe supply chain costs drastically, study

A recent study conducted by the Cointelegraph and Swiss-based blockchain firm Insolar outlines the hindrances that cannot be resolved by existing technological solutions but could be efficiently addressed by blockchain, if administered the right way. It stipulates that the supply chain industry stands to gain anywhere between four-tenths to eight-tenths percent (0.4% – 0.8%) by merely employing blockchain.

And while that figure may seem meagre, in reality, the sheer volume of this sector runs in trillions of dollars. As the study reports, blockchain can potentially bring down supply chain costs by as much as four hundred and fifty billion US dollars ($450 billion). The study further claims that the technology, being self-sufficient, pays for itself, thereby implying a further reduction in operational costs.

It states that around ninety-four percent (94%) of leaders in operations management today vouch for blockchain’s potential in bringing about the much-desired digital transformation. Large-scale industries stand to gain at least twenty-five percent (25%) in gross profits.

The joint research also highlights the fact that as much as sixty percent (60%) of companies today end up overpaying their suppliers and vendors. Additionally, seventy percent (70%) firms have experienced “visibility gaps” in internal supply chain management, including discrepancies and cybersecurity risks.

Blockchain to complement existing technology, not replace it

According to the report, the existing data management tools are, at best, functional firewalls and extremely vulnerable to tampering and hacks. The current approach fails to offer spontaneity in data sharing. It makes it rather difficult to obtain information regarding a specific item on the supply chain list given its intricate web of history surrounding its origins, manufacturing, distribution, etc. It is not up to date, and undoubtedly not reliable, the report confirms.

Peter Fedchenkov, the founder of Insolar, takes the opportunity to point out the incorrect conception surrounding blockchain. He says that blockchain technology isn’t here to displace the existing IT systems entirely, but a means to supplement them. Contrary to common belief, it does not call for a paradigm shift but provides an approach to complement and boost the existing framework.

That said, it would be wrong to say that corporations aren’t taking notice of blockchain’s capabilities. Last week, one of the Big Four companies, KPMG, employed blockchain to seek clarity on several industrial processes. One of the largest employers in the world, Walmart, embraced blockchain in October to monitor shrimp supply from India. Last month also saw two prominent names from the food industry, Nestle and Carrefour turn to blockchain to track infant milk supply.

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