In the past years, we have seen a rapid increase in the innovation and development of information technology; such as mobile phones, GPS systems, RFID technology or the internet, apart from countless others. These technologies have revolutionized the way that we as individual interact with the world around us, as well as with one another.
Moreover, these technologies are having an even more disruptive effect on the way processes are carried out by companies and corporations. One of the major effects of information technology has been on the supply chain management side of businesses. Firstly, because these information technologies allow businesses to access increasing amounts of data about customers, supplier or even competitors, for later data mining and/or knowledge extraction. Secondly, information technologies lower the transaction cost between buyer and supplier leading to a closer buyer-supplier relationship (M. Fasanghari and S. K. Chaharsooghi, 2009).
However, supply chain management might be about to encounter a major transformation with the integration of blockchain technology. The blockchain is a decentralized peer to peer network that is not owned by a single party, all the transactions or interactions that has happened on the network are recorded in a digital ledger. This digital ledger is owned by all the nodes or participants of the network, making it a transparent network for all participants (R. Hendrik, 2015). This system would completely automatize and digitalize the way companies to keep truck of all their inflows and outflows, as well as reduce the overall cost of doing so (K. Korpela, J. Hallikas, T. Dahlberg, 2017).
Furthermore, blockchain can provide a secure network where all these transactions are protected, first of all, because blockchain uses cryptography technology which encrypts the information on the network. Secondly, all the nodes need to verify and validate new transactions, this way if someone tries to cheat the ledger, all the other nodes will not arrive at a consensus and therefore will reject the transactions (C. Cachin, 2017). This type of protections will encourage business to change to the blockchain since it is almost impossible to hack the network.
Moreover, blockchain technology allows us to create smart contracts; “computer protocols intended to facilitate, verify or enforce the negotiations or performance of a contract” (Nick Szabo, 1997). These smart contracts could lead to the reduction of third parties’ systems or counterparty risk, reducing cost and reducing the extend to which companies have to trust a third party (Chamber of Digital Commerce, 2017). Smart contracts are very flexible and would allow companies to automate transactions to a very detailed level. These smart contracts would automate the way companies create simple contracts as well as reduce the number of intermediaries needed by a company.
Indubitably, information technology has and is still changing the way that supply chain management is being carried out by companies. However, blockchain will help change the way that data obtained by information technologies are used. Blockchain technology gives companies the option to create a secure network where transactions are automatically recorded and made visible for every member of the network.
Should companies trust the blockchain?
M. Fasanghari and S. K. Chaharsooghi (2009). “Utilizing IT as an Enabler for Leveraging the Agility of SCM”, Supply Chain the Way to Flat Organisation, Julio Ponce and Adem Karahoca (Ed.). Available from: https://www.intechopen.com/books/supply_chain_the_way_to_flat_organisation/utilizing_it_as_an_enabler_for_leveraging_the_agility_of_scm
R. Hendrik, (2015). “The Bitcoin and Blockchain Technology Explained”.
Available at: https://www.youtube.com/watch?v=oSP-taqLWPQ [Accessed 8 Oct. 2017].
Chamber of Digital Commerce (2017). “Smart Contracts: 12 Use Cases for Business & Beyond. Chamber of Digital Commerce”, p.3.
C. Cachin, (2017) “Blockchain, cryptocurrency, and consensus”, IBM Research- Zurich. Available at: https://www.zurich.ibm.com/~cca/talks/20170622-blockchain-ice.pdf [Accessed 8 Oct]
S, Nick, (1997). “Formalizing and Securing Relationships on Public Networks”. First Monday. Available at: http://firstmonday.org/ojs/index.php/fm/article/view/548 [Accessed 8 Oct 2017]
K. Korpela, J. Hallikas, T. Dahlberg, (2017). “Digital Supply Chain Transformation toward Blockchain Integration”. Hawaii International Conference on System Sciences, p.4181-4191, Available at: http://hl-128-171-57-22.library.manoa.hawaii.edu/bitstream/10125/41666/1/paper0517.pdf [Accessed 8 Oct 2017]
