Application of blockchain in Supply chain management

StelliumBlogApplication of blockchain in Supply chain management



Application of blockchain in Supply chain management

Blockchain is one of the most hyped technologies of twenty first century. This technology has the potential to change the way the whole world transacts today. It has got application right from currency market to supply chain to any progressive technological field which exchange data in real time (performs transactions).

How does a blockchain work

So how does a blockchain really work:

Here I am going to give a brief idea about how a blockchain really works:

Decentralized ledger concept:

Any blockchain network consists of multiple nodes. Take each node as a customer who wants to process their transaction. In a node all the necessary data of a single customer is maintained. Suppose initially there is two nodes A & B. Customer A initially has 500 Rs and customer B has 200 Rs. Customers A wants to send 50 Rs to customer B. Initially node A will send a transaction request to node B. When node B accepts the request customer A’s node will be deducted by 50 Rs and customer B’s node will be increased by 50 Rs. This transaction information will be stored in both the nodes. Now this is normal in any digital transaction. So, how’s it different then? Well the answer lies in when we add a third customer node C in the system. In these cases, each of the node A and node B will approve the addition of node C. The information regarding node C will be stored in both node A and node B. After node A and node B approved the addition of node C, Node C will be created in the system. Node C will store the information of node A and node B. In this way all the nodes in the network will know the status of all other nodes in the network. This is the main advantage of blockchain network than any other digital transactions. Because in any other digital transaction only the nodes which are transacting between them knows the status of each other. But in blockchain network all the nodes know about each single transaction.

How the combination of blockchain and IOT can transform the supply chain space:

The communication between the physical world and the digital world occurs through sensors. With the progress of IOT devices, now a days machines are connected to each other. Data acquisition has become easier and scalable. Application of IOT devices in the field of supply chain is gaining popularity as the devices is becoming cheaper. These IOT devices are the interface between blockchain technology and the physical world.

Supply chain application:

Take the following scenario:

A goods producer wants to export his produced goods to a factory located in another continent. In present scenario he will pack the products in cases in some export container and use courier service to dispatch the product to destination. Meanwhile he will share the courier information to the buying party overseas. Problem will start arising when there is theft, lost in transit of the products on the way to destination. there will be no visibility of the quantity, quality of the stock in transit. Once the buyer receives the product then he will make payment through some international banking agency which will work as broker between the domestic and the international bank. It will take at least 10 -12 days for the transaction to process. The solution is to use blockchain and IOT devices at all level of this supply chain. We can use sealed IOT devices on the goods Which will send information to blockchain node about every information like origin country, weight, quality, destination, value. There will be no chances of tempering the data in blockchain. Coupled with this if the financial data is put on blockchain then all the transactions will happen real time. There will be no need of third-party brokers. It would save the transaction time from 12 days to almost few hours. Thereby increasing the transparency, and efficiency of the whole supply chain. Theft and pilferage will be caught instantly.

Companies like Blockverify, Kuovola innovation, Riddle and code is developing Blockchain solutions which are mainly targeted at solving supply chain problems.


Although blockchain technology has plethora of offerings which can solve real time problems in supply chain. But it is still at nascent stage. The integration of IOT and blockchain technology possess the greatest challenge. We will have to ensure the safety of the IOT hardware, so that nobody can temper with the sensors. Also, the data communication should be encrypted so that the data transmission is secure.

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