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3 Reasons Blockchain is Necessary for Manufacturing Supply Chains

Most people initially became aware of blockchain technology after learning of its association with cryptocurrencies. However, the possibilities have significantly expanded since then, with some company leaders exploring how to apply the technology to the manufacturing supply chain. Following are some real-world reasons why it’s necessary to be open to that approach. 

  1. Smart Contracts Can Speed up the Hiring Process

Manufacturers often need help to hire enough workers. The resultant effects can strain supply chains and restrict growth. A 2022 study from Deloitte and The Manufacturing Institute showed 83% of respondents viewed attracting and retaining a quality workforce as a top focus. Moreover, nearly 45% of manufacturing executives said they’d turned down business opportunities due to workforce insufficiencies. 

The blockchain alone can’t solve this problem to strengthen the manufacturing supply chain, but it often helps – specifically when companies use smart contracts to replace traditional ones. They can automatically execute and control blockchain-stored documents as prespecified changes occur. This could result in a recently hired person immediately being placed into a higher pay tier after completing a 90-day probation period. 

Another advantage of smart contracts is how easy to it is to share them with all relevant parties while ensuring that all parties receive the most updated information when alterations occur. Relatedly, since blockchain content is immutable, everyone involved enjoys the same level of transparency. There’s zero risk of people trying to change the contract’s wording after everyone reaches an agreement. 

Since smart contracts are software based, they can also reduce the human errors often associated with paperwork. Smart contracts are not guaranteed to be free from mistakes, but they’re less likely to contain issues that could reduce the time required to hire someone and get them ready to work. 

The blockchain could also facilitate the administrative specifics of classes new hires must attend before starting work within manufacturing supply chains. A Chinese initiative shows what’s possible – it allows parents to pay for after-school training programs with smart contracts. A contract executes payment on a per-lesson basis, so it’s easy to refund money if students miss for any reason. 

  1. The Blockchain Aids in Traceability

Counterfeit products and items not made according to manufacturers’ promises can cause problems for the manufacturing supply chain worldwide. For example, improved traceability reveals a product’s total impact on the planet, helping people buy more sustainably. 

That becomes increasingly important as products pass through multiple companies, all of which contribute to a product’s impact. Since the blockchain supports better traceability and transparency, those characteristics can elevate customer confidence. 

Walmart is one of the major brands that successfully used the blockchain to reduce the time required to trace a product’s journey through the supply chain. It all started when one of the company's executives asked his team to track a package of sliced mangoes from the origin to source. That task took over six days, revealing a major weakness. Once the retailer switched to a blockchain-based system, tracking the produce took just over two seconds. 

Elsewhere, a company based in the United Kingdom uses the blockchain to issue digital passports for luxury goods like jewelry and rare art. The technology allows people to quickly verify authenticity by allowing them to see a record of every ownership transfer. In one notable first, an auctioneer sold a handmade platinum ring featuring 60 diamonds that offered this enhanced form of traceability. 

Another platform features tamper-proof tags and an app for verifying provenance and authenticity. People at the organization behind this solution believe it’ll protect brand value while enhancing customer loyalty. If options like these become more widespread, businesses could use the technology as selling points, proving their manufacturing supply is easier to verify than competitors'. 

  1. Manufacturing Supply Chains Must Move Towards Circular Economies 

Studies frequently show that customers care about the environmental, social, and governance (ESG) claims that companies make. Research from McKinsey also tied public ESG statements to business growth. The organizations making them achieved an average of 28% cumulative growth over five years versus the 20% by companies without ESG claims. 

The researchers admitted they could not demonstrate a causal relationship between ESG statements and customer purchases. However, the difference in sales growth is a notable aspect that suggests many customers are eager to support companies who are trying to make positive differences throughout the course of their operations. 

One area of focus for enterprises involves creating a circular economy that reduces or eliminates specific types of resource usage. That may mean reducing emissions or improving product durability as a start. 

A blockchain-specific example involves a company using the technology to trace the movement of hard-to-recycle plastics through the supply chain. Such applications are vital, particularly with more people in power passing laws to reduce manufacturers’ use of virgin plastics. A producer has the opportunity to use the blockchain to prove that the company uses the required percentage of recycled materials, thus preventing the business from receiving fines or reputational damage. 

The manufacturing supply chain could also use the blockchain as a value generator, proving certain products offered have lower emissions than others. This is the approach taken by gas company Williams, which advertises specific products with varying associated emissions. 

Tracking the carbon dioxide output requires pulling data from 150,000 sources within the gas value chain. Connected sensors and artificial intelligence also aid the company in identifying the cleanest pathways inside its supply chain. 

The Blockchain Supports the Manufacturing Supply Chain 

It’s not always easy to keep the manufacturing supply chain functioning well. Today’s professionals face various challenges, including counterfeit products and labor shortages. The examples above illustrate why exploring the blockchain’s potential is imperative, whether by using a custom-built product or commercially available one. 

Becoming familiar with the blockchain’s strengths and how they can reduce supply chain weaknesses is an excellent way to start seeing what’s possible. Decision-makers should also choose several goals they want to achieve and relevant metrics to track. This approach can justify blockchain investments and encourage people to keep using what many still consider an emerging technology. 

Finally, people must remember that using any new product or process often involves dealing with varied learning curves. Encountering challenges does not indicate failure, rather requires a closer look in order to identify areas for improvement. 

Emily Newton
Emily Newton
Emily Newton is the Editor-in-Chief of Revolutionized, an online magazine celebrating advances in science and technology.

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