Written by Shivashish Yadav on   -  8 min read

How Blockchain is helping to reform supply chain and logistics monitoring? Explained.


Blockchain has been described as an information-changer because of the unique capabilities of supply chain management and the benefits it offers to provide greater information transparency. At its core, the blockchain is a distributed digital ledger that lives on the Internet and records transactions and events.

The technology relies on well-established cryptographic principles and acts as a repository for information, which is recorded and shared through a peer-to-peer community. Within a decentralized network, all participants maintain their copy of the ledger, referred to as a node, where they validate new entries in the chain through the use of a consensus protocol.

In the supply chain, a private blockchain can be implemented, which determines the ability of users to read and write to the blockchain. Implementation of Blockchain technology enables supply chain points, including traceability, compliance, flexibility, and stakeholder management.

The supply chain includes the end-to-end flow of information, products and services, and money. The way these components are managed affects an organization's competitive position in areas such as product cost, working capital requirements, speed-to-market, and service perception. Organizations are exploring innovative ways to streamline their supply chains and achieve efficiencies to meet consumer demands.

What is Supply Chain Management?

Supply chain management makes up the management of the progress path of goods and services, including the transfer and deposit of natural resources (raw materials), the backlog of ongoing processes, and the management of complete products from origin to use. Supply chain logistics involves the design, planning, execution, control, and can do monitoring of travel activities of goods and services that add value to the final product.

Ultimately built on intercom communication networks, supply chains provide the end product to consumers, such as the extraction of raw materials, manufacturing to make the product, distributing the product to the middle-men (wholesalers, retailers), and allocating the product to the public.

Such activities are easily treated in our solution as transactions on the blockchain network, and the participants of the supply chain interact with each other through this network.

Components of Blockchain that affect the Supply Chain

1. Scalability

Many stakeholders take part in modern supply chains on a global scale simultaneously, with vast flows of newly created and time-sensitive information. Modern supply chain management systems handled poorly all this data, as no single shared database exists.

Blockchain can contribute significantly to scaling by providing a network and decentralized database for all supply chain parties to join. In this manner, any single point of failure disappears, while, all supply chain data is recorded on a ledger shared among all taking part in network peers.

2. Performance

With Blockchain, most activities can be represented as electronic transactions, which are presented on a ledger. In that case, they execute faster and without errors to enhance system performance.

Processes such as ensuring the validity and integrity or confidentiality of data take a significant amount of time in traditional supply chain systems, whereas blockchain can provide these features as inherent.

For example, digital signatures of a receiving party are automatically verified and verified along the journey of the goods, which lightens the workload of the system and improves performance limits.

3. Consensus

Blockchain platforms have a specific mechanism that ensures data immutability with a ledger called consensus. The special scope of consensus is to have a common agreement among the nodes of the network regarding all submitted transaction information. The information of such transactions may be time-stamped, thus they may be the order, sender and receiver addresses, amount transacted, were tagged with or electronic seal, etc.

The essence of blockchain technology innovation and uniqueness stems from the use of consensus mechanisms. Today, blockchain platforms support a variety of common protocol instruments depending on the level of access.

4. Privacy

The public blockchain provides its users with a pseudonym, in the sense that each user can interact with the ledger through a newly created address without revealing their true identity. Private blockchains can provide total anonymity inside the network in the following way. In this way, it is assured that they are legal partners.

5. Location

Since the proposed decentralized network can be shared over the Internet, any legal party in the supply chain can contribute to the freight life cycle from anywhere.

When bank transactions take place between distant parts of the world, the movement of payments can take months, depending on the law and the relationship between countries. Conversely, when a transaction with cryptocurrency occurs through a global blockchain network, confirming the transaction and completing the payment is completed within minutes.

6. Cost

Blockchain provides an economical solution to supply chains, as large distance transactions are slow. Since most activities can be represented as transactions, the entire workflow of the supply chain can be significantly faster than in the traditional case.

Current trends of blockchain-enabled applications in supply chain management

Blockchain can revolutionize supply chain management if there are the following problems-

  • How can physical products be connected to a digital ledger?
  • How can the blockchain-enabled network be connected to other external markets?
  • How can blockchain be extended to complex supply chain structures?
  • How can sufficient space be reserved to store the amount of information required by supply chains?


Issue 1: Bitcoin does not differ from its digital ledger. However, the supply chain includes physical products, equipment, and materials, separate from their producers. If we want to use blockchain to trace and trace products to their origin, we need to connect digital producers to physical products.

Unfortunately, currently available technologies, such as barcodes, RFID tags, 3D-stamps, and sensors, have two significant limitations. Much of this technique is duplicated. For example, a barcode on a pharmaceutical product can be duplicated and applied to thousands of counterfeit products.

In addition, this technology can be removed and replaced. Effectively linking physical products with digital producers can solve most of the above issues and create opportunities for a wide variety of industries.

Issue 2: Bitcoin cannot be used in any platform other than the blockchain network. If there were no markets other than the blockchain network, it would be possible to analyze inputs and outputs to verify claims about correctness.

Therefore, the manufacturer would be prevented from mixing olive oil with other types of oil and claiming the olive oil is pure.

Unfortunately, even if we solve this, the system cannot assure the customer that the company is selling pure olive oil, as the entire market is not integrated. It will be interesting to explore the ways that a blockchain network and other non-blockchain-based markets interact.

Issue 3: In bitcoin, all transactions are one-to-one. Assembly, disassembly, transformation, waste, break-down, faults, and other typical supply chain activities are not relevant to the bitcoin network. In contrast, relationships are often not one-to-one in a supply chain.

If a factory ship collects products for other nodes in the network, how will the data be stored? How can a system separate a kit of assembled parts from shipping the assembled part?

These types of relationships in the supply chain are more complex than simple transactions in bitcoin, and the blockchain as we know it is not designed to handle such complex relationships. Research is needed to overcome these limitations.

Issue 4: The amount of disk space bitcoin requires is increasing approximately every ten minutes. Whereas in supply chains, we may need to store product details, manufacturing specifications, machines and workers who have contributed to manufacturing, etc.

There is a tremendous amount of data for each product, and it may not be possible to distribute all the data among all the parties. Saving this data on a central server cannot ensure trust. Similarly, sharing the data would require a third party to manage the data sharing. It would be interesting to find a solution to this problem.


Thus, for blockchain to have a significant impact on supply chain management, it has to eliminate the need for trusted third parties, and supply chains must be adapted to the specific needs, both in terms of data requirements., and potentially the complex structures of supply chains.

For blockchain-enabled supply chain technology to reach its potential, and indeed, to be possible for many fascinating proposed blockchain-enabled supply chain use cases, the technology has to be developed to adapt and extend the pure blockchain. Needed. If it is, then the potential is enormous.