The word blockchain has evolved. What used to be considered exclusively as part of the cryptocurrency revolution has now become far more universal. As more and more people wake up to the wider potential of blockchain technology, the networks themselves are finding new and exciting applications.
One such application is inventory tracking and management. Read on as we explore the key benefits of blockchain in inventory tracking and logistics.
What Is Blockchain Technology and How Does It Work?
A blockchain is simply a decentralized system of data and digital asset storage. When the status of a network changes, the alterations are written into a new block in the chain, and a copy of the chain is shared across all the distributed nodes that make up the network.
How Does Blockchain Enhance Inventory Tracking?
But what makes the blockchain so valuable to inventory tracking, and why is it superior to a traditional system?
One factor is the speed and nature of the tracking itself. The network can confirm changes to inventory levels immediately, allowing the network to be updated in real-time.
When the new record is written into the blockchain, its source is attributable. This attribution becomes part of the record and cannot be tampered with, enhancing accountability.
No changes can be made to the record without changing every other copy of the record across each node of the network. If there is a discrepancy, or if an attempt at manipulation is made, this is flagged immediately, almost eliminating the risk of fraud.
What Are the Key Benefits of Using Blockchain for Inventory Tracking?
We've seen how blockchain inventory tracking systems can enhance operations, but let's take a look at the key benefits in more detail.
Real-Time Tracking and Updates
Blockchain supply chain network nodes write adjustments into the blockchain in real-time. In other words, if there is a change in inventory levels, or if a supplier contract is activated, this becomes part of the blockchain record immediately without a period of latency. It is shared between each node across the network and stored in a distributed ledger within each of these nodes.
This is incredibly valuable to the logistics industry and to all stakeholders within the supply chain. Any mistakes, discrepancies, or abnormalities within the inventory can be spotted immediately and put right. This in turn means inventory wastage and shrinkage are reduced, along with expensive errors, bringing operational costs down.
A More Reliable Network
Blockchain technology is, by its very nature, decentralized. This makes blockchain inventory tracking technology more reliable than a traditional system or network.
This traditional network will be built around a central database or datastore. If the database or store goes down, or if the connection to it is lost, the whole system goes down with it. The blockchain's collection of interlinked nodes removes this danger — if one of the nodes goes offline, the inventory management blockchain remains operational.
Enhanced Data Integrity and Fraud Prevention
Above, we've touched on how blockchain-based inventory tracking solutions share data within a distributed ledger. This is an important aspect of technology.
A full copy of this ledger is stored within each of the nodes within the network. In order for the network to operate, there must be a consensus across all nodes — essentially, every copy of the ledger must be the same, almost guaranteeing data integrity and eliminating fraud.
How Does Blockchain Improve Supply Chain Transparency?
A key aspect of this fraud prevention is transparency. Stakeholders need to be able to see who is making changes to the data identify which changes are being made, and take responsibility for their own changes.
The blockchain makes this possible thanks to the immutability of the data. No party can alter the data within the blockchain because they would need to alter the ledger across all the nodes simultaneously — which is essentially impossible.
Changes to inventory status are also attributed to specific users on the network. Each user node has its own identifier key, and this is part of the attribution that is written into the blockchain record. Supply chain transparency is achieved because there is no potential for fraud or data tampering and users are accountable for their changes. Stakeholders also become more confident in the integrity of the data they are working with.
What Role Does Blockchain Play in Data Security?
Security is among the main benefits of blockchain technology, and this has been a key driving force in its development. The fact that a consensus is needed across all nodes in the blockchain means that data cannot be tampered with. Inventory data stores remain secure and protected from fraud.
To enhance this security still further, the data stored in a block is encrypted and protected from would-be hackers. Even the block address and link key to the previous block in the chain are encrypted in this way, providing a double layer of protection.
Because of this robust security, it is expected that government offices will use blockchain technology to store social security information and other sensitive data sets in the future.
How Can Blockchain Enhance Inventory Accuracy?
One of the most important features of a blockchain-based system, as far as accuracy is concerned, is the smart contract. A smart contract is activated automatically once all the conditions written into it are met. In a basic sense, this might cover payment received by the seller and goods received by the buyer. However, in practice, smart contracts are often more complex than this.
Regardless of the complexity level, the contracts are executed in real-time once the specified actions take place. The transaction and status change is then written into the blockchain and becomes part of the immutable record. There is no need for human input or for other actions that might slow the process down or leave it vulnerable to error. As a result, interactions across the supply chain become far more efficient.
What Are the Challenges of Implementing Blockchain in Inventory Tracking?
While blockchain is certainly beneficial in a transparent supply chain and accurate order management, there are challenges to overcome. One of the biggest challenges is likely to be the initial implementation costs — some businesses may decide these costs will be too high and delay their adoption.
This is a problem. To be effective, industry-wide adoption of blockchain technology is needed, and this may take time. On top of this, the blockchain will need to integrate with the existing inventory management systems already in place.
What Are the Future Trends in Blockchain for Supply Chain Management?
The deployment of blockchain technology in logistics and supply chain management is still in its infancy. We can expect this to change significantly in the coming years.
First, it looks like the adoption of the technology will accelerate across the industry, as increasing numbers of businesses seek to reap the benefits. This may be driven by increasingly sophisticated smart contracts that can execute complex transactions.
We may also see experiments with other types of distributed ledger technologies (DLTs). The blockchain, at least in its current form, is not the only way in which decentralized information can be stored. A more efficient, less energy-intensive system may emerge — a sort of supply chain blockchain 2.0.
How Does SEKO Logistics Implement Blockchain Solutions?
At SEKO Logistics, we adopt a forward-thinking approach to blockchain inventory management and logistics solutions. We recognize many of the challenges facing adoption, including the need for integration with existing systems. This is why we work with cloud-based systems designed with broad integration in mind.
As experienced leaders in the inventory management and logistics market, we also understand the industry-specific requirements of blockchain technology in this space. We work to build blockchain-based systems that fully meet the requirements of the end users — end users who represent all stakeholders within the supply chain.
To find out more about how SEKO Logistics is implementing blockchain technology within our supply chain solutions, reach out to our team today.
