Blockchain Could Save $450 billion in Supply Costs
A recent study published by Cointelegraph Consulting and blockchain firm Insolar found that blockchain technology can reduce supply chain costs by 0.4% to 0.8%. Sounds insignificant, but given the value of global trading, it equates to an estimated cost saving of $450 billion in Western Europe alone.
The report found a range of issues within logistics, which could be addressed by the adoption of blockchain technology. Cointelegraph Consulting and Insolar found that 60% of companies pay a premium to supply chain partners and 70% of companies are experiencing 'visibility gaps' between the initial seller and the end user. This makes supply chain traceability and transparency extremely difficult for businesses to guarantee. Can you as a consumer be sure that those bananas really are fair trade? Or that your organic coffee is totally free from pesticides, herbicides and artificial preservatives?
Current supply chain systems typically use databases or Enterprise Resource Planning (ERP) to manage supply of goods and associated transactions. However these systems rely heavily on accurate, up-to-date inputting of data by all parties involved in the supply chain. In reality, often a few supply chain partners have access to or fully utilize such systems. This makes it much harder for us to transparently track the provenance of our food and ensure that the labeling claims are accurate.
The report goes on to state, that these traditional systems are not properly equipped to resolve basic supply chain issues, as almost 80% of enterprise data is hidden and liable to minimized integrity by all parties. The study further specifies:
“The database approach fails to provide an inherent share of data related to the supply chain, which is crucial for counter-parties that do not trust each other to obtain information about a certain product, its price, delivery conditions, etc. The information is not always up to date from some parties, and some data may be hidden.”
The founder of Insolar, Peter Fedchenkov, believes that blockchain solutions offer a complementary service to existing IT systems. The report also found that: 'In the transition to industry 4.0, industrial business can expect a 25% gross increase in [Return on Capital Employed] by 2035.' As such, the long term saving of blockchain solutions far outweighs initial implementation costs.
A separate study, recently published by Juniper Research, found that blockchain could save over $31 billion by 2024 through the reduction of food fraud. The combination of blockchain technology and Internet of Things (IoT), primarily location tracking sensors, temperature and humidity monitoring, will reduce the amount of fraud, mislabeling and diluted or substituted food products. The transparency and accountability of blockchain will also make it easier for faulty products to be effectively recalled and removed from food supply, alleges the report.
Juniper Research found, by replacing lengthy procedures and overhauling paper-based, centralised databases with blockchain technology, smart contracts and IoT, significant value to those involved in the food supply chain could be provided, from grower to retailers, all the way to consumers. These blockchain food supply systems, currently being developed by SOKTI, can bring cost reductions, risk mitigation and transparency to sustainable businesses and conscious consumers. According to research author, Dr. Morgane Kimmich:
'Today, transparency and efficiency in the food supply chain are limited by opaque data forcing each company to rely on intermediaries and paper-based records. Blockchain and the IoT provide an immutable, shared platform for all actors in the supply chain to track and trace assets; saving time, resources and reducing fraud.'
Blockchain technology is gaining widespread adoption in various industries such as diamonds, rare metals, fashion and food, with solutions being offered, among others, by KPMG and IBM. SOKTI on the other hand is developing a solution focused exclusively on sustainable food supply through an integrated ecosystem that you can check out right here.
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