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New Age News Why Blockchain Has Failed to Dominate Supply Chain
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Why Blockchain Has Failed to Dominate Supply Chain

Sven Kramer Feb 27, 2024
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Despite its worthwhile features, blockchain technology has surprisingly not taken the supply chain industry by storm as expected. This is not for lack of potential but rather due to a complex mix of challenges that have slowed its adoption.

However, despite its promise to enhance transparency, security, and efficiency within supply chains, blockchain faces hurdles that keep the technology away from reigning over the supply chain industry.

Why Blockchain Has Failed to Dominate the Supply Chain Industry

One of the most significant barriers is the perceived cost of blockchain implementation. The initial investment in technology, training, and transformation can appear daunting. Many supply chain operations, particularly smaller ones, operate on thin margins where such upfront costs are prohibitive.

Hite / Unsplash / Most people assume that blockchain requires heavy investment.

The assumption is that blockchain is a luxury rather than a necessity, which sidelines its adoption.

Legal Hurdles

Navigating the legalities of blockchain is akin to walking through a maze blindfolded. The technology is so new that regulatory frameworks are still catching up, leaving a gray area that businesses are hesitant to step into.

This legal uncertainty makes companies cautious, as the potential for future regulations could impact how the technology is used or force changes to established blockchain systems.

Scalability Stumbling Blocks

Blockchain’s decentralized nature, while a boon for security and transparency, comes with its own set of challenges. Scalability, or the ability to handle large volumes of transactions efficiently, remains a thorny issue.

As supply chains are complex webs of interactions involving countless transactions, blockchain systems need to be able to scale without compromising performance or security.

RDNE / Pexels / Since blockchain is not everyone’s cup of tea (and most people do not bother researching about it), it has yet to dominate the supply chain industry.

Most People Are Simply Not Familiar With Blockchain

The supply chain industry is steeped in established processes and systems that have been refined over decades. Introducing a radically new technology like blockchain requires not only a steep learning curve but also a cultural shift within organizations.

The unfamiliarity with blockchain’s workings and benefits leads to reluctance in adoption, as the comfort of the known is preferred over the uncertainty of the new.

The Transformative Potential of Blockchain

Despite these hurdles, the inherent strengths of blockchain technology are undeniable and offer transformative potential for the supply chain industry.

Decentralization

At its core, blockchain is decentralized, meaning it does not rely on a central point of control. This decentralization is revolutionary, offering a level of resilience and security previously unattainable.

Morthy / Pexes / In the context of supply chains, Decentralization means that records and transactions are not only safer from cyberattacks. But they are also transparent across all parties involved.

This can significantly reduce fraud, errors, and inefficiencies.

Plus, blockchain’s immutability – its ability to prevent alteration of data once recorded – builds unprecedented trust among supply chain participants. This feature ensures that once a transaction is logged, it cannot be tampered with retroactively.

For supply chains, this translates to an auditable trail of every product, from origin to consumer, enhancing accountability and consumer trust.

Tight-End Security

Blockchain’s cryptographic security measures are formidable. Each transaction is encrypted and linked to the previous one, creating a chain of blocks that is extremely difficult to hack. For supply chains, this means sensitive data about products, transactions, and logistics are securely stored.

Thus, it reduces the risk of data breaches that can cost companies dearly in financial loss and reputation damage.

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