Introduction

Today’s supply chains are a collection of interwoven processes to move products from suppliers to end consumers. While many supply chains or networks contain many different links, the complexity can lead to less visibility. Many organizations don’t necessarily track goods through the supply chain and are normally only aware of the product’s location when they physically see it. The lack of visibility can create dysfunction, distrust among parties involved in supply chain activities, and difficulty trying to prove authenticity of goods. While technology continues to advance and appear to solve some issues, clarity of the supply chain remains persistent. 

In the meantime, Enterprise Resource Planning (ERP) systems are essentially central repositories for all of a company’s business processes, including procurement, inventory management, finance, and human resources, into a single context. The systems also help coordinate and make the data more accessible across departments.  

The combination of blockchain and ERP could lead to revolutionary change in supply chain management. By merging ERP’s integrative strength with blockchain’s security and transparency, companies can create unprecedented levels of traceability and accountability. In this article, we will discuss how ERP systems with blockchain better connect supply chain transparency, deter fraud, offer real-time tracking, and facilitate smart contracts that automate processes.

 

The Significance of Supply Chain Transparency 

Supply chain transparency is the ability of an organization to track and disclose every phase within the lifecycle of a product – from raw material sourcing, to delivery at an end customer. Supply chain transparency involves a level of understanding regarding supplier practices, the manufacturing environment, logistics, and/or their environmental or social impacts.  

Where there is transparency, businesses will have some level of quality assurance / quality control, risk reduction, ethical standards, and consumer trust. 

1) Risk Management and Compliance 

Transparency is extremely important for product safety and compliance to regulations in certain industries such as pharmaceuticals, food and cosmetics. When businesses can trace where materials have come from and what has happened to them, they can quickly determine whether their products are potentially harmful to consumers.  

2) Consumer Trust and Loyalty

More and more consumers prefer companies that have ethical, sustainable practices. Research consistently indicates that 73% of consumers are prepared to pay a premium for products sourced from companies that maintain transparent supply chains.Businesses that can demonstrate the sourcing of materials and conditions of labor can also differentiate themselves in competitive marketplaces.  

3) Efficiency

Improved visibility into supply chain operations allows organizations to discover when they are inefficient, identify waste, and make more informed decisions about how to use or eliminate activities. Findings suggest companies with transparent supply chains are 20% more efficient and have operational costs that are 15% less. 

Integrating Blockchain with ERP Systems 

How Blockchain Adds Value to ERP 

Blockchain is based on a decentralized ledger model whereby participants in a network verify all transactions and are permanent in the form of links to the previous block. This makes the data immutable and highly secured against any unauthorized modifications. 

When incorporated into ERP systems, blockchain introduces several key advantages: 

1. Immutable record-keeping – Blockchain provides a record-keeping system that cannot be altered without authorization. Any transaction that takes place in the supply chain will be accurate and verifiable. Any discrepancies will be eliminated, and the risk of fraud is greatly reduced.  

2. Real-time tracking and traceability – Each transaction is time-stamped, allowing real-time tracking of every product movement for the business. This is helpful for inventory management, logistics management, and even recall management.  

3. Automation through smart contracts – A smart contract can be programed in a contract as a self-executing contract with the ability to trigger actions (pay, ship items) once pre-defined conditions are established. Automating activities frees one from repetitive tasks and minimizes human errors while at the same time increasing the speed of a company’s operational capabilities 

Impact on ERP Functionalities 

Better Accountability in Supply Chain- 

Blockchain allows a business to have an auditable trail regarding its products journey; therefore, businesses can confirm authentic and ethically sourced goods. Transparency also provides possibilities for corporate social responsibility. 

Automating Processes

Smart contracts allow processes to be carried out more efficiently, such as order fulfilment and invoicing. This can reduce the administration required and allow for quicker transaction processing. 

Nevertheless, blockchain implementation in ERP does have some significant challenges, such as requiring infrastructure development and a technical understanding of blockchain. Smaller businesses may have financial or logistical barriers to adopting this technology. 

Advantages of Blockchain-Enabled ERP in Supply Chains 

Fraud Prevention & Data Integrity

Blockchain’s cryptographic methods make adjusting transaction details unalterable and will reduce fraudulent activity. 

Removing Intermediaries 

Supply chains usually have third-party validator(s) making the supply chain expensive and delaying shipment time. Blockchain validates in a decentralized way, removing the need for third-party validation, making the supply chain more efficient. 

End-to-End Visibility

All stakeholders have the same visibility and can access real-time updates regarding the product status; this will allow for better coordination and eliminate delays. 

Regulatory Compliance

Industries that are heavily regulated (e.g., pharmaceuticals) can use blockchain to provide verifiable documentation for audits. 

Real-World Applications 

Many of the top companies in the world have adopted blockchain based, ERP systems in the following ways:  

1. Walmart uses blockchain for tracking food products, making contamination risks less likely and recalls quicker. 

2. Maersk uses blockchain for keeping track of shipping, improving transparency across global trade. 

Conclusion 

Integrating blockchain technology with ERP systems represents a significant step forward towards more transparency within supply chains. Companies can benefit from immutable records, real-time tracking capability, and smart  contract automation. Consequently, businesses can add security, cut down on inefficiencies, and provide trust to their partners.  

There are considerations to be made regarding significant investment in technology adoption, however the long-term gains such as fraud prevention, operational efficiencies, or regulatory compliance, outweigh this investment decision. This also raises the possibility of new operational realities with supply chain businesses.  

Understanding the evolution of these technologies and assessing how blockchain technology can be incorporated into a company’s framework will enable organizational stakeholders to capture strategic advantages. The future of supply chain management will come down to whether the stakeholders embrace technologies such as blockchain to offer an ecosystem of accountability and responsible practice.